medimond template 17 agora international journal of economical sciences, aijes, issn 2067-3310, e issn 2067 – 7669, vol. 15 (2021) marketing influencer oana petrișor mateuț1 1faculty of economic sciences, agora university of oradea, oradea, romania e-mail oana_mateut@yahoo.com abstract is marketing influence the right way or not for a business? investing in this type of marketing is advantageous or not for promoting a product or service. what type of marketing defines this strategy? we will discuss all these aspects in this paper. keywords: influencer, social network, followers, direct marketing. 1 introduction influence marketing is a form of social media marketing that involves referrals and product placement from influencers, people, and organizations that have an alleged level of knowledge or social influence in their field. who are these influencers really? there are people who are actually users and who have thousands or millions of followers on various social networks. among young people in particular, direct communication has passed into online communication on various social networks such as youtubers, an instagram, a blogger, a facebook page, twitter, etc. the difference between users and influencers is that the latter influences their followers. is a kind of opinion leader with charisma, authority, skills, sometimes in promoting products or services other times in promoting games. young people, whether they are teenagers or not, are very attracted to these influences, capturing all their attention and time. 2 current trends in marketing influencer early career is it difficult or easy to become an influencer? i tend to think it's not easy. why? it is not enough just to have a good computer dexterity but you need skill, spontaneity, presentation topics, communication skills and attracting the listener. because they have to choose the sector in which they want to operate, to have a web, a marketing plan, to know how to advertise, to a strategy to capture as many followers as possible, to create videos, live, pictures, articles and transmit them on different communication-socialization channels. after that, it follows the obtained results, monitors them in order to evaluate if the approached strategy is correct and is implemented correctly. but in addition to these free influencers, companies also hire influencers to work in the marketing department and control the economic value of the brand's popularity, those who work alone to promote the company. mailto:oana_mateut@yahoo.com 18 companies specialized in influencer activity have also appeared on the market, offering consultancy in this field. the value of an influencer is given by the number of followers and the size of the community. we also meet top influencers who are famous people on social media being known and who ask for a commission to advertise. micro-influencers who have a certain community of their own, well-formed, and where it has an indirect communication with the followers and who can influence their choices. this happens especially on the facebook page, and in the last year the most publicized aspect in facebook networks was sars-cov-2 pandemic. but do these influences, if they are not employed, have an income and it is made from this activity? yes, they can have income from this activity. how? they may have sponsors to advertise to, but not in the traditional sense, but actually through what they wear, taste, visit. many influencers are teenagers and after graduation they pursue a career. as in advertising, advertising is an influence for the promotion of a brand while in other cases it influences followers in the purchase of a good or service. thus, transforming them into customers or consumers. everything is a strategy to encourage users' buying behavior by presenting certain offers, coupons, discounts that appear. depending on the number of posts and views, the influencer can receive commissions for the products sold. when an influencer becomes known then there will be many companies that will look for him, in most cases this aspect is achieved especially through agencies. depending on the number of posts and views, the influencer can receive commissions for the products sold. when an influencer becomes known then there will be many companies that will look for him, in most cases this aspect is achieved especially through agencies. the incomes they get are not very clear but sometimes they can be very high. these incomes vary depending on the social networks they choose. in a studio made on the market, it seems that revenues obtained on the network: -facebook varies from 7000-200000 euro / post; -youtube: 14,000-330,000 euros / post; instagram: 6000-160,000 euros / post; twitter: 300070,000 euros / post. in the classification of influencers, we can find different classifications depending on the activity they post, having: marketing influencer forms a trusting link between the brand and followers (potential consumers). this type of marketing has started to catch more and more and lately the influence has moved from bloggers to vloggers. -travel influencer-dealing with the promotion of the tourism sector, fashion influencer the fashion sector, one of the most competitive; fitness influencer divided into female and male categories; 19 vip influencer various internationally known celebrities or well-known media people, we can still meet those thematic hashtags. to understand what these hashtags are and how they are used. these are the posts that can bring you popularity. we see everywhere on social media. sometimes really misused. "click" has become the most commonly used method at the expense of promoting dor to dor, word of mounth. 3 conclusions global technological developments have brought an involution of today's young people in terms of communication, reading a book-story, playing outdoors and various sports activities. but this is the goal that an influencer has to get as many followers as possible, he having a great reliability and independence in his actions. digitization is more and more developed, slowly the tangible system is replaced with the electronic part. what will happen next? time will tell. references medimond template agora international journal of economical sciences, aijes, issn 2067-3310, e issn 2067 – 7669, vol. 14 (2020) consideration over a happy organization gheorghina liliana bîrlădeanu1 1faculty of juridical and administrative sciences, agora university of oradea e-mail gheorghina_birladeanu@yahoo.com abstract ”the happy organization” is based upon a strategy of happiness that brings real joy to the employees having the purpose to obtain productivity, innovation and profit growth. happiness at work has not been just a simple “buzz” for a long time, it has rapidly transformed in strategies and objectives implemented in the day-to-day managerial plans of the top management in general and of the human resource manager in particular. keywords: happy organization, the management of happiness, the strategy of happiness, “the humanization” of the managerial strategies, intelligent and emphatic management, a family type organizational climate 1 introduction taking into consideration the full and effervescent life, but also the current pandemic, we are more and more preoccupied with happiness. from an organizational perspective, we have become increasingly conscious of the importance of happy employees because happiness determines them to be more productive, more satisfied and more attached. for that purpose, it is necessary to make more efforts to satisfy our employees. of course that the road from a smile to organizational happiness is a difficult and complex one, requiring empathy and a well-defined strategy. the state of happiness, balance and well-being in an organization proves to be a “must have” for the long term success of any organization. the studies show that the employees motivated and satisfied with their jobs are more productive and creative. they are also more involved in the organizational activities. that is why we ask ourselves a lot of questions: ”how do you build a happiness strategy in an organization?”, ”how can a performance culture produce satisfaction and involvement?”, ”what are the steps of creating a positive work environment?”, ”what does a human resource manager need to do in order to have a friendly work atmosphere in the organization, but also stringent enough to determine performance and involvement?”, ”how do you form an organizational culture that promotes worthwhile work?”, ”what is the role of the employer branding segment?”, ”which are the levers used by the organization to raise the employees` engagement and wellbeing level?”. 2 section pursuing happiness at any cost is a delicate process that requires professional managerial competences, since, in any organization, the border between happiness and unhappiness is extremely thin. the manager`s art consists in the ability to know how not to pass this border and what represents the basis of the wellbeing of an organization, taking into consideration: leadership, management systems, human relationships or the human quality of those representing the organization. what do we understand by happiness at the workplace? in this respect, we need to be aware that happiness is a positive state generated by three very important vectors: mailto:gheorghina_birladeanu@yahoo.com ➢ involvement – a concept which means that the focus is set on developing the employees` potential so as to protect them from the effects of possible stress factors and to raise productivity. ➢ satisfaction – it is a positive state that results from the employee`s attitude at work. ➢ commitment – we are discussing three types of organizational commitment: the affective one that can predict the employees` performance, the continuity commitment and the normative one that can predict the probability for an employee to leave the company.1 according to a research from warwick university, happiness raises productivity with up to 12%. laura kubzanki, associated professor at harvard school of public health demonstrates the fact that happiness reduces stress and illness risk. in the same context of benefits, we mention goodthink inc. research, which shows that happy employees are very good team people. the results of iopener institute researches prove that happy employees distinguish themselves by a medium engagement duration four times higher and a retention level much bigger. the ”happiness is contagious” study made by harvard universities from california demonstrate that happiness is contagious because they emanate in the working environment the manifestations of joy, offering the team well-being. moreover, it has been proved by research studies made iopener institute for people of performance that happy employees reach their goals at work by 31% more than other, thereby meaning that also the organizational goal is achieved. in this context, it is extremely necessary for every manager interested in his own company success to race the engines to their full potential in the process of raising the employees` satisfaction by initiating and developing a variety of actions under the form of theme parties, team activities, different trainings and diverse office benefits. but we cannot say that these are the only measures meant to produce employees` happiness. achieving the employees` happiness and implicitly that of the organization, compels the managers to realize and apply a strategy of happiness that is characterized by a high level of complexity and requires three steps: ➢ realizing an organizational diagnosis that can identify the positive elements in order to be fructified exponentially. for measuring the various indicators, this stage will use a multitude of scientific instruments and different observation methods. ➢ implementing the strategy represents what we have set as goals and what we distribute through the different programs that we have established for this stage. these programs will be selected as a follow-up to the diagnosis. thus, we emphasize some of these, which are eventually potential ways of producing organizational happiness: training, teambuilding and coaching programs. ➢ in order to convince ourselves of the profitability of the chosen programs and also of the success of the organizational actions, we need to move on to the third stage which means the assessment and sustainability of the program. this last stage contains two inseparable steps, the assessment which will accentuate the efficiency and effectiveness of the strategy, and the sustainability which will lay stress on maintaining in the organization the already created attitudes. these attitudes that are the targets of the organizational happiness strategy have as founding elements: „the humanization” of the managerial strategies, the implementation of an intelligent and emphatic management, the formation of a family type organizational climate, the manager`s and the employees` human-emphatic personality and behavior. 1 https://www.todaysoftmag.ro/article/1479/cu-un-zambet-nu-se-face-primavara-stiinta-fericirii-in-organizatii https://www.todaysoftmag.ro/article/1479/cu-un-zambet-nu-se-face-primavara-stiinta-fericirii-in-organizatii 3 conclusions we conclude by saying that a scientific founded strategy on the basis of a real diagnosis and of an implemented complex program can bring to the company and to its employees great quantitative and qualitative benefits by the materialization of some pragmatic actions, moving on from its abstract statute of organizational happiness to concrete and measurable actions. we reiterate the importance of the personnel`s quality and of the manager`s personality, these being the foremost ingredients in the management of happiness. references [1] cole,g.a. , the personnel management, bucharest: codecs., 2000. [2] mihuţ, i., general elements of management theory and practice, in the manger`s guide, mago publishing house, sibiu, 1997 [3] ştefăroi, p., the happiness theory in social assistance, lumen publishing house, iaşi, 2009. [4] ştefăroi, p., the particularity of the efficient management in the field of social assistance, social assistance magazine, no. 3, polirom publishing house, 2007 [5] https://www.todaysoftmag.ro/article/1479/cu-un-zambet-nu-se-face-primavara-stiinta-fericirii-inorganizatii https://www.todaysoftmag.ro/article/1479/cu-un-zambet-nu-se-face-primavara-stiinta-fericirii-in-organizatii https://www.todaysoftmag.ro/article/1479/cu-un-zambet-nu-se-face-primavara-stiinta-fericirii-in-organizatii agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 no. 1 (2023), pp. 24-30 24 marketing innovations in cross-border passenger transportation iryna honcharova¹, tetіana metil², viktor koval³, illia neskhodovskyiº dept. of business and tourism management, izmail state humanities university, ukraine ¹ https://orcid.org/0000-0003-2607-6698, e-mail: cehovich2610@gmail.com ² https://orcid.org/0000-0002-4553-4343 ³ https://orcid.org/0000-0003-2562-4373 º https://orcid.org/0000-0002-3044-2163 ___________________________________________________________________________ abstract. the development of innovations in various areas of economic activity has its own characteristics. there are a number of unique features for the development of passenger transport routes, which should be considered in more detail than in the planning of freight transport, and characterize this type of activity as particularly unique and requires a specialized approach in marketing innovations in this area. the presented article outlines the basic principles and concepts of the approach both when working with the material and technical base and when working with personnel in the course of planning and implementing innovations in passenger transportation. particular attention is paid to the system of motivation for the implementation of the innovation process since the result of the introduction of innovation depends on the degree of motivation of potential subjects of the innovation process. also, options for communication are considered both directly with potential consumers of the service created in the process of innovative activity and with local authorities in those regions where it is planned to carry out the innovative activity. keywords: marketing innovations, passenger transportation, carbon footprint reduction, motivation, innovation roadmap. introduction modern aspirations to reduce the carbon footprint can be viewed from the point of view of the transportation of passengers from two fundamentally different positions. the first position includes technological changes in terms of personal transport, which is still progressing rather slowly due to the high cost of development results, which makes them inaccessible to the vast majority of the population. the second position is to offer a convenient way of transportation for passengers in order to reduce the use of personal vehicles. for the success of the second position, it is necessary to revise existing routes and develop new ones, including cross-border ones, in order to maximize the convenience of passengers' movement while causing minimal harm to the environment (honcharova & metil, 2022). passenger convenience will come from the fact that the time spent driving a private car can be used much more rationally in the era of virtual production and communication, that is, instead of wasting time on amateur driving, people can spend it studying correspondence, performing certain types of work, that can be done electronically and other things that cannot be done while driving a personal car. https://orcid.org/0000-0003-2607-6698 mailto:cehovich2610@gmail.com https://orcid.org/0000-0002-4553-4343 https://orcid.org/0000-0003-2562-4373 iryna honcharova, tetіana metil, viktor koval, illia neskhodovskyi 25 the reduction of the carbon footprint will be facilitated by the fact that passenger transport is much easier to convert to environmentally friendly technologies than private transport (koval et al., 2022). however, at the same time, the comfort of passengers should not suffer, that is, it is necessary to radically change the approach to the choice of rolling stock for the implementation of all passenger traffic in general and cross-border in particular. i. literature review the problem of optimizing and bringing the passenger transportation system in line with modern requirements has now faded into the background, however, authors such as comfort (2020) and munby (2014) are of the opinion that an efficiently functioning passenger transportation system is of high social importance. these authors are of the opinion that there is a need for deep innovation in this industry. in turn, such authors as dias (2018), kunret (2018), and pfohl (2022) note that in the computer era, planning and implementation of various types of transportation, including passenger transportation, should be taken in a new way. as kunret (2018) emphasizes, the main stabilizing factor at present is complete and reliable information, which is promptly communicated to all participants in the transport and logistics process (kunert, 2018). in turn, pfohl (2022) provides clear economic requirements for the passenger route as an object of logistics infrastructure. in general, all authors consider passenger transportation mainly from an economic point of view. ii. results ii.1. motivation to development of innovations the main motivation for the development of innovative activity is the increase in the economic efficiency of enterprises. passenger traffic is characterized to some extent by seasonality, variability in passenger traffic, different density of potential passenger traffic for different areas and many other features that should be taken into account when developing specific routes and considered along with such facts as the presence of border checkpoints along the route (fragerberg, et al., 2006). despite the presence of a number of factors that negatively affect the potential route, the benefits of developing a new route for both the transport company and the population living in the territories that will be served by this route should also be taken into account (comfort, 2020). the diagram in figure 1 shows the implications for an area for which a new passenger route is proposed as an innovation. figure 1. consequences for the area after the opening of a new passenger route. (compiled by the author) new passenger transportation route economic consequences social consequences access to new job markets new markets for households and farmers access to goods and services degree of feeling of personal freedom interper-sonal communication marketing innovations in cross-border passenger transportation 26 if we consider in more detail the consequences for the region after the introduction of a new route for passenger transportation, then the motivation for introducing innovations in passenger transportation in general and in particular through the development and implementation of a new route will be more widely revealed. as can be seen from figure 1, all impacts can be divided into two main categories: economic and social. the economic consequences include the opening of new markets for the population. the main thing will be the opening of a new labor market, since in practice there are quite often disproportions in the professional composition between the unemployed and the available vacancies. new passenger routes can help smooth them out through labor redistribution opportunities. it may also open new markets for households and farmers, which will raise the level of well-being of the backbone of any economy the household (karlsson, et al., 2009). thus, the possibility of reducing unemployment, increasing tax inflows from employees, households and farmers is a motive for local authorities to look for opportunities to open new passenger routes (koval, et al., 2023). access to goods and services is not only an economic, but also a social consequence of the introduction of a new passenger route, since from an economic point of view, an increase in trade serves to form a more sustainable economy in the region, and from a social point of view, it makes it possible to improve the quality of life of the population, since access to a wider range of goods and services may also mean access to a greater number of medical services provided by private and public companies, that is, it improves the quality of life of the population in various areas of physiological existence (nagaraj, 2021). ii.2. plan for innovation in passenger transportation when drawing up a marketing plan for any innovation, the stages of innovation should be clearly defined, for which an innovation roadmap is drawn up. figure 2 presents a roadmap for innovation in the passenger transportation industry. figure 2. innovation roadmap: "new passenger route". (compiled by the author) iii. market demand study when studying the market in order to create a new route for passenger transportation, special attention should be paid to a survey of potential consumers of the proposed service. in order to obtain objective and reliable information, it is necessary to conduct full-scale surveys of residents in all settlements according to the proposed route patterns (tobelmann, 2011). in modern conditions, it is possible to conduct a survey of potential consumers using electronic means, limiting the possibility of submitting a response from each device only once (boland, 2014). if it is necessary to conduct a study in areas where internet technologies are poorly developed, it is possible to contact the local authorities for help in conducting a survey of residents. market demand study supply opportunity research comparison of demand and economic efficiency plan to match supply with demand new passenger route iryna honcharova, tetіana metil, viktor koval, illia neskhodovskyi 27 as an example, let's consider data on non-regular transportation carried out by bolgradtrans jsc for the period 2020-2022. figures 5-8 show graphs of passenger traffic for the main traffic routes in romania and bulgaria. figure 3. passenger traffic to galati, romania figure 4. passenger traffic to constanta, romania figure 5. passenger traffic to bucharest, romania figure 6. passenger traffic to varna, bulgaria figure 7. passenger traffic to balchik, bulgaria figure 8. passenger traffic to sofia, bulgaria (fig.3-8 compiled by the author) iii.1. supply opportunity research the study of the capabilities of carriers operating in the region is carried out in terms of the availability of rolling stock, the quality of rolling stock and the formation of a professional staff of drivers for passenger transportation. as mentioned earlier, one of the missions of opening new passenger routes is to reduce the carbon footprint. to achieve this 1240 2460 3880 0 1000 2000 3000 4000 5000 2020 2021 2022 galati, romania 650 1400 2105 0 500 1000 1500 2000 2500 2020 2021 2022 constanta, romania 400 980 1850 0 500 1000 1500 2000 2020 2021 2022 bucharest and otopeni (international airports), romania 1100 1300 1650 0 500 1000 1500 2000 2020 2021 2022 varna and kovarna, bulgaria 1420 1760 1840 0 500 1000 1500 2000 2020 2021 2022 sofia, bulgaria 800 750 1250 0 500 1000 1500 2020 2021 2022 balchik and general toshevo, bulgaria marketing innovations in cross-border passenger transportation 28 goal, it is necessary to clearly follow the policy of improving the quality of rolling stock for passenger transportation (comfort, 2020). therefore, when considering new possibilities for the implementation of transportation, it is necessary to consider the rolling stock both in terms of the comfort of transporting passengers and in terms of safety for the environment (trachenko et al., 2021). when planning cross-border passenger routes, it is necessary to take into account the requirements for the rolling stock of all states through whose territory the route will pass. if we consider the personnel potential, then for the selection of drivers for passenger routes, it is necessary to consider candidates who are not inclined to create conflict situations, who have positive thinking and, in the case of cross-border transportation, speak the necessary languages to communicate with employees of bus stations and passengers. iii.2. comparison of demand and economic efficiency to study the effectiveness of a potential passenger route, it is necessary to carry out a number of calculations. initially, for each section between two settlements, it is necessary to determine the number of potential passengers (pp) for a certain unit of time, for example, per month, and then determine the number of possible seats (ps) provided by carriers. then you can calculate the density of demand (in %) using the formula 1. 𝐷𝐷 = 𝑃𝑃 𝑃𝑆 ∗ 100% (1) in the case when the density of demand is below 50%, the route will be economically inefficient, however, to serve potential customers, it can be laid so that passengers can use it, but with a transfer. if the resulting potential demand is between 50% and 75%, further research is needed to determine the frequency of the route, as some routes are more popular on weekdays and some are more popular on weekends. when obtaining a demand density above 75%, it is necessary to plan a systematic movement along this route (munby & watson, 2014). iii.3. plan to match supply with demand if quantitative indicators were more significant to determine the economic efficiency of the passenger transportation route, then to bring the supply in line with demand, the quality factors of the services provided are much more significant. the quality of the services provided in the implementation of passenger transportation currently means not only the comfort of the cabin of a passenger bus, but also comfort at stops, and, most importantly, the presence of an electronic notification system about the movement of the bus along the route (frey & osterloh, 2013). it is especially important to have an electronic notification system when planning a cross-border route, since the imperfection of the system of border and customs control does not allow drivers of such routes to strictly adhere to the time frames of movement along the route. the solution to the problem of long-term border and customs control can be the creation of a passenger database, in which information about passengers will be entered at bus stations or by the driver by scanning biometric passports when boarding a bus on a cross-border route. if we consider the electronic notification system about the movement of the bus along the route, then it can be an integral part of the mobile application, the functionality of which iryna honcharova, tetіana metil, viktor koval, illia neskhodovskyi 29 will include both obtaining information about the available seats on the route of interest to the passenger, the level of comfort of the bus provided, the availability and location of empty seats. in addition, the fare payment service should be available through the application, in the case of a cross-border route in any of the currencies of those countries through which the route passes, and through the application the opportunity should be provided at the bus station to enter the relevant data of the international passport into this application (machado & davim, 2022). conclusions innovation is the basis for progressive growth in all areas of society. it is impossible to consider separately the economic and social effect of the introduction of innovations, since they are closely interconnected and form the quality of life of end consumers of goods and services. when forming innovations in the transport sector, especially in the field of passenger cross-border transportation, there are a number of problems, the solution of which requires an integrated approach both from the side of business and from the side of the authorities, many state structures. the ultimate goal of the formation of innovations in passenger transportation, especially in cross-border ones, is both to increase the degree of freedom of movement of citizens, and the possibility of intercultural and intersocial exchanges, which will give a positive dual effect for the mutual development of participants in such contacts. another positive effect of introducing innovations in passenger cross-border transportation is the reduction of the carbon footprint, which is one of the main tasks of modern society. references 1. boland, l. a., 2014. the methodology of economic model building (routledge revivals): methodology after samuelson. s.l.:routledge. 2. comfort, p., 2020. public transportation. s.l.:amazon digital services llc kdp print us. 3. dias, a., salmelin, b., pereira, d. & dias, m. s., 2018. modeling innovation sustainability and technologies: economic and policy perspectives. s.l.:springer. 4. fragerberg, j., mowery, d. c. & nelson, r. r., 2006. the oxford handbook of innovation. s.l.:oup oxford. 5. frey, b. s. & osterloh, m., 2013. successful management by motivation: balancing intrinsic and extrinsic incentives. s.l.:springer science & business media. 6. honcharova, i. & metil, t., 2022. finding areas of innovative activity of the enterprise. s.l., управління та адміністрування в умовах протидії гібридним загрозам національній безпеці: матеріали ііі міжнародної науково-практичної конференції (м. київ, 22 листопада 2022 року).. 6. karlsson, c., johansson, b. & stough, r., 2009. entrepreneurship and innovations in functional regions. s.l.:edward elgar. 8. koval, v. et al., 2022. model analysis of eco-innovation for national decarbonisation transition in integrated european energy system. energies, 9(15). 9. koval, v., honcharova, i., metil, t. & stepanova, n., 2023. conceptual approaches to creating innovations in the field of crossborder transport. in: innovative management of marketing innovations in cross-border passenger transportation 30 business integration and education in transnational economic systems. riga: isma university riga (latvia), pp. 170-180. 10. kunert, c., 2018. design for stability in transport logistics definition, concepts and evaluation. s.l.:kit scientific publishing. 11.machado, c. & davim, j., 2022. organizational innovation in the digital age. s.l.:springer nature. 12. munby, d. & watson, a., 2014. road passenger transport: road goods transport. s.l.:elsevier science. 13. nagaraj, s., 2021. insights, innovation, and analytics for optimal customer engagement. s.l.:igi global. 14. pfohl, h.-c., 2022. logistics systems: business fundamentals. s.l.:springer nature. 15. tobelmann, m., 2011. public policies on sustainable logistics and the impact on thirdparty logistics provider. s.l.:grin verlag. 16. trachenko, l. et al., 2021. optimization modeling of business processes of engineering service enterprises in the national economy. naukovyi visnyk natsionalnoho hirnychoho universytetu, issue 4. 18 agora international journal of economical sciences, aijes, issn 2067-3310, e issn 2067 – 7669, vol. 16 (2022) between covering the basic needs and self-fulfilment jobs – why we need a better eu strategy for employment ana-maria coatu1, 1faculty of european studies, babeș-bolyai university, cluj-napoca, romania e-mail ana.coatu@ubbcluj.ro abstract: this article tries to present two distinct concepts in relation to labour: basic-needs jobs and self-fulfilment jobs. those two concepts should be taken into account when designing and envisioning eu work strategies. keywords: employment strategies, basic-needs job, self-fulfilment job 1. introduction labour together with capital and resources constitute the primary factors of production. of these, the labour force has the greatest dynamism, on which the accumulation of capital depends most, given that resources are limited. at the level of a country, the level of training of the labour force represents the mirror of economic and social development, respectively it contributes to the economic competitiveness of the country on the international level. thus, investment in the training level of human resources contributes to increasing economic competitiveness from the smallest sme to the largest multinational. in this context, the professional training of young people is the first and most important step toward access to the labour market. the development of practical skills among young people, starting with the preparation of students in order to facilitate the transition from school to the labour market is the basis for having a balanced society, with a low unemployment rate and with a high added value regarding the services and goods that are produced. to be competitive a nation must have highly skilled labour rather than cheap labour. beyond the fact that an unemployment rate as low as possible represents a desire at the level of any nation, access to the labour market represents a desire at an individual level starting from a certain age. at the individual level, access to the labour market does not only provide an income, that is, the person in question can satisfy his primary needs, but can also ensure the need for self-realization. on the opposite pole, the lack of a job can have negative consequences on a psychological and even physical level for the person concerned. thus, facilitating the access of young people to the labour market should be a priority at the government level, as the young people of today are the adults of tomorrow who contribute to the development of society and the retirees of the day after tomorrow who must be supported to enjoy a decent living towards the end of life. restricted/difficult access to the labour market can lead to alienation of the young person from his family or community, which is often associated with drug use, alcohol abuse and the adoption of violent, desperate behaviour [3]. furthermore, the lack of a job can have a negative impact on the level of the young person, to the level of the whole society: low socio-economic and cultural participation, non-involvement in the decision-making process at the political level, there is a risk of drug abuse, alcohol, violence, become on social assistance, may live in squalid conditions, may affect the ability to start a family, as well as future earnings. a young person who is long-term unemployed or who fails to get a job that matches their skills or to keep it for a longer period of time can subsequently become a burden on society [3]. mailto:ana.coatu@ubbcluj.ro 19 2. between basic needs and self-fulfilment jobs a job paid accordingly to professional education and experience is the first step towards financial independence, which is the basis of the transition to adult life and to a fulfilled life, with both material and spiritual satisfaction. also, a young person who has a job that brings him satisfaction can contribute to the society of which he is a part, from participating in the decision-making process to involvement in socio-cultural life and, above all, at an economic level through taxes and the taxes he pays, as well as by the fact that he brings money to the local or national budget, especially in the conditions in which the state has spent on his education and training in many of the eu countries, such as romania. employment and training are interdependent and represent the foundation on which a young person, a family, a community, a society, or a nation develops. therefore, the employment of young people is a complex field and of utmost importance for the development of society and the individual. we believe that having a job, an occupation is located both at the base of maslow's pyramid by providing primary needs: food, a roof, etc., but also at its peak by covering the need for selffulfilment. according to maslow's theory, it makes sense for an employee to place an initial emphasis on satisfying the basic-needs of ensuring security and physiology. a person just starting their job will typically be particularly concerned about physiological demands like appropriate pay and regular income as well as security needs like benefits and a secure workplace. everyone wants to work in a stable atmosphere and earn a respectable wage to support their families. the employees who do not have their basic needs satisfied will choose their jobs based on factors like pay, stability, and safety. additionally, when their lowest-level needs are not supplied or are in danger, employees will resort to meeting those needs (such as during an economic downturn) [2]. what no strategy or plan of action takes into account is the fact that for a young person once he has secured his primary needs, the need for self-actualization, for self-fulfilment, becomes more important, consequently prompting him to seek another job that satisfies this need. thus, at the level of the europe 2020 strategy, we believe that it was not enough to set a target regarding employment, but, above all, regarding the quality of employment. in fact, it is the same mistake that happened with the previous european strategy, the lisbon agenda. we consider that is necessary to establish a delimitation between having a job that pays the bills and a job that is fulfilling. the first type of job we will name basic-needs job and the second one is a self-fulfilment job. by basic-needs job, we mean a job that ensures the fulfilment of primary needs: food, a rooftop etc. and which is usually present early in a person's career. a self-fulfilment job is defined as an occupation that satisfies the highest need in the hierarchy of needs, namely, selfactualization, self-fulfilment, and self-esteem, and occurs later in a person's career, after reaching a certain social status and after having ensured a greater degree of financial independence. however, we consider that the two types of employment can be interspersed during a person's career: at first, he is an employee who covers his basic needs, then he identifies a job that he feels fulfils him, that it offers him certain professional satisfactions (selffulfilment job), but then, due to an economic crisis, for example, he ends up again in the initial situation where he survives from day to day. basic-needs employment, in our view, refers to the situation in which an employee, perhaps because of the economic situation, perhaps because of the low level of education or because they are at the beginning of their professional career or, most of the time, also because of low aspirations career, he manages to cover some of his basic, security and physiological needs, as they are presented in maslow's hierarchy of needs [4]. 20 employment for self-fulfilment, in addition to covering basic needs through the salary, gives to the employee a certain social status as a professional in a certain field, and a certain degree of financial independence the employee manages to save, the salary covers his basic needs, but above all, through this workplace, the employee feels that the daily activities bring him satisfaction, the successes at the workplace are part of his person, define him, and now he can, including, contribute to the development of the community from which is a part (through donations, volunteering or even through the work they do). the employment for self-fulfilment, proposed by us through this article, becomes the aggregator of these desired and the foundation by which the european commission can recommend to member countries to develop measures to encourage the quality, not just the quantity of job creation and development. among the targeted education measures, we propose the development of mandatory career counselling and guidance programs at pre-university and university education levels. a young high school student should be guided in choosing a career path, to understand the advantages and risks of a certain trade/profession, the connection and evolution between the demand and supply of the workforce in that field, as well as the sacrifices they would resort to in order to he gets where he wants to go. a young student should be able to discern between the need to obtain a qualification/ diploma in the field in which he wants to work, the multitude or, on the contrary, the limited fields in which he can work and the need to equip himself not only with fundamental knowledge through studies university but also the compulsion to acquire practical skills through internships or volunteering programs to carry out consistently and with dedication. the key concepts for envisioning better work strategies in the european union are human capital, career counselling, self-fulfilment jobs, personal needs, professional potential, work experience, better matching of skills and competencies, and the need to meet the skills and interests of the employees. the new eu work strategy should focus on the development of abilities and skills of the youth that will enable them to find better jobs, jobs that contribute to their filing of self-fulfilment. a report by eurofound emphasizes that the role of the workplace lies not only in ensuring decent living conditions but above all in offering citizens the right mechanisms to achieve their potential and goals in life. a job is not only a source of income to survive, but offers a certain social status and a role in society to the one who holds it. thus, people who have a job are more satisfied with their lives, resulting in employment being a milestone for development and wellbeing [1]. and in our research conducted to write this article, we have come to the conclusion that what is missing from the theoretical and conceptual research on employment policies, is a breakdown by types of employment beyond a dimensioning of employment by seasonal activities, part-time or full-time, etc. the practical applicability of the two concepts defined earlier lies in the fact that once named and characterized, they can represent the foundation that shows the direction of employment measures. thus, for those who are in the category of the active population, but not employed, the measures should be of a nature to stimulate basicneeds employment, and for those who have a job, measures should be thought through so that they acquire a certain sense of personal accomplishment, that is, measures should be created to stimulate employment for self-fulfilment. it is true that when a nation struggles to provide minimum decent working conditions or when there is fairly high unemployment, the goal of government can only be to provide as many jobs as possible for as many people as possible, to ensure a decent living and to be/ become responsible taxpayers. 3. conclusions the distinction between a basic-needs job and a self-fulfilment job is a complex matter. there are different aspects of them, such as: 21  the situation when a country has a shortage of personnel;  the situation of over-qualified personnel and low-paid jobs;  the situation of inexperienced and unskilled workers at the beginning of their careers who lack formal education as well. and this list can continue. these are just some of the aspects that a new eu work strategy should take into account when defining work measures, directions and priorities. in this article, we have presented some considerations regarding the concepts that we have proposed to the scientific community and that we have tried to define and justify as best we could. references [1] eurofound, the gender employment gap: challenges and solutions, publications office of the european union, luxembourg. research report, 2016, pp. 62-67 [2] how to apply maslow’s theory to the workplace. lower level needs https://managementisajourney.com/motivation-applying-maslows-hierarchy-of-needs-theory/#maslowhow [3] mascherini, massimiliano; ludwinek, anna; ledermaier, stefanie, social inclusion of young people, eurofound, 2015 [4] poston, bob, an exercise in personal exploration: maslow`s hierarchy of needs, 2009 http://www.ast.org/pdf/308.pdf https://managementisajourney.com/motivation-applying-maslows-hierarchy-of-needs-theory/#maslow-how https://managementisajourney.com/motivation-applying-maslows-hierarchy-of-needs-theory/#maslow-how http://www.ast.org/pdf/308.pdf medimond template agora international journal of economical sciences, aijes, issn 2067-3310, e issn 2067 – 7669, vol 11 (2017) the adaptation of management consultant profession from international trends to romanian market conditions felix-angel popescu 1 , laurențiu petrila 2 1 doctoral school of economics, university of oradea, university street, no. 1, oradea, romania 2 doctoral school “european paradigm”, babeș bolyai university, emanuel de martone street, no.1, cluj-napoca, romania e-mails felixangelpopescu@gmail.com, lauren.petrila@gmail.com abstract as a point of reference on the romanian market for management consulting services, it can be stated that its evolution over the last years has suffered a positive impact, in principle, due to the relative overcoming of the period of economic recession. of course, this does not mean that the situation of client companies is extremely favorable, because it is precisely this period of return and re-adjustment to market requirements that has led to cost cutting measures, including management consulting costs. keywords: management, consulting, profession, market, romania. 1 introduction in order to understand such a general concept like management consulting, a broader definition given by specialists assimilates it to “an added value, an optimizing factor of the resources of organizations in the public and private environment, an instrument of human and material resource efficiency, adapting technological processes to market conditions and needs” [1]. although it may sound like an eulogy, rather than a definition, other specialists think bigger when it comes to acknowledging the benefits of management consultancy by saying that a company is similar to the human body. “when a dysfunction occurs, it can be repaired following treatment. similarly, in a company, many types of problems can arise: many companies are quite healthy although a little physical exercise and a change in diet would make them stronger” [1]. the two definitions denote an evolution on the perception of consulting services, from simple research projects, in the past, to increasingly complex organizational transformation processes from a personal point of view, from here a question can be raised: does economic growth generate the gradual development of the consulting services, or the benefits of the consulting services determine the economic growth?, question that we have tried to answer in a previous paper [4], in relation to the structural and cohesion funds consultancy sector in romania. if we look in the past, we would find that in the early 1900’s, management was strongly related to technologies, in other words, the us initiators of this science like f. taylor, h. gantt, a. little, h. emerson [2] called it management engineering, only years later being transformed into a more commercial meaning, that of management consulting. there was also a generational shift in the existence of management consulting market, because during that period most of the companies were working with the industrial and the governmental sector, like the company of a. little or e. booz [2]. then there started to appear companies mainly focused on strategic management, like those of j. mckinsey or boston consulting group [2]. but why are we talking only on the us side? because, in the american leadership psychology, the gesture to appeal to competences from outside the organization was seen as a normal solution to solve the respective problem. mailto:felixangelpopescu@gmail.com mailto:lauren.petrila@gmail.com 2 the introverted leaders were found in europe, where it was not acceptable to call for help from outside the organization and even worse, to pay for it. in france or germany, there was a higher self-esteem among the business sector and it was promoted the idea that european leaders were better trained than the fellow americans. indeed, if we analyze the creation of the global market for management consulting services, it can be observed that international trade expansion has left aside this kind of vanities and has permitted american management consulting companies to go deep into the european market, most of them gaining good reputation until present. 2 the birth of management consultancy in romania, during the transition from the state centralized economy to the market economy 2.1 the introduction of management consultancy standards and the development of regulations regarding the management consultant profession in romania in romania of the mid 1900s, the state centralized economy did not have anything to do with the concept of management consulting, so the united nations tried to implement this concept by establishing a center for professional development [1] in bucharest, with the aim of bringing in foreign lecturers. the late 1900s caused the fall of the communist regime and the institute, even if it changed its name into romanian institute of management [1], it gradually lost its market and staff, facing direct competition from numerous american consulting and training companies installing on the romanian liberalized market. following its accession to the european union in 2007, romania adopted the liberal professions code, according to the directive of the european commission on the recognition of professional qualifications (2005/36/ec) [3]. even if romanians were getting used to the idea that liberal professions were provided on the basis of a relevant professional qualification by those who provide intellectual and / or creative services, in the interests of clients, it was difficult to understand why management consulting was a liberal profession self-regulated through industry bodies, and not by laws. from this point of view, the transition from a state-centralized economy to the market economy gave some headaches in understanding the new forms of legal organization and functioning in romania, and it became much easier for larger companies which had their own procedures for attesting the consultants or were part of professional associations in which the ability of members to provide consulting services was verified and attested to expand in the field of consultancy. at the opposite pole there were the small companies, recently established, which were not part of professional associations and did not know how management consulting should look like. the counter-offensive came along with the establishment of the romanian association of management consultants at beginning of the 1990s, which has strived, or better said, tried to make efforts to define the profession of management consultant and to inform the market and clients about the ways of working with a management consultant. the first normal steps resulted in the successful registration of the occupations of management consultant and ict consultant in the romanian classification of occupations (caen code 7022) [6]. the liberalization of the romanian market meant that more and more management consulting companies started to accommodate in, so it was necessary to implement a procedure of professional attestation according to european standards, which would assess the ethics, the logistics and the know-howof the candidate company [6]. however, these procedures were not mandatory and newcomers did not have to obey all the rules, if they did not want to. in order to professionalize the market, there was borrowed again the american perception on management and was wide spread through all europe the international certification specific to the profession of consultant and trainer in management, that was the cmc, meaning certified 3 management consultant [6], which was worldwide accepted. but the european union wanted more, so they issued an own european standard for management consulting service, through the european committee for standardization. as if it was not sufficient enough, each member state approved its own standard for management consulting, so romania’s liberalized market looked a bit odd, because at the end it has made a shift from a state-centralized economy to a european super state centralized economy. 2.2 the characteristics of romanian management consultancy market, between big international players and local newcomers in the romanian market of management consulting services, the big players started to have a high degree of competitiveness, because, as we said before, they were subsidiaries of large consulting companies in the international environment, they had an extended portfolio of external clients and their employees had a reputation in the consulting profession. but this fact it should not be seen as a negative fact, because most of the international consultancy firms contributed to the early stages of romania’s negotiations and compliances for the accession to the european union. even after this major step, these companies continued to carry out multiple activities, especially in international assistance projects. as it has succeeded to the european market, the first management consulting companies in romania were subsidiaries of american companies such as mckinsey, roland berger, or at kearney [7]. at present, exact figures of the total number of management consulting companies in romania is not known, because most of them have multiple caen codes. in the current period of stabilization of the annual growth of the market of management consulting services in romania, the external companies of profile have the opportunity to develop, as close strategies for entering this market, the opening of a commercial office in romania, the implementation of direct exports, the development of a chain of smaller companies by regions, as well as another form not yet fully exploited: the association or partnership with foreign consulting firms. this model is also applicable in reverse sense, taking into account the case of local consulting firms with smaller financial possibilities, who try to implement strategies of direct / indirect exports of consulting services outside romania. there are also contradictory discussions about the fact that management consulting services would be substitutable. indeed, each consulting firm has a different approach, offers different solutions as a method of application and logic, some services being of higher quality than others. but, even in a narrow field as management consulting, the sub-domains are different, ranging from management, accounting, taxation, insurance, to customs consultancy, therefore they cannot be substituted for each other, but they can be mutually complementary. at the same time, in the field of management consulting, most specialized companies offer services in approximately the same structural branches of a firm (management; financial; human resources; strategies; operations). a threat with substitutes would be the possibility for some companies to set up their own internal consulting departments or their own consultant employees, in this case not needing the services of the consulting companies from the external environment. another case of substitutes is represented by the increasingly common practice of some accountants or lawyers, who, in addition to their specialized services, usually take over the consulting part in management, human resources, financial, fiscal, etc. another case of substitutes is represented by the departments or offices / consultancy divisions within some public administration institutions or banks, which offer clients competitive services. competitive rivalry in the field of management consulting services should not be viewed as an unwanted thing, as an obstacle or as a fact that impedes the development of this sector of activity, but on the contrary, as long as the multinational consulting companies decide to open their offices or consultants on the romanian market, the quality of these services will increase considerably, because these services involve an increasing rate of updating knowledge in 4 management, a vast and continuously developing experience in management processes and strategies and a continuous need for market research. indeed, the profits of the companies may fluctuate, but the demand for consultancy services will not show a high degree of affect, as the romanian managerial culture is still in a stage of development and needs continuous support, with fundamental areas not yet fully exploited (agriculture, health, industry, icts). 2.3 doing business as a management consultant in romania: high consulting fees versus high expectations of clients for romanian clients, it was hard to understand, at the beginning, that management consultancy is a service with results that are more difficult to quantify and sometimes even materialize on paper, especially in the long term. according to some specialists [5], there was also a big gap in the mindset between the providers and beneficiaries of these kind of services, because for the client the fee was interpreted as a global cost, but the consultant does not fully benefit from it, due to the fact that there are other associated costs of the company. to clear up this misunderstanding, in each agreement, regulation or deontological code of the professional associations in a certain branch, it is mentioned that: “the liberal service provider can fix his desired fee and this must be made known to the client, clearly explaining the weight and the size of the component cost elements” [1]. in romania, the most common fee systems are: days-consultant (man-days) and success fee [5]. the man-days pricing system starts from the premise that any consulting activity can be broken down into days worked for the benefit of the client, and the fee is determined by multiplying the number of days worked with the daily fee [1]. the success-fee system tries to correlate the results obtained in the consulting mission with the consultant's fee, but presents some implementation and uses abnormalities [5], in the sense that the effects of a consulting service do not appear immediately after the completion of a consulting mission (or during the course of the mission). romanian consulting firms have not taken any american or european organization model, some of them having permanent consultants in management, other working mostly with collaborators. the same can be said about the specialization of the consultants, most of them having training in the economic field or technical training, and the others in approximate proportions equally, having training either in the legal field or in the field of social sciences. 3 conclusions in the period before the economic recession, management consulting services went through a profitable period on the romanian market, determined by the expansion of large corporations, which could not produce the management competence within the company as quickly as they developed. according to some specialists [7], this type of clients used appealed to management consultants in order to complete their management teams on different projects where they did not have sufficient or specialized resources. in other cases, clients just wanted to confirm certain managerial decisions that had to be implemented without further testing. however, with the economic downturn, the global consulting market contracted and the growth rates for the successive years were very low, therefore, the competition remained high, directly influenced by the contraction of the labor market and the changes in the consumer behavior, in the sense that client companies have not experienced such spectacular growth rates, so they started to cut any unnecessary expenses. limiting the budgets has inevitably led to a reduction of demand for management consulting services. it is necessary to understand that, although the recession has passed, the economic situation of the businesses sector is difficult. romania faces many challenges: each macro-sector of the economy urgently demands the definition and pursuit of clear objectives, and maybe this is the point where management consulting companies should bring decisive options and the ability to plan in the medium and long term, by capitalizing on strengths and opportunities. 5 references [1] finantare.ro, managementul firmelor de consultanță, bucurești, 2009. http://www.finantare.ro/biblioteca/2011/studiu-managementul-firmelor-de-consultanta-finantarero.pdf [2] d.r. mihai, strategii de marketing utilizate pe piața brașoveană a serviciilor de consultanță pentru management, brașov, 2007. https://www.scribd.com/doc/47415897/3 [3] g. pleșoianu, profilul profesional al consultanților în management, ghid practic pentru profesia de consultant în management, bucurești, 2004. http://www.svasta.ro/_upload/biblioteca/documents/ghid_consultant_prof.pdf [4] f.a. popescu, c.b. benea, do european funds consultancy market’ extensions determine romanian economic growth or vice versa?, emerging markets economics and business, no. 5, pp. 110-113, 2017. http://steconomiceuoradea.ro/wp/wp-content/uploads/2014/01/volum_conferinta_doctoranzi_2017.pdf [5] m. svasta, sisteme de onorarii și tarife în consultanță, ghid practic pentru profesia de consultant în management, bucurești, 2004. http://www.svasta.ro/_upload/biblioteca/documents/ghid_consultant_prof.pdf [6] m. svasta, sisteme de atestare/certificare în profesie, ghid practic pentru profesia de consultant în management, bucurești, 2004. http://www.svasta.ro/_upload/biblioteca/documents/ghid_consultant_prof.pdf [7] d. șchipor, tendințe în consultanța de management. http://cursautorizat.ro/blog/management/tendinte-in-consultanta-de-management-2 http://www.finantare.ro/biblioteca/2011/studiu-managementul-firmelor-de-consultanta-finantarero.pdf https://www.scribd.com/doc/47415897/3 http://www.svasta.ro/_upload/biblioteca/documents/ghid_consultant_prof.pdf http://steconomiceuoradea.ro/wp/wp-content/uploads/2014/01/volum_conferinta_doctoranzi_2017.pdf http://www.svasta.ro/_upload/biblioteca/documents/ghid_consultant_prof.pdf http://www.svasta.ro/_upload/biblioteca/documents/ghid_consultant_prof.pdf http://cursautorizat.ro/blog/management/tendinte-in-consultanta-de-management-2 25 agora international journal of economical sciences, aijes, issn 2067-3310, e issn 2067 – 7669, vol. 16 (2022) perspectives of the modification of the tax burden in the hotel and restoration industry, in the context of tax pressure generated by geo no. 16/2022 răzvan-lucian vonea1, 1faculty of economic sciences, agora university of oradea, oradea, romania e-mail vonea_razvan@yahoo.com abstract the proposed article sets out the tax burden on economic entities operating in the hospitality industry in terms of income taxation. we have presented theoretical legislative aspects regarding the specific tax trim, which remains in its full action until the end of the financial year 2022, but also illustrative examples that provide accurate information on the fiscal pressure felt by these economic operators. the prospect of increasing tax pressure in this industry is becoming clearer, following the amendment of the primary legislation in the field of taxation of these economic operators. thus, the idea of applying the tax specific to these activities is abandoned by shifting to another form of income tax. keywords: hospitality industry, specific tax, microenterprise income tax versus corporate tax, tax burden, tax pressure. 1. introduction horeca is a sector of the national economy that expresses an abbreviation for 3 words hotels, restaurants and cafes (catering), being most widely used in europe, namely in scandinavia (sweden, norway, denmark, iceland and finland), the benelux countries (netherlands, belgium and luxembourg) and france. this term is used in the hospitality industry to convey very clearly an activity that simultaneously refers to accommodation and catering (food and drink) services. starting from 2017, according to law no. 170/2016, romanian legal entities paying profit tax that carry out accommodation and catering activities are obliged to pay the specific tax. in this sense, on april 14, 2017, the order of the minister of tourism and the minister of public finances no. 264/464 for the approval of the methodological rules for the application of this law. the purpose of this article is to present this type of tax applied to entities in the horeca sector, whose existence ends on 31.12.2022, according to the provisions of geo no. 16/2022 amending the fiscal code, and replaces it with the profit tax or the income of microenterprises. also, some illustrative examples are presented from which we can draw certain opinions regarding the change in the tax burdens of entities in the hospitality industry. 2. materials and methos studying the fiscal behavior of economic operators operating in the hospitality industry is a concern for us, given the implications it propagates for the romanian citizen's leisure options. a field strongly affected by the pandemic period, the hospitality industry recorded a decrease in turnover in 2020 compared to 2019 by 35% in relative terms, and in value terms from 27.5 billion in 2019 to 17.9 billion in 2020; the number of employees in hotels and restaurants decreased in 2020 compared to 2019 mailto:vonea_razvan@yahoo.com 26 from 186,000 lei to 150,000 employees; the net profit recorded by companies in the horeca industry that are in surplus decreased by 46.5% to 2.49 billion lei in 2020, compared to 4.65 billion lei in 2019. but not only the horeca industry itself is relevant in this analysis; its interconnection with other economic activities gives it a significant contribution to the evolution of some companies that develop businesses in related fields, such as agriculture, local suppliers of ingredients, producers and distributors of raw materials in the kitchen, importers and distributors of food products, dedicated service providers industry, as well as management systems, cleaning, transport, logistics, packaging. taxation constitutes the set of obligations to the tax office, as well as the means of collecting them, the regulations and practices relative to them. the immediate effect of the action of taxation is the encumbrance of the income of the payers, and from this perspective taxation creates constraint, pressure, sacrifice for them. the tax is a form of forced collection at the disposal of the state, without direct consideration and with a non-refundable title, of a part of the income or wealth of natural and/or legal persons, in order to cover some public needs. the documentary material we have referred to is the primary legislation we have regarding the direct taxation of the hospitality industry. this legislative package includes: law no. 170/2016 regarding the specific tax for certain activities; the fiscal code approved by law no. 227/2015; omt no. 264/464/2016 for the approval of the methodological norms for the application of law no. 170/2016 regarding the specific tax of certain activities1; the methods used by us to capture the fiscal pressure created on economic operators in the hospitality industry sector are descriptive and quantitative, relevant in this regard being the indicators of fiscal pressure. we have also used the method of analysis and comparison, given the change in the taxation system in the hospitality industry sector, through which we will analyze and compare the taxes owed today against those that will follow starting from the financial year 2023. the tax legislation that currently governs the taxation of earnings in the hospitality industry is law no. 170/2016 regarding the specific tax. it falls under the scope of the hospitality industry: 1 publicat în m.o. nr. 266 din 14 aprilie 2017; specific tax 01.01.2017 – 31.12.2022 conditions: 1. to have one of the caen codes listed below inscribed in the constitutive act; 2. not to be in liquidation procedures, according to the law caen 27 5510 "hotels and other similar accommodation facilities" 5520 "accommodation facilities for holidays and short periods" 5530 "caravan parks, campsites and camps" 5590 "other accommodation services" 5610 "restaurants" 5621 "food activities (catering) for events" 5629 "other food services" 5630 "bars and other activities serving drinks" the following criteria were taken into account when establishing the taxable matter: a. useful commercial/serving area for caen codes 5610 "restaurants" and 5630 "bars and other restaurant service activities", defined as the sum of the areas of lounges, terraces and summer gardens, according to the classification/authorization certificate; b. the useful area for carrying out the activity specific to caen codes 5621 "food activities (catering) for events", 5629 "other food services n.e.c.", defined as the total built area, according to the classification/authorization certificate. determination of tax for restaurants payers: restaurants, catering, other public food services calculation formula: unde: k = 1400, valoarea impozitului standard (lei); x = variabilă în funcție de rangul localității; y = variabilă în funcție de suprafața utilă comercială de desfășurare a activității; z = coeficient de sezonalitate; q = 0,9 și reprezintă coeficient de ajustare pentru spațiu tehnic. table no. 1. seasonality coefficients and the locality rank variable for a restaurant seasonality coefficient– z bucurești, brașov, cluj-napoca, craiova, iași, constanța, ploiești, sibiu, timișoara 0,45 towns, cities 0,35 tourist resorts of national interest 0,3 villages, communes and tourist resorts of local interest 0,1 variable according to the rank of the locality x bucurești zona a 17,0 zona b 16,0 zona c 15,0 isa/unitate = k x (x + y x q) x z https://www.flickr.com/photos/phil_fry/6897803087/ https://creativecommons.org/licenses/by-nc-nd/3.0/ https://creativecommons.org/licenses/by-nc-nd/3.0/ https://www.sgfoodonfoot.com/2017/05/jade-restaurant-fullerton-hotel.html https://creativecommons.org/licenses/by-nc-nd/3.0/ https://www.vedeteblog.com/2018/11/top-instagram-locuri-de-iesit-din.html https://creativecommons.org/licenses/by-nc-nd/3.0/ https://creativecommons.org/licenses/by-nc-nd/3.0/ 28 zona d 13,5 8 poli (brașov, cluj-napoca, constanța, craiova, iași, ploiești, sibiu, timișoara) zona a 15,0 zona b 14,0 zona c 13,0 zona d 11,5 towns zona a 13,0 zona b 11,0 zona c 9,0 zona d 7,0 cities 5,0 resorts 5,0 commune 3,0 table no. 2. the variable usable area for a restaurant the area between variable depending on the useful area of the location ("y" variable) 0 mp – 30 mp 2,0 31 mp – 50 mp 7,0 51 mp – 70 mp 12,0 71 mp – 90 mp 16,0 91 mp – 120 mp 21,0 121 mp – 160 mp 29,0 161 mp – 200 mp 38,0 201 mp – 240 mp 47,0 241 mp – 300 mp 58,0 301 mp – 400 mp 75,0 401 mp – 500 mp 80,0 501 mp – 600 mp 85,0 601 mp – 700 mp 90,0 701 mp – 800 mp 95,0 peste 801 mp 105,0 determination of tax for bars and other activities serving drinks payers: restaurants, catering, other public food services calculation formula: unde: k = 900, valoarea impozitului standard (lei); x = variabilă în funcție de rangul localității; y = variabilă în funcție de suprafața utilă comercială/de servire/de desfășurare a activității; z = coeficient de sezonalitate; q = 0,9 și reprezintă coeficient de ajustare pentru spațiu. table no. 3. seasonality coefficients and the locality rank variable for a bar seasonality coefficient– z bucurești, brașov, clujnapoca, craiova, iași, constanța, ploiești, sibiu, timișoara 0,45 towns, cities 0,35 tourist resorts of national interest 0,3 villages, communes and tourist resorts of local interest 0,1 the variable depending on the rank of the locality x isa/unitate = k x (x + y x q) x z 29 bucurești zona a 16,0 zona b 15,0 zona c 14,0 zona d 12,5 8 poli (brașov, cluj-napoca, constanța, craiova, iași, ploiești, sibiu, timișoara) zona a 14,0 zona b 13,0 zona c 12,0 zona d 11,0 town zona a 12,5 zona b 10,0 zona c 8,0 zona d 4,0 city 2,0 resorts 2,0 commune 0,4 table no. 4. the useful surface variable for a bar the area between variable depending on the useful area of the location ("y" variable) 0 mp – 30 mp 2,0 31 mp – 50 mp 4,0 51 mp – 70 mp 6,0 71 mp – 90 mp 8,0 91 mp – 120 mp 10,0 121 mp – 160 mp 14,0 161 mp – 200 mp 16,0 201 mp – 240 mp 18,0 241 mp – 300 mp 20,0 301 mp – 400 mp 25,0 401 mp – 500 mp 30,0 501 mp – 600 mp 40,0 601 mp – 700 mp 50,0 701 mp – 800 mp 60,0 801 mp – 900 mp 70,0 901 mp – 1000 mp 80,0 peste 1001 mp 90,0 the annual standard tax per unit is established by law, per type of unit, and is the basis for determining the specific tax owed by these units, according to a calculation formula: standard tax restaurants 1500 lei/year bars 900 lei/year hotels depending on the classification 30 the legislation applicable to this sector starting from 01.01.2023 abolishes the specific tax and gives the possibility to economic operators in the hospitality industry to submit either to the rules of the income tax of micro-enterprises or to the rules of the profit tax. the microenterprise income tax is 1% for microenterprises that have one or more employees. however, economic operators in the hospitality industry do not have to meet the requirement regarding the number of employees, nor the requirement to have a turnover of less than 500,000 euros/year.2. determining the tax on the income of micro-enterprises payers: micro-enterprises, which meet the conditions stipulated by the definition of microenterprises, from art. 47 para. (1) from the fiscal code. tax rate: 1% taxable base: income from any source, except those provided by art. 53, para. (1) of the fiscal code calculation formula: deadline: this tax is calculated and paid quarterly to the state budget, no later than the 25th of the month following each quarter. determination of profit tax payers: taxpayers provided for in art. 13, para. (1) and para. (2) fiscal code. tax rate: 16% taxable base: taxable profit formulă de calcul: unde: vt = venituri totale; ct = cheltuieli totale; cn = cheltuieli nedeductibile; vn = venituri neimpozabiile pri = profit fiscal impozabil ipr = impozit pe profit starting from this fiscal-accounting information, we notice that we are dealing with 2 different economic categories: profit and income. in the accounting sense, revenues are flows generated from the operating and financial activity of a company, and profit denotes a 2 art. 47, alin. (1), lit. c) și alin. (2) din legea nr. 227/2015; iv = vt x 1% profit contabil profit fiscal vt ct vt ct + cn -vn ipr = pri x 16% 31 result that remains after deducting from revenues the costs incurred to obtain those revenues. it follows that starting from 01.01.2023, economic operators in the hospitality industry will have to pay attention to the amount of income or profits, as these become the taxable bases for determining their tax burden. in the specialized literature, the fiscal pressure is calculated as the ratio between the taxes and contributions due and the amount of gdp. regarding our study, we will calculate and analyze the fiscal pressure borne by economic operators in the hospitality industry by referring to the company's turnover, a parameter that most faithfully expresses the volume of the company's activity, in gross form. using this indicator, we will capture how much an enterprise allocates from its turnover to paying tax and we will do this by comparing specific, income and profit tax. 3. results and discussions under the conditions of applying the specific tax, in the case of restaurants, it will have the following values, with an example for a restaurant with an area of 130 square meters: table no. 5. the specific tax for a restaurant restaurant location specific tax for a restaurant commune/village 1400 x (3 + 29x0,9) x 0,1 = 4 074 lei resorts 1400 x (5 + 29x0,9) x 0,3 = 13 062 lei municipality area a 1400 x (13 + 29x0,9) x 0,35 = 19 159 lei brașov area a 1400 x (15 + 29x0,9) x 0,45 = 28 893 lei in the case of a bar, cafe, with an area of 120 square meters, the annual specific tax due is calculated as follows: table no. 6. the specific tax for a bar bar/cafe location specific tax for a bar / cafe commune/village 900 x (0,4 + 10x0,9) x 0,1 = 846 lei resorts 900 x (2 + 10x0,9) x 0,3 = 2970 lei municipality area a 900 x (12,5 + 10x0,9) x 0,35 = 6772 lei brașov area a 900 x (14 + 10x0,9) x 0,45 = 9315 lei let's take as an example a restaurant in zone a which, starting from 01.01.2023, has to choose between the profit tax and the tax on the income of micro-enterprises; case: a restaurant presents the following accounting information for the first quarter of 2023; we will determine how much this restaurant would pay to the state budget if it chose the profit tax system or the income tax system: table no. 7. example of tax calculation at a restaurant, after 01.01.2023 restaurant accounting quantities abbreviations profit tax micro income tax total income vt 100.000 100.000 total expenses ct 40.000 40.000 taxable accounting profit pri 60.000 60.000 tax due id 9.600 1.000 lei fiscal pressure prf 9,6% 1% calcule: 32 pri = vt – ct = 100 000 – 40 000 = 60 000 lei ipr = pri x 16 % = 60 000 x 16% = 9 600 lei iv = vt x 1% = 100 000 x 1% = 1 000 lei id prf = ---x 100 = 9600/100000 = 9,6% mi 4. conclusions based on the research of the documentary material composed primarily of the primary legislation in the field, we found that the taxation of units in the hospitality industry was based on other taxation criteria than income or wealth. compared to other economic operators, whose earnings are taxed according to the amount of income and/or profits, the horeca sector was imposed, in order to determine the tax due, criteria such as: the seasonality of the business, the rank of the locality where it operates, the useful area of the location. geo no. 16/2022 amending and supplementing the fiscal code eliminates this type of taxation of these companies and leaves them free to choose between: income taxation with 1%, or taxation of profits at 16%. regardless of the form of taxation that these economic operators choose to adopt, the legislator created the prerequisites for respecting the principles of fiscal equity, as they were formulated as maxims by adam smith, in the book wealth of nations; the absolute and relative tax burden of each taxpayer to be established according to his contributory power, which is dependent on the amount of income and taxable assets, as well as the personal situation of the taxable subject. in the case analyzed by us, we can draw the following conclusions: table no. 8. comparison of taxes owed by a restaurant in 2022 and 2023 types of tax calculated tax due specific tax 19159 tax 9600 income tax 1000 in this case, we considered a cost margin (fixed and variable) of the restaurant of about 40%. compared to this average cost margin of a restaurant, we can say that, through the changes made to the fiscal legislation regarding the taxation of restaurants, there has been a fiscal relaxation, reducing the fiscal pressure felt by them in terms of the taxation of earnings. it 33 can be observed that through the specific tax due, it took more into account parameters, such as the rank of the locality, the usable area, seasonality; aspects that from 2023 are removed and give restaurants the possibility to be taxed: profit or turnover. observing not only the percentage rate that is different between the taxation of profits and incomes, but also through detailed analyses, we can state that the turnover tax tends to become more advantageous for the hospitality industry sector as well, in terms of the amount of tax owed, but also in terms of flexibility, ease and way of managing it. of course, apart from the cases in which these types of economic operators obtain accounting and fiscal losses, in which case in the variant of taxation of profits, the fiscal pressure borne by them would become 0. references [1] cătineanu, florian, 1999, finanțe publice – studii de caz, 1999, editura mirton, pg. 37 [2] cristea, dumitru, horea, mutașcu, m., nicolescu, ana, cristina, 2009, elemente de teorie și practică fiscală, timișoara, pg. 13-29; [3] popa, adriana, florina, dobre, f., ciobanu, r., 2022, fiscalitate, editura ceccar, pg. 53-62; [4] smith, adam, 1965, avuția națiunilor, editura academiei române, pg. 39; [5] talpoș, ioan, 1996, finanțele româniei, editura sedona, 1996, pg. 137; [6] vonea, r., 2021, contabilitate financiară i., editura universității agora, oradea; pg. 15-42; [7] vonea, r., 2019, bazele contabilității – curs didactic, editura universității agora, oradea, pg. 15-35; [8] omt nr. 264/464/2016 pentru aprobarea normelor metodologice de aplicare a legii nr. 170/2016 privind impozitul specific unor activități [9] codul fiscal al româniei, aprobat prin legea nr. 227/2015, modificată și completată; [10] oug nr. 16/2022, publicată în mo nr. 716/15.07.2022, de modificare și completare a codului fiscal; [11] legea nr. 170/2016 privind impozitul specific unor activități; [12] legea nr. 31/1990 privind societățile comerciale, republicată; [13] www.termene.ro [14] www.deloitte.com ghid privind industria horeca [15] www.horeca.aristudio.ro http://www.termene.ro/ http://www.deloitte.com/ situatii financiare consolidate agora international journal of economical sciences, aijes, issn 2067-3310, e issn 2067 – 7669, vol 11 (2017) consolidated financial statements elements of the management decision to invest cristina ioana antik 1 1 agora university of oradea, tineretului square str., no. 8, oradea, romania e-mail antikcristina@yahoo.com abstract the objective of the consolidated financial statements is to present the financial position, performance and evolution of the financial position in relation to the units included in the group of companies, as if it were a single company. the subject of consolidation is the companies within the group, and the object of consolidation is their annual financial statements. consolidation of financial statements is a technique of engineering financial accounting, which aims to produce information necessary for external users. it is also a management tool, as it allows to clarify the complex relations between subsidiaries and the parent company and to compare the results obtained with the set objectives. keywords: consolidated, financial, statements, management, decision, investment. 1 introduction in the economic life of different countries there are both economic agents who carry out their activity as independent legal entities and groups of companies linked to each other from an economic and financial point of view, under the control or influence of one of them. groups of societies are an increasingly important reality in the contemporary world. the group of companies represents the ensemble made up of two or more companies, each with its own legal personality, but which are subject to a unitary economic direction assumed by one or more of them. the companies within the group, having legal personality, each prepare consolidated financial statements according to the specific regulations established by each country. the information provided by the individual annual financial statements of the component companies of the group is insufficient and irrelevant, as they do not allow a correct assessment of the economic-financial situation of the group. the individual financial statements do not reflect the joint activity of the various group companies. the consolidated financial statements of the group are not equal to the sum of the annual financial statements of the group companies, as there may be internal transactions between the group companies. these operations artificially increase the values of individual accounts. the elimination of these operations is not limited to the simple addition of individual accounts. the need for consolidated financial statements is obvious, they give a more comprehensive picture of the real situation of a group, an image that can not give all the balance sheets of the component companies, they allow the global expression of the financial situation and the result of the group. the consolidated financial statements ensure the aggregation of assets, liabilities and equity, as well as income and expenses to provide a global and accurate picture of the group of companies. for a group of companies, whether operating at national, regional or global level, benefiting from the information provided through the consolidated financial statements is a real and solid basis for substantiating investment decisions, strategic decisions and, last but not least, executive management decisions. an investment decision based on mailto:antikcristina@yahoo.com 2 viable, comparable, consolidated and real accounting information is subject to a high degree of success. 2 the purpose and content of the consolidated financial statements in a modern accounting framework, the purpose of the consolidated financial statements is to provide a structured financial representation of the financial position and transactions of the group. consolidated financial statements must provide information about the financial position, performance and cash flows of an enterprise, information that must be useful to a wide range of users in making their economic decisions [1]. to achieve this goal, the consolidated financial statements must provide information to enable users to make forecasts of future cash flows, in particular regarding their maturity and probability. in this regard, the information aims to: group-controlled assets, ie resources generating future cash flows; group debts, ie external liabilities that must be at the origin of payments; equity, as residual interest of the owners in the assets controlled by the group; the result of the group and, in a broader sense, its economic performance, rendered by reflecting the evolution of equity, evolution from which are excluded the effects of operations performed directly with the owners; past cash flows, which can be the basis for determining future cash flows. this information must enable account users to specify the ability of the undertaking concerned to pay dividends, interest and, in general, to pay its debts on time. in accordance with ias 1 presentation of financial statements, a complete set of financial statements includes the following components: 1. balance sheet 2. income statement 3. a situation showing: a. either all changes in equity (all changes in equity); b. either changes in equity, except for those arising from capital transactions with owners and distributions in their favor (changes in equity than those arising from capital transactions with owners and distributions to owners); c. cash flow statement; d. accounting policies and explanatory notes. according to omfp 3055/2009, the consolidated financial statements include the consolidated balance sheet, the consolidated profit and loss account and the explanatory notes to the consolidated financial statements. these documents constitute a unitary whole [2]. the consolidated financial statements provide a true and fair view of the assets, liabilities, financial position and profit or loss of the companies included in these financial statements as a whole. beyond these financial statements, companies are encouraged to provide critical management views, by describing and explaining the main features of financial performance and financial position, as well as the main uncertainties they face. such a report must include: the main factors and influences that determine performance, including the environmental changes in which the entity operates, its response to such changes and effects, its investment policy to maintain and increase the performance from which, distinctly, the dividend policy should be presented; the sources of financing used by the entity, its borrowing rate policy and its risk management policies; 3 the solidity of the entity and its resources, elements whose value expression is not reflected in the balance sheet, in accordance with the international accounting reference. 2.1 the consolidated balance sheet in accordance with the international standard ias 1, the structure and content of the balance sheet must distinguish between current and non-current items. when such a distinction is not made, assets and liabilities are, in principle, classified according to their liquidity and their exigibility. regardless of the presentation, the group mentions, in the consolidated financial statements, the under-one-year portion of assets and liabilities for all items that are likely to contain both short-term and long-term items. overall, this standard (ias 1) refers to the items that must be disclosed in the balance sheet: property, plant and equipment; intangible assets; financial assets (excluding equity investments, customer and operating receivables, cash and cash equivalents; equity investments; inventories; customers and other operating receivables; cash and cash equivalents; suppliers and other operating liabilities; tax liabilities and assets, provisions, noncurrent interest-bearing liabilities, minority interests, issued capital and reserves. according to omfp 1802/2014, the assets and liabilities of the entities included in the consolidation are fully incorporated in the consolidated balance sheet, by summing up similar elements [2]. 2.1.1 current and non-current assets current balance sheet assets include: items intended to be made or held for sale or consumption within the normal operating cycle of the enterprise; or items intended mainly for trading on different markets; or items held in a short-term perspective, the entity (group) expecting to achieve them within a maximum of one year from the end of the year; or liquidity or liquidity equivalents, if their use is not restricted. the other assets are considered non-current items. they include both tangible and intangible assets, as well as long-term operating and financial assets. current assets refer, in particular, to inventories and receivables, which are sold, consumed or realized in the normal operating cycle, even when they are not expected to be realized in the next 12 months after the end of the year. both omfp 3055/2009 for the approval of the accounting regulations compliant with european directives and order 2239/2011 which were subsequently repealed by order 1802/2014 (the latter coming into force on january 2015) [2] show that stocks can be presented as a single item in the consolidated annual financial statements, if there are special circumstances that could lead to unjustified expenses. securities traded on the markets are current assets, if they are expected to be realized in the next 12 months following the end of the year, otherwise they are considered non-current assets. order 1802/2014 specifies that the book values of the shares in the capital of the entities included in the consolidation are offset by the proportion they represent in the capital and reserves of these entities, as follows: a) offsets are made on the basis of the book values of the identifiable assets and liabilities at the acquisition date of the shares or, if the acquisition takes place in two or more stages, at the date when the entity became a subsidiary. the acquisition date is the date on which control over the net assets or operations of the acquired entity is effectively transferred to the acquirer. 4 b) in the conditions in which the values provided in letter a) cannot be established, the compensation is made on the basis of the accounting values existing on the date when the entities concerned are included in the consolidation for the first time. the differences resulting from such offsets are presented as a separate item in the consolidated balance sheet, as follows: the positive difference is presented under the item "positive goodwill"; the negative difference is presented in the item "negative goodwill". these elements, the methods used and any significant changes from the previous financial year must be explained in the explanatory notes to the consolidated annual financial statements. the amount attributable to the shares in the subsidiaries included in the consolidation, held by persons other than the entities included in the consolidation, is presented separately in the consolidated balance sheet, under the item "minority interests". minority interests must be presented in the consolidated balance sheet in equity, separately from the parent company's equity. 2.1.2 current and non-current debts a debt is a current element of the external liability when it is to be repaid: either within the normal operating cycle; either at a maturity within the next 12 months following the end of the financial year. some current liabilities, such as trade payables, those related to employee relations or other operating costs, are part of the working capital requirement used in the normal operating cycle. such items, as in the case of assets, are classified in the current category, even if they must be repaid over a period of more than one year. there are also cases where some current debts are not repaid within the normal operating cycle, but must be settled within the next 12 months, following the year-end date. for example, the short-term part of mediumand long-term loans, dividends paid, taxes on benefits payable, other non-commercial creditors. interest-bearing debts, which generate a long-term financing of working capital requirements, are non-current elements of debts, for their part due at a date of more than one year. an enterprise must classify its long-term interest-bearing liabilities as non-current liabilities, even if they must be settled within the next 12 months following the end of the financial year, if [3]: these are debts that, at the time of their contracting, were long-term debts; the entity in question intends to refinance these debts through a long-term debt; this intention is confirmed by the existence of a refinancing or rescheduling contract, concluded before the financial statements were approved. an analysis of the consolidated balance sheet allows us to make the following assessments: within the balance sheet items of assets, respectively equity and debts, the following items specific to the consolidated accounts are presented: goodwill (positive acquisition difference), equity investments, minority interests; the consolidated equity consists of: the share capital of the parent company, the consolidated reserves (the reserves of the parent company to which is added its share of the reserves obtained by the consolidated companies after the acquisition of the securities) and the accumulated accumulated profits or losses ( the accumulated profits or losses of the parent company to which is added its share of the profits or losses accumulated by the consolidated companies after the acquisition of the securities); the differences generated by the conversion of the accounts of the foreign subsidiaries based on the closing rate method must be included in the category of consolidated equity; the balance sheet is presented after the distribution of the result. 5 2.2 the consolidated profit and loss account in accordance with ias 1, the income statement must disclose at least the following items: income; financial expenses; the share in the result of the affiliated entities and of the joint ventures put in equivalence; the pre tax gain or loss recognized on the sale of assets or the settlement of obligations relating to discontinued operations; income tax; gain or loss after tax, found on discontinued operations; the result of the exercise. also, some items will be presented in the profit and loss account as profit or loss allocations. these are the profit or loss attributable to minority interests and the profit or loss attributable to the capital holders of the parent company. a group must present in its profit and loss account or in the explanatory notes a classification of expenses by nature or by function. however, ias1 encourages entities to use such an analysis directly in the income statement. the analysis by function of expenses, called the sales cost method, requires the allocation of expenses on three functions, as part of the cost of sales, distribution or administration activities. this classification may be of more interest to the recipients of the accounts than the classification by nature, giving them more relevant information, but sometimes involves arbitrary choices in the distribution of expenditure. in its application, professional judgment has an important role. the analysis by nature is simpler than the analysis by function, because it does not require an allocation of expenses according to the nature of the different functions of the enterprise. 2.3 the consolidated statement of changes in equity the statement of changes in consolidated equity explains the changes in consolidated equity from one year to the next. consolidated equity may change due to: increasing the capital of the consolidating enterprise; distributions made by the consolidating enterprise during the year; the incidence of the exchange rate variation, in case of consolidation of foreign enterprises; incidence of revaluations; the incidence of restructurings and certain internal disposals of assets; changes in the percentage of interest in consolidated enterprises, following the change of its capital; changes in accounting methods. 2.4 incidences of the conversion of foreign companies’ accounts on equity in order to consolidate foreign companies, their financial statements may be converted based on the use of the historical cost method or the closing rate method. the use of the historical exchange rate method does not cause a change in equity, because they are converted based on historical cost and the incidence of exchange rate changes is recorded in the income statement. in the case of the closing exchange rate method, equity is also converted on the basis of the historical exchange rate. but, due to the conversion of the other balance sheet items based on the closing rate, in the balance sheet of the foreign company is presented the balance sheet item of capital “conversion differences”. when the securities of the consolidated company are eliminated, the translation differences are divided between the group and the minority. in this situation, the conversion difference that belongs to the group changes from one year to another depending on the evolution of the exchange rate. 6 2.5 consolidated cash flow statement the cash flow statement is an essential component of the financial statements presented by large enterprises. the format of the cash flow statement in the international accounting framework is based on the ias 7 standard “cash flow statement”. the current success of the cash flow statement is closely linked to the development of the valuation of economic activities through financial markets. as it provides investors with useful information for making decisions, the picture of cash flows contributes to the efficiency of markets. also, the success of value-based management can only increase the importance of the cash flow statement. the table of cash flows shows such flows, known as receipts and payments, during the period. in other words, it shows where the liquidity came from and how it was spent, thus explaining the causes of their variation. in the vision of the accounting norm ias 7 “statement of cash flows”, cash is assimilated with cash and cash equivalents. liquidity includes cash and demand deposits. liquidity equivalents are short-term investments that are highly liquid, easily convertible into a predetermined amount of liquidity and whose value is not likely to change significantly. the purpose of holding cash equivalents is to meet short-term treasury commitments. it follows that their maturity is usually less than 3 months. the securities representing the participations are excluded from the cash equivalents, except for the preferred shares acquired shortly before their maturity and which have a fixed redemption date. the expression cash flows refers to the set of cash inflows and outflows and cash equivalents. cash flows do not include movements between items that constitute liquidity or cash equivalents, because they are part of the management of the company's treasury. the statement of cash flows must show the cash flows for the year, broken down into operating, investing and financing activities. 2.5.1 cash flows generated by operating activity these refer to: proceeds from the sale of goods and services; receipts from royalties, fees, commissions and other income; payments on debts to suppliers of goods and services; payments in favor of employees; payments and refunds of income taxes, provided that they cannot be specifically associated with financing and investment activities, etc. 2.5.2 cash flows generated by investment activity these refer to: payments made for the acquisition of tangible and intangible assets, as well as other longterm assets; proceeds from the sale of tangible and intangible assets and other long-term assets; payments made for the acquisition of equity securities and debt securities issued by or from other undertakings, as well as payments made for the acquisition of securities in joint ventures; receipts relating to the sale of equity securities and debt securities issued by or from other undertakings, as well as receipts relating to the sale of securities held in joint ventures; cash advances and loans to third parties; receipts from the repayment of cash advances and loans to third parties. 2.5.3 cash flows generated by financing activity these refer to: receipts from the issue of shares and other equity instruments; payments made to shareholders for the acquisition or redemption of the company's shares; 7 proceeds from the issuance of bonds, bank loans, treasury bills, mortgages and other shortterm or long-term loans; liquidity repayment of borrowed amounts; payments made by the lessee to reduce the debt balance related to a lease-financing contract. 3 conclusions the need for consolidated financial statements is obvious, they give a more comprehensive picture of the real situation of a group, an image that can not give all the balance sheets of the component companies, they allow the global expression of the financial situation and the result of the group. the main factor in generating this need is presented by the existence on foreign capital markets of multinational companies and groups. in order to be able to manifest themselves as actors of the international capital markets, the groups of companies must first of all have comparable information, but also sufficient, or relevant, regarding the existing investment opportunities. the existence of consolidated information at the level of a group of companies, especially in the conditions in which it operates beyond the borders of the national economy, represents a mandatory condition for the success and economic performance of the group [4]. the objective of the consolidated financial statements is to present the financial position, performance and evolution of the financial position in relation to the units included in the group of companies, as if it were a single company. the existence of consolidated financial statements at the level of the group of companies has quickly covered the distance between necessity and reality, due to the needs manifested by economic reality, but also due to significant efforts to increase the competitive advantages of different economic entities [5]. within any company, but especially within a group of companies, the foundation of managerial decisions and, in particular, of investment decisions on real economic and financial bases has become a necessity, as a result of the risks that may arise and cause a failure of actions taken, but also due to the significant costs involved in adopting and implementing an inappropriate decision. benefiting from the information provided through the consolidated financial statements is a real and solid basis for substantiating investment decisions, strategic decisions and, last but not least, executive management decisions. an investment decision based on viable, comparable, consolidated and real accounting information is subject to a high degree of success. consolidation of accounts is an important condition for rendering a true and fair view of the balance sheet, performance and financial position of an enterprise in accordance with the normative framework of international accounting standards. the harmonization of the accounting regulations in our country with the international ones will bring to the forefront this issue, in the not too distant future. consolidation of accounts, especially using a regulatory framework, leads to clarification of the financial position and performance of a group of enterprises. it is thus eliminated that the public is misled by multiplying turnover as a result of reciprocal transactions, or by confining all risks and indebtedness to a single enterprise in the group for a more favorable presentation of the others. references [1] dorina nicoleta lezeu, analiza situațiilor financiare ale întreprinderii, editura economică, 2004; [2] omfp 3055/2009 pentru aprobarea reglementarilor contabile conforme cu directivele europene modificat prin ordinul 2239/2011 și care ulterilor au au fost abrogate de ordinul 1802/2014 (acesta din urmă întrând în vigoare începând cu luna ianuarie 2015) https://contabilul.manager.ro/a/14125/noi-reglementari-contabile-de-la-1-ianuarie-2015-s-a-publicat-ordinul-18022014.html https://contabilul.manager.ro/a/14125/noi-reglementari-contabile-de-la-1-ianuarie-2015-s-a-publicat-ordinul-18022014.html 8 [3] l.eros-stark, m.pantea, analiza situației financiare a firmei. elemente de teorie, studiu de caz, editura economică, bucurești, 2001 [4] https://www.academia.edu/31080775/capitolul_i_aspecte_generale_privind_grupuril e_de_societ%c4%82i_%c5%9ei_situaiile_financiare_consolidate_1._noiunea_d e_grup_de_societ%c4%82i [5] https://lege5.ro/gratuit/gqytambrgm/situatii-financiare-anuale-consolidate-si-rapoarte-consolidatereglementare?dp=gy4tanjyha4ti https://www.academia.edu/31080775/capitolul_i_aspecte_generale_privind_grupurile_de_societ%c4%82i_%c5%9ei_situaiile_financiare_consolidate_1._noiunea_de_grup_de_societ%c4%82i https://www.academia.edu/31080775/capitolul_i_aspecte_generale_privind_grupurile_de_societ%c4%82i_%c5%9ei_situaiile_financiare_consolidate_1._noiunea_de_grup_de_societ%c4%82i https://www.academia.edu/31080775/capitolul_i_aspecte_generale_privind_grupurile_de_societ%c4%82i_%c5%9ei_situaiile_financiare_consolidate_1._noiunea_de_grup_de_societ%c4%82i https://lege5.ro/gratuit/gqytambrgm/situatii-financiare-anuale-consolidate-si-rapoarte-consolidate-reglementare?dp=gy4tanjyha4ti https://lege5.ro/gratuit/gqytambrgm/situatii-financiare-anuale-consolidate-si-rapoarte-consolidate-reglementare?dp=gy4tanjyha4ti agora international journal of economical sciences, aijes, issn 2067-3310, e issn 2067 – 7669, vol 10 (2016) 4 the use of structural funds and european investments (esi) in order to develop the member states. examples of good practice in the use of esi funds gabriela bologa 1 , casian butaci 2 abstract multiannual financial framework of the european union (eu) for the period 2014-2020 enables implementation of the new generation of eu spending programs since 1 january 2014. eu member states provide, through the structural funds and european investment funds or esi, financial resources to support them in order to develop continuously. this paper discusses disclosure of such funds and a number of issues that need to be known by potential beneficiaries in the member states. keywords: beneficiary, funding program, expenditures, funds introduction regulation (eu) no. 1303/2013 establishes common rules applicable to the european regional development fund (fedr), european social fund (fse), the cohesion fund (cf), european agricultural fund for rural development (feadr) and the european maritime fund (fepam). these funds operating under a common framework, known as structural funds and european investment funds or esi. it also defines the provisions necessary to ensure the effectiveness of esi funds and coordination among themselves and with other eu instruments. 3 esi general funds esi funds are managed jointly by the commission and member states in accordance with the subsidiarity principle. according to this principle, action at eu level is justified only if it proves to be more effective than action taken at national, regional or local level. to qualify for funding, they were introduced a number of eligibility criteria: 4 • time: there are limits on the period during which operations can be performed and expenses • scope: imposed restrictions on the types of activities that can be funded • the categories of costs: certain categories of costs are excluded • geographical location: operations: only certain areas are eligible • durability of operations: investment must be maintained for a minimum period after the operation încherii later 1 agora university of oradea, tineretului square nr.8, 410526, oradea, romania, gabi_fiat@yahoo.com 2 agora university of oradea, tineretului square nr.8, 410526, oradea, romania, cbutaci@univagora.ro 3 guide for beneficiaries structural funds and european investment of eu instruments and annexes 5 • types of beneficiaries: only certain businesses, organizations and economic actors are eligible for assistance according to the guideline for the beneficiaries of structural funds and european investment instruments and related eu member states should develop strategic plans that include investment priorities for the five funds esi. these are called partnership agreements (ap). details of the objectives they intend to achieve with the resources available are in the operational programs (po) national and/or regional rural development programs (pdr) for the feadr. operational programs are designed to meet the challenges of socio-economic and environmental country or region concerned. member states must allocate funds to areas with the most pressing needs and do not have the opportunity to use all themes and funding models available under regulations. 5 managing national designated by each member state are responsible for managing programs effectively. along with the monitoring committees, which are responsible for: • develop and implement procedures for the selection and eligibility criteria • providing information to potential beneficiaries, such as minimum size of the project and financing plan period • ensuring enrollment projects within the scope of those funds • financial management and control programs applications must be submitted to national or regional management authority responsible for managing the program in question. before you apply for a grant, the potential beneficiaries must verify the investment priorities, eligibility criteria and procedure for submission of applications within their region and country programs. 6 the scope of the esi funds 7 negotiations between member states and european commission are crucial in the financing of the esi funds. priorities are set within national or regional multiannual programs. basically, member states may choose to focus on different activities in different eu regions; therefore, eligibility depends on the scope of the program in each region or country. to reduce the development gap between countries, financing from the cohesion policy is targeted to the poorest regions and member states. european regional development fund (fedr) 8 fedr aims to strengthen economic and social cohesion in the eu by correcting imbalances between its regions. erdf will contribute to all 11 thematic objectives. however, most of its resources will be directed to: • c&d: eur 39.9 billion; • smes: eur 32.8 billion; • economy with low carbon: eur 30.1 billion; • transportation and energy: eur 25.6 billion; 5 http://www.fonduri-structurale.ro/fondurile-esi-pe-scurt 6 http://www.fonduri-structurale.ro/ 7 http://ec.europa.eu/regional_policy/sources/docgener/guides/synergy/synergies_beneficiaries_ro.pdf 8 http://fondurile-euro.ro/fedr/fedr.php 6 fedr will also support cross-border cooperation transnational and interregional cooperation within the european territorial cooperation objective. cohesion fund (fc) the cohesion fund is intended for member states whose national income (vnb) per capita is less than 90% of the eu average. it aims to reduce economic and social disparities and promote sustainable development. the cohesion fund will support only fear objectives 4, 5, 6 and 7. the funding structure envisaged is as follows: • the transport infrastructure and energy: 33 billion; • environment: eur 17.2 billion; • economy with low carbon: eur 7 billion; european social fund (fse) 9 fse is the main instrument through which europe supports the creation of jobs, help people get better jobs and ensure more equitable job opportunities for all eu citizens. fse will focus on a limited number of priorities, to have a real impact in terms of solving the key challenges facing member states, namely: • employment: 30 billion; • education: 26 billion; • social inclusion: eur 21.3 billion; • institutional capacity: eur 3.6 billion; therefore, taking into account the special allocation for the initiative on employment among young people, amounting to eur 3.2 billion, over 86 billion will be invested in europe's population in the next seven years. european agricultural fund for rural development (feadr) 10 eu rural development policy supports the eu's rural areas to meet a wide range of challenges and opportunities they face in the twenty-first century: economic, social and environmental. feadr funding mechanism of the common agricultural policy (pac) which has a budget of 95.57 billion euros. rural development policy focuses on three objectives multidisciplinary, which aligns the europe 2020 strategy and the overall objectives of the pac:  the competitiveness of agriculture;  sustainable management of natural resources and climate action;  balanced territorial development of rural areas. in order to manage effectively the rural development policy through rural development programs (rdp), these three objectives are supported by six key priorities: • knowledge transfer and innovation in agriculture, forestry and rural areas; • increase the competitiveness of all types of agriculture and enhancing farm viability; • promoting food chain organization and risk management in agriculture; • restoring, preserving and enhancing ecosystems that are dependent on agriculture and forestry; •promoting resource efficiency and supporting the shift towards a low-carbon and climate resilient economy in agriculture, food and forestry sectors; 9 http://www.fse-romania.ro/ 10 https://ec.europa.eu/agriculture/rural-development-2014-2020_ro 7 • promoting social inclusion, poverty reduction and economic development in rural areas. european fund for fisheries and maritime affairs (fepam) 11 with a budget of eur 5.7 billion, fepam stimulates sustainable fisheries and sustainable aquaculture. this will improve data collection and control and the implementation of regulations in fishery. the fund will help create jobs and diversification in communities dependent on fisheries and promote the implementation of the integrated maritime policy. financial management of funds esi it is important to note that the esi funds represent over one third of the eu budget, so that the management and control systems established by member state authorities aim to prevent, identify and correct rules that are not respected including fraud. these authorities will monitor fraud risks associated with esi funds. the risk of damaging the reputation of a person associated with fraud and corruption is considered extremely seriously at all levels. examples of good practice in the use of esi funds 12 example. 1. ,, fifteen cornwal " restaurant in cornwall, uk, owned by celebrity chef jamie oliver, has successfully used both fedr and esf funds to start its program for entrepreneurship and training for apprentices. the restaurant has used funding to provide disadvantaged young people aged between 16 and 24 years the chance to form as cooks in an apprenticeship program recognized nationally. renowned restaurant was built, in turn, with financial support from the fedr. since 2006, fifteen cornwal program had over 140 apprentices enrolled, of which 70% are cook and present. the program also invests 1 million gbp annually into the local economy through a policy to use local resources in proportion of 70%. a decisive aspect is to create through this program to 80 jobs, in addition to the 86 already internship ends. example 2. a mix of innovative financing care for older people in rural areas of germany. in the land mecklenburg vorpommern, the local action group (lag), a leader in the region, was asked to help obtain financing for the construction of a specialized treatment for people with dementia. the aim was to provide patients the chance to live with a mate in a safe and comforting area. a former textile factory was transformed into the seat of malchow island caring for people with dementia and the investments made through this project contributed to the preservation of this building with heritage rural value. the community approach was that of developing a project and multidisciplinary combined three different sources of eu financing: feadr, fse and fedr. esi funds and romania romania receives in 2014-2020 a financial allocation of 30.84 billion eur in funds esi adding and national contribution of 5.63 billion euro, romania has a total budget of eur 36.47 billion for investment in various fields. esi funds are allocated as follows: 10.73 billion euro using fedr 8.13 billion euro using feadr 11 https://ec.europa.eu/fisheries/cfp/emff_ro 12 http://ec.europa.eu/regional_policy/sources/docgener/guides/synergy/synergies_beneficiaries_ro.pdf 8 6.93 billion feadr using fc 4.77 billion eur using fse 168 million eur using feapm 106 million eur using yei fig. 1. the distribution of esi funds in romania source: http://www.fonduri-structurale.ro/fondurile-esi-pe-scurt conclusion every esi fund potential recipient must know that these funds are used to support financial instruments that contribute to the implementation of financially investment. financial instruments are aiming to increase the leverage of eu investments by attracting additional resources from public and private investors. it is also important to realize that can be used, according to the legislation in force, several funds of funds category esi, and this can be a real help for local economies. in fact, there are a number of projects that have successfully used various forms of investment and creativity in the various programs funded esi. bibliography regulation(ue) nr. 1303/2013 guide for beneficiaries structural funds and european investment of eu instruments and annexes http://www.fonduri-structurale.ro/ http://www.fonduri-structurale.ro/fondurile-esi-pe-scurt http://www.fonduri-structurale.ro/ http://ec.europa.eu/regional_policy/sources/docgener/guides/synergy/synergies_beneficiaries_ro.pdf http://fondurile-euro.ro/fedr/fedr.php http://www.fse-romania.ro/ https://ec.europa.eu/agriculture/rural-development-2014-2020_ro https://ec.europa.eu/fisheries/cfp/emff_ro http://ec.europa.eu/regional_policy/sources/docgener/guides/synergy/synergies_beneficiaries_ro.pdf http://www.fonduri-structurale.ro/fondurile-esi-pe-scurt https://ec.europa.eu/agriculture/rural-development-2014-2020_ro https://ec.europa.eu/fisheries/cfp/emff_ro medimond template agora international journal of economical sciences, aijes, issn 2067-3310, e issn 2067 – 7669, vol. 14 (2020) traditional marketing versus digital marketing valentina simona pașcalău1, ramona mihaela urziceanu2 1 doctoral school of economics and business administration, west university of timișoara 2 faculty of juridical and administrative sciences, agora university of oradea e-mails valentina.pascalau73@e-uvt.ro, ramona.urziceanu@gmail.com abstract today, the digital economy contributes decisively to increasing competitiveness, especially since a digital transformation involves migrating to new technological models, where digital marketing is a key part of the strategies of users’ growth and loyalty. the internet and digital marketing have become important factors in campaigns, which attract and retain internet users. this study aims to identify the main ways in which users can be gained and retained through the use of digital marketing. digital technologies can monitor behaviours, can analyse the content of requests, problems, assessments, both on the platforms of organizations and on social networks. organizations need to understand how favourable assessments will result in the outcome that the marketing department needs to achieve. keywords: traditional, digital, marketing. 1 introduction online marketing does not differ much from classic marketing, the ultimate goal being sales, regardless of the object of sale (products, services, information, etc.). at the same time, this type of marketing has some distinct features, the integration of the new media into the marketing mic, that leads to new concepts, such as: viral marketing (imitates the viral process), viral mobile marketing, transactional marketing, conversational marketing, internet marketing, digital marketing, interactive marketing. all of these being modalities to attract numerous clients with very low costs and presume a good web design, a comprehensive data base, links, using interactive promotional materials, development of the personal sale, etc. (coltman, t., 2007). when registering the clients into the virtual shop, must be required their permission to send them messages with the company offers and promotions. with the information explosion and the revolution produced by the spectacular evolution of information and communication technologies appeared the concept of digital marketing that synthetized all the activities developed through the information systems that use the binary or digital environment, specific to itc application. thus was born the digital marketing, known also as online marketing, cybermarketing, webmarketing, e-marketing, i-marketing, electronic marketing, digital marketing of marketing on the internet. 2 conceptual delimitations here you must presents your original contribution. the term digital marketing was first used in the 1990s. in the 2000s and 2010s, digital marketing became more sophisticated as an effective way to create a relationship with the consumer that has depth and relevance (coltman, t., 2007). the main disadvantages or weaknesses of traditional marketing are (orzan, 2007): traditional marketing is in many cases considered more expensive in terms of resources (material, mailto:valentina.pascalau73@e-uvt.ro mailto:ramona.urziceanu@gmail.com monetary, human), such as printing brochures, leaflets, catalogues presentation, product sheets (jarratt, d., 2009). also, direct marketing through classic mail is very expensive in terms of the costs of postage, envelopes, etc. and requires more time and staff involved in this activity. marketing research conducted through online questionnaires is much more costeffective than the classic one, which involves many costs. another aspect is the abandonment of advertising companies, which act as intermediaries between the company and organizations or individuals, as in the case of advertisers on tv or radio, or in the written press, who charge quite high commissions. negotiation with a website is often done directly by companies. traditional marketing can be an intensive process, often its tools taking a long time to implement. a physical banner, to be placed in a public location, takes a long time to obtain permits, to create it, etc. a banner on online sites is displayed much faster. the marketing research carried out through the classic questionnaires takes a long time until they are completed by the subjects, until they are centralized, etc. while in the online environment all this takes place very quickly, and the centralization is much simpler, the online questionnaires having the possibility to export the data directly to specialized software for their analysis, such as soss, quantam, stata, eviews etc. also, if there is a mistake in an advertising text that must appear in an advertisement, the procedure is very difficult and time consuming, in all this interning the advertising company as an intermediary, and for prestigious publications you can expect a few months until the desired message appears. traditional marketing is not always available, for example a tv or radio commercial is broadcast at certain times, depending on how it is set out in the contract, while a commercial on a website is available all the time, these being some of the basic attributes of the internet through its infrastructure consist of online servers that are available 24 hours a day, 365 days a year (jaworski, bj, 1993). also, the most representative element of the online presence, the website of the company or of another person, or even the one dedicated to a product, is available all year round, being most of the time updated. traditional marketing has a low interactivity, as it is in the case of direct marketing through classic mail, where it is not known for sure if any feedback will be obtained from potential customers, the company thus having very high costs. also in the case of tv or radio commercials, the exact audience is not known, or in the advertising messages in the written press, it is not possible to estimate how many people noticed a banner they passed. in the online environment, all these aspects can be followed by the fact that most of the time online spots or advertisements have the possibility to click on them to direct us to the parent website of the company they come from or to get more many details about the products or services promoted, these clicks being easily counted, thus obtaining the possibility to evaluate the feedback of potential customers. traditional marketing generally operates locally, while online marketing is global, reducing communication barriers, a website being available in any area of the globe that has access to the internet, while most televisions, radio stations and the print media are only available in a certain geographical area. before, it was exceedingly difficult for a company to provide technical support to its customers, requiring a representation and a service with numerous staff in each country. now, with the advent of global websites, which have identical versions for each country, the only difference being the language spoken in a certain area, this staff has been considerably reduced, with customer support being able to deal with a much smaller staff, many one of the problems being solved through online support from another country. the internet can be considered a free market, where consumers can more easily compare prices for certain goods and services offered by companies than in real life. they can also compare prices in one country with those in another. the emergence of online stores and global sites like ebay or amazon has greatly facilitated the purchase of goods from foreign countries. there was also a freedom on the labour market, so companies in one country can promote their services in another country, such as software companies or websites, which can also place orders from abroad, not being their physical presence in a certain place is necessary. the internet has also reduced communication barriers, so a negative news about a certain company is in a very short time in any area of the globe with online access. the advantages of online marketing over traditional marketing are summarized and listed (orzan, 2007), so we see that online marketing can save money and help reduce the marketing budget, due to the fact that on the internet the transmission of information from the company to the customer or the potential customer is significantly more profitable. for example, an online catalogue can be updated at any time, it can be sent to a very large number of people, all costing almost nothing, while the classic method requires printing costs, postage, shipping staff this, plus the very long time to perform these procedures. the same happens in the case of direct marketing through classic mail, unlike email, which has minimal costs, where only one employee can perform the task for which a team was previously required. the email also reduced telephone calls involving large staff and high costs for companies in service or customer service departments, due to the fact that an email can be answered in a timely manner, unlike a classic letter, with the advantage that the message remains in the memory of the servers of the email service, thus being useful to both customers and the company. some companies also offer online chat support, thus reducing the cost of fixed or mobile telephony. online marketing can save time and reduce the steps of the marketing process, so marketing materials no longer have to wait a long time for printing, they can be uploaded to servers immediately, becoming accessible all the time for potential customers. in the case of the company's customer service, they no longer must write letters or call; now, by sending a simple email this problem is solved much faster. practically, internet marketing puts you in touch with the market much faster, guaranteeing instant access to marketing information: presentation website, catalogues and brochures, online video presentation spots, etc. thus, the online marketing process is much simpler, more accurate and more efficient. adopting digital technologies, online marketing is continuously available, so the online presence of marketing materials is guaranteed by the servers that make up the internet infrastructure 24 hours a day, 365 days a year, and changes to these materials or updates can be made also at any time of the day. this allows a much higher accuracy of the information, so the customer can be better informed about the various promotions, price reductions, special offers and their availability (jayachandran, s., sharma, s., 2005). online marketing is interactive and offers customers another way to shop. interactivity is achieved mainly through personalization, which leads to the interaction between the potential customer and the company. customers in modern society want much more information about the product, they are much more analytical. and the category of customers who purchase products and services online is a very dynamic one, usually with higher education, with a very high analytical spirit, often documenting themselves long before purchasing a product. this whole category of customers is looking for opinions written by other users of a product on forms, blogs or in the comment sections of online stores. all these elements presented provide a much greater interactivity of the online environment, but there are several methods of companies to achieve it, one being the so-called cookies that remember the pages visited from a website and what products attracted the visitor's attention, thus making recommendations or remind him when he enters another time on the site what were he was interested last time. another method is that of interactive argumentation (orzan, 2007), which makes the mentality of mass dissemination disappear, being replaced by a personalized communication, an involvement of the customer in the purchasing process, a focus on real-time satisfaction of prospecting and the immediate provision of advice and information, thus invigorating the company's innovative image and allowing it to differentiate its product portfolio from that of the competition. thus, on many websites customers are allowed to choose the colour for a certain product, the method of transport, the delivery date, the method of payment, or if they change their mind and want to buy that product again, it remains in the shopping cart online with all options selected as long as the product is still available. in conclusion, this interactivity by personalizing the products and services offered ensures visitors a much better percentage of remembering the website where they encountered this, this personalized dynamic of content ensuring much greater customer loyalty and customer choice optimally. 3 conclusions online marketing is global and offers equal opportunities for access to both organizations and individuals. 34% of the planet's population has access to the internet, which means an unprecedented possibility of disseminating information, plus the advantage of the disappearance of physical borders between states (reinartz, w.j., 2003). thus, companies in one country can promote, sell or offer their services in another country, which is a huge advantage for their development. at the same time, hundreds of millions of potential customers around the world can document themselves, or search for or buy products from another geographical location. another advantage is the fact that in online marketing the discriminations related to the ethnic framework, to the type of business, to its size disappear, thus being attacked the monopolies that until now certain companies had in a country in a certain field. the problem regarding the legal aspects disappears, the company from a certain country respecting the legislation in force of that state and not that of the state where it offers its services online. faxing was the first step in removing these barriers, but the internet and email completely eliminated them by ensuring the freedom of movement of written information. thus, the internet contributes to a democratic globalization, and consumers in the online environment, once accustomed to this freedom, will hardly ever give it up, no matter what political regime comes to lead a state. references [1] coltman, t., (2007), why build a customer relationship management capability? , j. strategic inform. systems 16(3), pp. 301–320 [2] ja  rra  tt, d.g. , (2009) , o  rga nі za  tі o  na  l prе сo ndі tі o  nѕ ѕu ppo rtі ng rе la  tі o  nѕhі p ma  na  gе mе nt сa pa  bі lі ty rе nе wa  l, jo  u  rna l o  f ѕtra tе gі с ma rkе tі ng 17(5), pp. 365-381 [3] jaworski, b.j., kohli, a.k., (1993)., market orientation: antecedents and consequences. , journal of marketing, 57(3), pp. 53–70 [4] ja  ya  сha ndra n, ѕ. , ѕha rma  , s., (2005) , ro lе  o  f rе la  tі o  na  l і nfo rma  tі o  n pro се ѕѕе ѕ a nd tе сhno lo  gy u ѕе  і n сu ѕto mе r rе la  tі o  nѕhі p ma  na  gе mе nt. і mplі сa tі o  nѕ o f tru  ѕt a nd dі ѕtru ѕtfo r o  rga nі za  tі o  nѕro lе  o  f сu ѕto mе r o rі е nta  tі o  n і n a   fo u  r-na  tі o  nѕtu dy, і mplі сa tі o  nѕ o f tru  ѕt a nd dі ѕtru ѕt, jo u  rna  l o  f ѕtra tе gі с і nfo rma  tі o  n ѕyѕtе mѕ. сo nсе ptu  a  lі zі ng a   rе la  tі o  nѕhі p ma  na  gе mе nt сa pa bі lі ty, ma  rkе tі ng thе o  ry, pp. 177192 [5] orzan, gh., (2007) , tehnologii informatice inteligente de accesare multidimensionala a bazelor si depozitelor de date de marketing, revista de marketing online, bucharest university of economic studies, school of marketing, vol. 1(2), pp. 29-41 [6] reinartz, w.j. and kumar,v., (2003), the impact of customer relationship characteristics on profitable lifetime duration, journal of marketing ( 67) , pp. 77-99 agora international journal of economical sciences, aijes, issn 2067-3310, e issn 2067 – 7669, vol. 12 (2018) entrepreneurial marketing from the perspective of strategic innovation valentina-simona pașcalău1 1agora university of oradea, tineretului square str., no. 8, oradea, romania e-mails valentina.pascalau73@e-uvt.ro abstract the purpose of this paper is to identify the implications of strategic innovation in entrepreneurial marketing. this article aims to define and analyze concepts such as: entrepreneurship, entrepreneurial marketing, innovation, innovation management. we will also present the priorities in the reconceptualization of marketing, we will discover the approach of strategic innovation, strategic thinking in marketing and the issue of strategic thinking. keywords: entrepreneurial, marketing, strategic, innovation, management. 1. introduction peter drucker affirm that “innovation is the specific tool of business people, the method by which they exploit change for the benefit of a new business or a new service. it can also be presented as a discipline that can be learned and practiced. businesses need to look for the sources of innovation, change and clues that provide opportunities to innovate. and he needs to know how to apply the innovations and success principles of something new. ” the main goal is to be known as a brand, it would be ideal to stand out from the start-up phase precisely through innovative ideas, it contributes to an industry that often sets the standard to be followed by other industries. in order to maintain a competitive advantage and maximize value, innovation is the key to success, but if, on the one hand, opportunities are identified to "change the game", on the other hand, there is a risk of losing money on new technologies that have not been proven, for the time being, to be feasible in the market in which we operate. also, in order to survive, we must invest in the quality of manufacturing and research, the lack of action allows competitors to surpass us. innovation is imperative for companies that want to remain competitive and meet the demands of the changing market. innovation is no longer just about creating a sustainable product, companies are forced to innovate across the full spectrum of processes, products, technologies and business models. technological innovation offers the opportunity to create something new every day, but few industries are as prone to such high-speed development as the footwear industry. designers have more design and development opportunities than ever before, whether it's a new material or technology. 2. the concept of entrepreneurship and entrepreneurial marketing mailto:valentina.pascalau73@e-uvt.ro 2 entrepreneurship is a “dynamic process of vision, change and creation. it requires the application of energy and passion in the direction of creating and implementing new ideas and creative solutions”(kuratko & hodgetts, 2004). in the vision of hisrich (1992), entrepreneurship is the process by which a product / service with high added value is created, allocating the necessary time and effort, assuming financial, psychological and social risks, obtaining monetary rewards and personal satisfaction. "in a turbulent environment, entrepreneurial actions have a high relevance, the marketer must act as an innovator, entrepreneur and as an agent of change" (morris, schindehutte & laforge, 2002). the central idea of entrepreneurship is the "new entry" into a new or existing market, with a new or existing product, the creation of new products with a high degree of innovation, the creation of new organizational forms, the creation of new markets, the creation of new sources of value for the customer. entrepreneurial marketing is the behavior of an individual or an organization that adopts a philosophy of challenging current market conventions during the process of developing new solutions. the entrepreneurial behavior of an organization can be monitored by creating strategies, structures, systems and organizational cultures. the rational model of entrepreneurial behavior is reflected in determining future organizational performance objectives, reviewing conventional factors influencing performance, analyzing the possibility of achieving objectives by complying with conventions and developing an entrepreneurial plan to meet performance objectives using unconventional concepts entrepreneurial organizations have specific characteristics such as: innovation in the product market and technology, risk-taking, proactivity in seizing opportunities, initiating actions that respond to competition, initiating high-risk projects and high-income opportunities and trying to place in a position of technological leadership and research and development. the key elements of the rational approach in entrepreneurial marketing are: systematic analysis of the situation, evaluation of alternative actions and definition of appropriate, conventional or unconventional actions. 3. innovation as a process innovation is a process of transformation, an improvement of an opportunity in a new idea and its capitalization by creating a practical use on a large scale. industrial innovation includes the technical, design, manufacturing, managerial, and commercial activities involved in marketing a new or improved product (freeman, 1982). innovation allows an organization to create a competitive advantage, through the real challenge of innovation, ensuring its technical and commercial feasibility. innovation is also a process of developing ideas into practical use, developing and exploiting new knowledge that is not limited to inventing it. innovation should not be confused with invention, the latter being only a first step in the process of transforming an idea for widespread and effective use. innovation is determined by the ability to see connections that can lead to completely new possibilities to use / capitalize on radical technologies, to identify opportunities and to take advantage of them, to identify where and how new ones can be created and developed markets and to identify new ways to serve current and mature markets. innovation is a key process associated with the radical renewal or change of what it offers, of the way it creates and delivers that new offer. 3 thus, the innovation process may include: generating new ideas that may be inspirational in nature, from permuting from another context, from understanding user needs, from advanced research, from combining existing ideas into a new one or from building models alternatives for the future. innovation also includes selecting the best ideas and implementing new ideas that ensure a balance between resources, time and budget on the one hand, the probability of market success on the other. 4. strategic innovation and management the success of innovation depends on the company's resources (human resources, financial resources, knowledge, equipment, etc.) and the company's capabilities to manage these resources. innovation management must ensure a balance between the manifestation of creativity and the discipline that ensures the achievement of things. an innovative company combines good ideas with a motivated staff and an instinctive understanding of what the customer wants (richard branson). success in innovation management depends on the following factors: understanding what we are trying to manage, understanding the strategy that shapes the innovation we achieve by answering the questions “what? why? and when?”, understanding the conditions under which this can be achieved and understanding innovation management as a process of building dynamic capabilities. the continued development of the new digital economy intensifies the need for strategic innovation to improve performance, but many managers fail to provide adequate support for efforts in this direction. managers do not focus on providing the necessary support for the strategic renewal and reinvention of the company, and this is due to a specific mentality of the industrial economy that seeks to routinize and stabilize the company. strategic innovation is not limited to product innovation, but transforms knowledge creation and innovative action into a way of life, seeking to create and expand markets rather than just responding to customer demand, by redirecting resources from profitable business lines to potentially more profitable business lines in the future. successful strategic managers use creativity and innovative action to access and capitalize on organizational potential. these managers reinvent the business model and renew relationships to increase customer value and maintain the company's competitiveness. regarding the approach to strategic innovation (abraham & knight 2001), the growth of the new digital economy intensifies the need for strategic innovation in order to improve performance, many managers failing to provide adequate support for efforts in this direction. the failure to provide the necessary support for the strategic renewal and reinvention of the company is due to a mentality specific to the industrial economy that seeks to routinize and stabilize the company. strategic innovation is not limited to product innovation, ensuring the link between resources and efforts of the overall business strategy. strategic innovation turns knowledge creation and innovative action into a way of life, seeking to create and expand markets rather than just responding to customer demand, redirecting resources from profitable business lines to potentially more profitable business lines in the future. successful strategic leaders use creativity and innovative action to access and capitalize on organizational potential. they reinvent the business model and renew relationships to increase customer value and maintain the company's competitiveness. 5. strategic thinking in marketing and the issue of strategic thinking in the literature we find various definitions of the concept of strategic thinking. 4 strategic thinking is the distinct managerial activity that aims to discover new, imaginative strategies that can rewrite the rules of the competitive game and view the potential future in a significantly different way from the present (goldmann , 2007). abraham (2005) states that strategic thinking is a process of discovering alternative ways to compete and provide value for the customer, and in the opinion of south (1981) it is a thought process that ensures the focus on the right strategic themes and a common frame of reference for discussing and reviewing the strategy. from the perspective of struebing (1996), strategic thinking is the dynamic process of continuous review of the mission, strategies and activities related to customer needs and market forces, and bonn (2005) states that it is a way of solving strategic problems that combines the rational approach convergent with the process of creative and divergent thinking. according to moon (2013) is a way to solve strategic problems that combines a rational and convergent approach with a creative and divergent process to discover alternative ways to compete and ensure value for the customer. strategic thinking is characterized by: creativity, experimental nature, disruptive character, focus on intention, intelligent opportunism (liedtka,1998), focus on the future, systemic / holistic approach and hypothesis-oriented approach. the work experiences that contribute to the development of strategic thinking are: general work experiences, mentoring experience, monitoring results / benchmarking, holding a senior executive position (ceo), managing a strategic initiative for major company growth, challenges that the employee must cope with them, managing a threat to the company's survival and involvement in strategic planning (goldman & casey , 2010). fig.1. model of learning to think strategically (goldman&casey) 5 the elements of strategic thinking at organizational level are: systemic thinking, approaching the organization as a holistic system, an integrative perspective that requires understanding internal and external organizational dynamics, creative thinking, seeking new approaches and seeing better ways of action, creating new combinations of existing ideas, vision-oriented thinking and marketoriented thinking. fig.2. model of strategic thinking (moon 2013, p.1699) 6. conclusions understanding the object of innovation is reduced to four dimensions of change, namely: product innovation materialized in changes in products or services offered, process innovation materialized in changes in the way things are created and delivered, innovation of position materialized repositioning of product / service perceptions / brand in the context of the user and the innovation of the paradigm materialized in the changes of mental models that determine what the organization is doing today. managerial practices for motivating strategic thinking refer to ensuring congruence between employees and tasks whose performance involves the use of their experience and skills, ensuring employee autonomy in how to approach their work, providing the necessary resources, establishing support work teams, encouraging recognition by supervisors and creating a climate in which the entire organization supports creative efforts. based on our findings, we offer the following managerial recommendations. first, avoid too extensive analyzes of a very large volume of data that can unduly complicate the decision-making process. the second recommendation refers to the use of knowledge obtained by managers from previous experiences in order to increase effectiveness and, finally, the use of intuition to identify entrepreneurial solutions in the situation where the solution generated by rational analysis is not viable. when an entrepreneurial idea is recognized as superior to existing conventions, the new idea is quickly adopted by other organizations and becomes the new convention in the sector. 6 references [1] abraham, j. l., & knight, d. j. (2001), strategic innovation: leveraging creative action for more profitable growth, strategy & leadership, 29 (1), 21–26 [2] abraham, s. (2005), stretching strategic thinking, strategy & leadership, vol. 33, no.5, 5-12 [3] bonn, i. (2005), improving strategic thinking: a multilevel approach, leadership and organizational development journal, 26(5), 336-354 [4] drucker, p. (1985), innovation and entrepreneurship, harper collins publishers [5] freeman, c. (1982), the economics of industrial innovation, 2nd edition, francis pinter, london [6] goldman, e.f. ( 2007), strategic thinking at the top, mit sloan management review, 48, 75-81 [7] goldman, e.f., casey, a. (2010), building a culture that encourages strategic thinking , volume: 17 issue: 2, 119-128 [8] hisrich, r.d. (1992), the need for marketing in entrepreneurship, journal of consumer marketing, 9(3), 43 [9] kuratko, d. f. and hodgetts, r. m. (2004), entrepreneurship: a contemporary approach., thompson, 30 [10] liedtka, j. (1998), strategic thinking; can it be taught?, long range planning, 31, (1),120-129 [11] moon, b.j. (2013), antecedents and outcomes of strategic thinking, journal of business research, elsevier, vol. 66(10), 1698-1708 [12] morris, m. h., schindehutte, m. & laforge, r.w. (2002), entrepreneurial marketing:a construct for integrating emergingentrepreneurship and marketing perspectives, journal of marketing theory and practice,10(4), 1–19 [13] struebing, l. (1996), strategic plans don’t produce desired results, quality progress, vol. 29, issue: 6, 22 agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 17, no. 2 (2023), pp. 78-86 78 personnel work process using digital economy application programs a. hashimova albina hashimova customs academy of state customs committee, azerbaijan orcid no. https://orcid.org/0000-0002-9866-5865, e-mail: albina-hesimova@mail.ru abstract: information technologies are emerging as systems that can meet the emerging demands of the business world in the conditions of increased competition and globalization. today, with the help of information technology, it has become a value that can be multiplied and continuously produced and shared. today, increased functionality with information technology has become the most important weapon of enterprises. today, information technologies are used as the most important means of value creation, change, and renewal. the main purpose of the article is to determine the selection, training, and motivation of personnel for the digital economy. also, the role of personnel emerging as a result of the digital revolution in the economy was particularly emphasized. the relevance of the study is that the increase in the labor productivity of the organization's employees and the increase in the efficiency of the personnel management system resulting from the use of digital technologies as a whole result in the increase of the competitiveness of the organizations. keywords: digital economy, digitalization phenomenon, digital technologies, academic research. introduction the globalization phenomenon that accompanied the development of information technologies and the post-industrial revolution affected economic and social structures as well as business life. the introduction of new technologies, the spread of industrial and service production on a global scale, changes in the management and organizational structures of enterprises, and the flexibility of production to meet the needs of consumers have changed work life at a high level. (ar, 2023; əliquliyev, 2019) meanwhile, macro-level neoliberal policies, successive economic crises rising unemployment around the world, regulation, enterprise-level flexibilities, and human resource approaches have weakened the power of trade unions. a reflection of the digitization process in work life is the monitoring and management of the work environment through digital technologies. monitoring the work environment through cameras and various sensors installed in workplaces and offices has security advantages. however, ignoring the privacy of a person in this regard, continuous monitoring of employees through cameras is a serious problem for personnel in the work process. (armstrong’s handbook, 2015). digitization requires the adaptation and development of new knowledge and new work methods. digital technologies are modern tools for the ever-changing way in which organizations employ, manage, and support people. (barber, 2006) https://orcid.org/0000-0002-9866-5865 mailto:albina-hesimova@mail.ru albina hashimova 79 automation of many processes, increasing the speed of operation, various possibilities, and convenience all these are positive aspects of digitalization. the negative aspects of this include making the management process more complicated, the lack of qualified personnel working with personnel management, and a large part of the collected data. (bennet & lientz, 2011) the basis of the study is that the increase in the labor productivity of the organization's employees and the increase in the efficiency of the personnel management system resulting from the use of digital technologies in general result in an increase in the competitiveness of organizations. (bohlander, et.al., 2010, p.231) in the digital economy, such forms of work are gaining popularity, such as freelancing and outsourcing. according to the world labor organization, the number of remote workers worldwide is 17%, and in japan and the united states, this number has already reached 40%. (ceylan, 2014) according to world statistics data, 31% of job seekers wanted to work from home at the end of 2019 and the beginning of 2020. 14% of them are freelancers, and 17% are employees who are not on the payroll of companies. it is considered very necessary to use new modern approaches and take into account the features of this work in the management of a large number of employees remote workers. (ehnert, 2013; ergin, 2019) it was observed that the companies that allow their employees to work remotely from home are also the companies that have built the technological infrastructure to allow this in previous years and at least allow their employees to work remotely. the investments made by these companies in previous years in tools that support virtual work and communication have ensured that they can respond quickly to such a crisis. in the current situation, infected workers, even those who are suspected of not being infected, are naturally out of work during the diagnosis and treatment processes, which is a huge waste of time for office workers. (rahmanov, 2022) companies should establish central decision mechanisms that can make quick decisions to protect their activities, identify, classify, and evaluate cash resources that may be suitable for the company, define digital economic scenarios, and define and protect liquidity elements in modeling the predicted financial effects of profitability. (ilhami, 2019) in terms of financial sustainability, companies must maintain business continuity by digitally connecting with their customers, understanding and supporting their employees, developing solutions to supply chain challenges, building digital capabilities, and connecting with other businesses in the same ecosystem. in doing so, companies should aim to get out of this process unscathed, retaining both employees and customers. digital visibility and the use of online sales channels have come to the fore in this area, and companies that can serve their customers with this sales channel have continued their business. (reyhan, 2012; taşdemir, 2014) the article examines the following nuances: 1. investigate the selection, training, and motivation of personnel for the digital economy; 2. to determine directions for improving the process of selecting personnel for the digital economy; 3. investigate ways to strengthen staff potential; 4. explore the role of personnel in the digital economy; but how has the work process of personnel changed during the use of digital economy application programs? (terhan, 2019) the process that started with digitization and rapidly progressed toward the digital revolution reveals very significant changes in economic, social, and cultural structures. the phenomenon of digitization affects and changes the economic structure, production method, job and workplace personnel work process using digital economy application programs 80 definition, and labor markets on the one hand, and at the same time shapes social life and cultural structure at a modern level. central to these effects is the role that technology plays in data collection, storage, exchange, and use. (marchington, 2016) digital technology has particular power because it improves the organizational, analytical, and managerial aspects of the production of firms and workers, creating value and reducing the importance of other work. in this context, digital technology has emerged as the most important driving force of today's economy. although this situation greatly impacts workplaces and disrupts established business practices, it has the power to greatly improve information management and rulebased operations in workplaces. (nur, 2016; sabuncuoğlu, 2012) digitalization can be considered the main feature of the modern era due to the changes it has brought about in the field of economic, social, and cultural structure. while digital media is now at the center of global capital flows, digitization has spurred the convergence of disparate sectors. the biggest impact of information technologies and the digitalization process is seen in the economic structure. (simon, 2011) while the phenomenon of digitization creates new jobs and new professions with technological innovations, work and work-related organizational structure, job instructions, and competencies, the spatial dimension of production of goods and services, production method, production process, marketing network, way of reaching produced goods and services, consumption concept, etc. it rapidly changes many things, in short, the economic structure. the revolution caused by this change is characterized as the fourth stage of the industrial revolution. (susan, 2018) the main goal of the "digital economic revolution" is to implement smart sales networks that can reflect the activity. the new process is based on highly automated forms of work, where human labor is used the least, but the highest labor productivity is achieved. although information technologies that have been developing since the last quarter of the 20th century have changed economic structures and work life, the digitization process that began in the 2000s has given a different speed to this change. digitization is changing all business processes in general, in addition to increasing automation and changing work processes. (i̇lhami, 2019) methodology: analysis of the work process of personnel in the digital economy the change in organizational structures with the introduction of digital technologies requires a customer-oriented strategic work schedule. indeed, digital transformation requires the creation of a core competence and mainly focused directly on the customer, so that the organization can better cope with the change in general. therefore, the digitization of data, processes, and roles that make up the activity of an enterprise, brings about the digital transformation of business and business strategy, and at the same time leads to a change in the business model. thus, this period, which begins with digitization and continues with the digitization of work life, reveals the digital revolution, at the same time it leads to the expansion of the service sector, which leads to the disappearance of many professions. the process of digital transformation is also changing company management and organizational structure. for example, at the management level is the "chief digital officer" or cdo (chief digital officer) for short, who may work under various titles such as digital strategist, digital marketing specialist, digital general manager, or digital customer experience. albina hashimova 81 figure 1: organizational structure in economic digitization compared to 2020, employment in occupations with high digital content is seen to increase from 5.4% to 27% in 2022, and from 40.2% to 51.3% in occupations with medium digital content (http://www .erctr-az.gov-economic). on the contrary, the level of professional employment among personnel with low digital content fell from 55.7% to 21.1%. in absolute terms, more than 32 million workers work in highly digital jobs, and about 66 million work in medium digital jobs. figure 2: indicators of playback in digital working conditions over a million medium digital jobs 9% those working in highly digital jobs medium digital jobs employees in highly digital jobs 91% in line with these trends, digitally oriented-professions have greatly supported business transformation and creation in the past few years. digital strategist chief digital officer most responsible head of digital activities digital marketing specialist digital customer experien ce personnel work process using digital economy application programs 82 specifically, of the 13 million new jobs created in the country since 2010, nearly 4 million require high-level digital skills, and nearly two-thirds of new jobs require either high or medium digital skills. with the digital transformation process, even when the work hours are over, employees can access e-mail or other social networks while at home or on vacation. this takes working time beyond the concept of overtime. in addition, this situation causes adverse effects on employees. employees who have to check and respond to their e-mails outside of working hours are said to cause stress, exhaustion, sleep problems, and relationship difficulties, in addition to not being paid extra for these working hours. against this situation, it is recorded that trade unions have started to make special provisions regarding their collective agreements, and even in france, laws on this issue have already been prepared. another dimension of digitalization of working life is the topic of "artificial intelligence" and robotic technologies. for example, automated teller machines in the banking sector and robotic arms used in various factories, especially in the automotive industry where human muscle power is stressed, have long replaced manpower. what is new is the acceleration of the use of "artificial intelligence" and robots in smart companies, banking, healthcare, and many other areas that have emerged with the digital revolution, the creation of scenarios, and the intensification of discussions. figure 3: professional employment of personnel 2020 2022 51.30% 50.00% 45.00% 40.00% 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 40.20% 27% 5.40% highly digital employment in digital employment in employment content occupations occupations albina hashimova 83 academic research in recent years has shown that thanks to digitalization, individual workers can quickly see the nature and rewards of job change. therefore, the spread of digital technology tends to have a significant impact on workers, firms, industries, economic and trade relations, labor markets, and entire regions. important studies of labor markets in the 1970s, 1980s, 1990s, and 2000s show that workers who use computers at work earn more. based on our research to identify digital workforce competencies, we can divide digital workforce competencies into three groups: 1. professional skills and information technology knowledge: this includes interpersonal skills, reliability, adaptability, critical thinking, lifelong learning, innovation, general communication, problem-solving, teamwork, information technology, mathematics and science, information law, and ethics. 2. infoformation technology management and support: this includes digital marketing, information technology risk management, digital communication, information support, project management, and basic business knowledge. 3. technical knowledge of information technology: this includes mobile technology and application, hardware/network, software applications, databases, english language skills to use information technology applications, basic information technology knowledge to conduct business, etc. belongs to. discussion: innovative methods in personnel selection for the digital economy the development of the digital economy, technological development, and demographic changes have a significant impact on the business world. it also affects the number, quality, and implementation of existing megatrends, and the skills workers will need to succeed in the competitive environment of the future. although the timing and pace of this development will vary between countries, growth in the labor market is expected to affect both developed and less developed countries. in line with these changes, it is becoming increasingly important to ensure that employee competencies are effectively matched to labor market requirements. in recent years, rapid technological changes, the introduction of new digital innovations in the production process, digitization of production and service areas, and initiatives such as, have begun to focus on work areas to attract talented employees with digital skills and information technology. empirical evidence presented in a report published by the organization for economic co-operation and development suggests that the current labor market and economic changes have created a major imbalance between skills and supply. there is a great need for computer and electronics (knowledge and software, programming, and use) knowledge and decision-making skills in oecd and european union countries. for this reason, businesses have difficulty finding employees with the necessary competencies to use new methods and work with new technologies. based on the research, we can say that according to the organization for economic co-operation and development report, the new competence requirements that appear as a result of the increased use of digital technologies in the workplace and are considered necessary are divided into three dimensions: 1. general information and communication technology skills: this includes having general information and communication technology skills, such as accessing information online or using applications that can be used in everyday work life. personnel work process using digital economy application programs 84 2. specific information and communication technology skills: this includes programming, application development, and network management of products and services such as software, web pages, e-commerce, mathematical computing, and big data. 3. complementary information and communication technology skills: includes complementary skills such as processing complex information, communicating with colleagues and customers, solving problems, planning ahead, and quickly implementing a plan. effective and innovative employee selection methods. why use something like social media profiles to investigate selection decisions when there are more accurate ways to assess the skills and suitability of job applicants? the main reason for this may be related to the number and type of selection tests available. in this case, it is very important to choose the most suitable, innovative method for the work process. these include: 1. general mental ability it is the best tool for employee selection. this approach is highly effective in predicting future performance in every type of business, at all job levels, and in every industry. general intelligence can be assessed in a variety of ways, from 30-minute paper-and-pencil tests like the wonderlic to more expensive online computer aptitude tests. both computer-based and paper-and-pencil tests are equally valid, allowing organizations to choose the most appropriate approach. 2. structured interviews. these are not standard interviews that start with "so tell me about yourself...". in structured or behavioral interviews, applicants are asked a series of specific, predetermined, job-related questions, and their answers are evaluated against detailed criteria. a "report panel" approach is often used here, where 2-3 trained managers ask questions and collect each response individually. after the interview, their ratings are compared to determine the consistency or reliability of structured job interviews. when responses are judged to be inconsistent, the interviewers discuss their basis and reach a consensus. 3. situational judgment tests. these tests are described as the multiple-choice equivalent of structured interviews. with this method, applicants are asked to choose how they would respond to various hypothetical situations related to the target job. the results indicate how that applicant will behave when faced with certain situations and decisions. the ability to predict how applicants will respond to complex decisions makes this method one of the best approaches for managerial and technical positions. it is important to note that the combination of multiple tools or methods greatly improves the predictive validity of the recruitment process. for example, combining general mental ability tests with structured interviews will be more effective than using either alone. in addition, using any of these three methods is preferable to evaluating applicants' resumes and giving unstructured interviews or unvalidated pretests. there are countless tools, methods, and approaches to making the right choices about decisions. however, based on decades of applied organizational research, the ones described above are the most successful, accessible methods for finding them. it is important to note that other valid methods are intentionally left out. human resources professionals who have direct responsibility for their employees must be prepared for these innovative human resources principles. if hr professionals can adapt to new roles, they can meet work-related demands and employee needs while gaining competitive strength. albina hashimova 85 therefore, it can be said that human resource professionals and managers need to develop and expand their talent management approaches. as these approaches are developed, they need the ability to access innovative workforce models and alternative labor resources, modify selection criteria, and create age-appropriate contractual arrangements 58. in addition, new training and development models, as well as new motivation tools, must be prioritized to retain this workforce. implementation of personnel selection with such innovative methods will increase the work potential and will positively affect the future destiny of the company. conclusions in conclusion, we must note that it is a well-known issue that the debates about the effects of the digitization process on work life or the digitalization of work life will intensify in the future, and research on this topic will create a certain wealth of literature. although digitization is an extremely important trend, there is some uncertainty about where this process will lead. therefore, it is too early to describe this process as a transformation. because this process is still ongoing and subject to various changes. in recent years, studies on the effects of the digitization process on work life have been characterized by more employment aspects of the issue. some of these are predictions about the future. since hr performance evaluation was first studied, the most interesting and sought-after aspect of hr transformation has been the individual and organizational benefits. the studies provide an overview of the implications and benefits of digital hr. while digital ict increases the engagement, competence, and harmony of employees individually, it reinforces ict investments in an organizational context in terms of: • reorganizing ict activities; • by increasing the quality and efficiency of ict services; • by turning ict functions into a strategic business partner, as well as providing benefits by reducing costs. performance appraisal systems supported by information technology provide ideal usability and increase success, especially for performance appraisals based on very different data sources, such as the balanced scorecard. the digital transformation and therefore the process characterized as the fourth industrial revolution must be further developed to explore the topic in depth in different dimensions. in in other words, to assess the impact of the digital transformation process on work life and industrial relations, including employment, it is necessary to keep work life to some extent "fixed" with possible economic, social, and cultural structures. we can make the following suggestions regarding the selection, training, and motivation of personnel for the digital economy: 1. preparation of a new strategic plan; 2. taking measures to increase motivation among employees; 3. to use world experience in the digital economy; 4. using the methods acquired by foreign companies in our country to conduct experiments in the innovation system, etc. considering all these proposals, taking measures for innovative progress in this field will not only accelerate the development of companies but also affect the economic dynamics of the country. personnel work process using digital economy application programs 86 references 1. azərbaycan respublikasının informasiya təhlükəsizliyi və kibertəhlükəsizliyə dair 2023-2027-ci illər üçün strategiyası. ar prezidentinin sərəncamı// 28 avqust 2023 2. əliquliyev.r.m.(2019). “elmi kadr hazırlığı”. bakı,“i̇nformasiya texnologiyaları”, 289 səh. 3. armstrong’s handbook. (2015). “human resources management practice”. london: 378 p. 4. barber, d. (2006). portal buildingthe implementation of an enterprise portal: 289 p. 5. bennet p.f. lientz k.p. (2011). breakthrough technology project management, academic press: 128 p. 6. bohlander g., snell s., mathis r., jackson j., "managing human resources", 2009-2010, p.231 7. ceylan r.l. (2014). i̇nsan kaynakları yönetimi. eskişehir. anadolu üniversitesi. i̇stanbul, bakan yayın evi: 346 s. 8. ehnert i.h. (2013). “sustainability and human resources management”. london: 454 p. 9. ergin a.m. (2019). “dijital ekonomide iş prensipleri”, i̇stanbul, koçak yayın evi: 447 s. 10. f. rahmanov (hashimova a.c, r.salahov) “management of digitization processes in the field of social services”. marketing and management of innovations. – issn 2218-4511 (print) issn 2227-6718 (online) ukraine– 2022 – vol 14. (№2) – səh.173-184 11. i̇lhami f.a, (2019). “i̇nsan kaynakları yönetimi”. i№ baskı, i̇stanbul, bas yayın evi: 378 s. 12. reyhan u.n. (2012). “i̇nsan kaynakları”. ankara, ford yayın evi: 445 s. 13. taşdemir s.p. (2014). motivasyon kavramına genel bir bakış. istanbul, baskı yayın evi: 235 s. 14. terhan o.n. (2019). motivasyonun geliştirilmesi: psikolojik yaklaşım. ankara, rendem yayınları: 349 s. 15. marchington m.a. (2016). “human resources management at work”. london: 327 p. 16. nur y.r. (2016). “i̇nsan kaynaklarının önemi”. i̇stanbul, beta yayın evi: 451 s 17. sabuncuoğlu z. (2012), "i̇nsan kaynakları yönetimi(uygulamalı)",beta yayınları, vі baskı, i̇stanbul, 362 səh. 18. simon s.y. (2011) “personnel and human resources management”. london: 256 p. 19. susan e.m. (2018), human resource management, london: wileyblackwell, 2nd edition: 547 p. 20. i̇lhami f.a, (2019). “i̇nsan kaynakları yönetimi”. i№ baskı, i̇stanbul, bas yayın evi: 378 s. medimond template agora international journal of economical sciences, aijes, issn 2067-3310, e issn 2067 – 7669, vol. 14 (2020) accounting of public institutions component of general accounting and especially of public accounting cristina antik1 1faculty of juridical and administrative sciences, agora university of oradea e-mail antikcristina@yahoo.com abstract public accounting is the accounting that ensures the highlighting of all collection and payment operations related to public funds. it assesses the obligations of taxpayers, highlights the receipts from these obligations and determines the differences from the unfulfilled obligations, as well as the responsibility of the authorizing officers regarding the making of payments from public funds. its organization is mandatory for all public authorities, territorial communities, national and local public institutions. keywords: public, institutions, accounting, obligations. 1 introduction vincent raude and jean claude pagat1 retain for public accounting several definitions, one usual, another technical and the third administrative. thus, the usual definition formulates it as: “the set of rules applicable to the management of state revenues”, the technical one “rules for presenting public accounts”, and the administrative one considers public tasks and defines it as “public accounting rules are in at the same time rules for presenting the accounts and rules for organizing the services of public accountants”. the shortcomings of these definitions consist in the fact that the usual one refers only to state revenues and does not consider a legal basis, the technical one is too limited, and the administrative one does not refer to authorizing officers. finally, the authors we referred to, propose for public accounting the following definition that would express, in our opinion, its functions most correctly, namely: of public revenue officers and public accountants. " this definition gives the rules of public accounting a legal, technical outline and includes within it the obligations and responsibilities of both public accountants and authorizing officers. 2 rules and norms of public accounting although public sector accounting is organized on the basis of separate plans of accounts, with particularities, both in terms of the structure of accounts and their operation, the basis of public accounting are common rules and regulations with those of general accounting, namely:  the use of models of accounting registers and common forms regarding the financial and accounting activity;  the models of the balance sheets, as well as the general chart of accounts for the public institutions, are established by the same body, respectively by the ministry of public finance; 1 vincent raude şi jean claude pagat – “cours sur les règles de la comptabilitè publique”, école nationale des services du trésor, paris, 1991, pag. 3-6 mailto:antikcristina@yahoo.com in this respect there is a unitary conception in the matter (chart of accounts, balance sheet and other specific forms);  its operation is mandatory according to the same rules and methods as follows: • accounting is conducted in double entry; some exceptions allowed for certain public institutions that have the right to organize one-off accounting (local communal councils) do not invalidate the rule; • chronological and systematic recording in accounting of all collection and payment operations simultaneously, in the debit of some accounts and the credit of others; • establishing the total debit and credit amounts, as well as the final balance of each account; • drawing up, at least monthly, the checking balance, which reflects the equality between the total debit and credit amounts, and the total debit and credit balances of the accounts; • presentation of the final monthly, quarterly, annual execution, of the revenues collected and of the payments made, as well as of the surplus or deficit, compared to the profit and loss account, in the case of financial accounting. as in the case of general (financial) accounting, public accounting must ensure a true picture, regarding the situation of execution of the consolidated general budget, of the information necessary for the own needs of public institutions, as well as regarding their provision to law enforcement bodies. , with prerogatives in the matter. in this respect, public accounting must comply, in good faith, with the generally valid unitary rules and regulations of general accounting, as well as its principles, namely:  the principle of prudence, which does not allow the underestimation of revenues and overestimation of expenditures, both in the process of drawing up budgets and in the execution process especially. this principle in public accounting must be manifested especially in terms of the correct assessment and registration of budgetary rights that public institutions have.  the principle of permanence of the methods, which imposes the continuity of the rules and norms regarding the way of evaluating the revenues and the criteria for establishing the budgetary credits, ensuring the comparability in time of the information regarding the structure of the budgets;  the principle of continuity of activity, which, in the case of public accounting, determines its existence as long as there is a public sector, and it will exist as long as there is a state organization. in this direction we could mention, possibly, about a development of the attributions of the public accounting, with the expansion of the public sector, whose public expenses, of the relation between them and the gross domestic product, have increased in the last century almost five times;  the principle of independence of the exercise, which determines the beginning of the budget execution at a certain date, its conclusion at another precise date and, consequently, of the non-admission that during this period to register incomes and to make expenses belonging to other exercises. we could also call this principle of “adaptability of accounting information to the budget execution system used”, “management” or “exercise”. in this regard, the public sector has adopted the system according to which there is an annual record of budget appropriations, cash payments and receipts to the state budget, the state social insurance budget and local budgets. this system imposes the validity of budget appropriations opened and distributed only within the respective budget year; also, cash payments can be made only within the limit and within the term of validity of the credits. on the revenue side, only those receipts that are collected during the financial-budgetary year are valid, and those collected after december 31 are highlighted for the following financial year;  the principle of non-compensation, which in public accounting finds its widest expression in that no payments can be made directly from receipts, all revenues are recorded in the budget, and for any expenditure that is made there is an obligation of approval. some exceptions to this rule, especially in the case of extra-budgetary and special funds, do not invalidate the general principle;  the principle of intangibility of the opening balance sheet is applied only partially in the situation of public accounting, because, in the case of public funds, the incomes due to the current year, but collected in the next year, are registered as income in the year in which they were collected. also, the funds approved by the annual budgets and not used in that year lose their validity at the end of the year. only in the case of certain budgets, such as those in extrabudgetary means and special funds, which have the right to carry over the execution balance from the previous year, could we talk about a certain intangibility of the opening balance sheet;  also, as in the case of patrimonial units, where the responsibility for organizing and keeping the accounts, in accordance with the law, is the administrator, and in the case of public institutions the responsibility, from this point of view, rests with the authorizing officer (ministers, heads of institutions public, central and local, etc.) compared to the rules enunciated, in connection with the functioning of public accounting in romania, the authors we referred to earlier, vincent raude and jean claude pagat, in the same paper mention the following fundamental principles of french public accounting: “the principle of distinction between opportunity and regularity; of the distinction between authorizing officers and accountants, and of not affecting the receipts and expenses ”. to these three basic principles could be added: "the principle of responsibility (for authorizing officers and accountants) and of unity (regulatory unit, ability to handle accounts, treasury unit)". apart from the beauty of defining the principle of unity, we retain the principle of distinguishing between regularity and opportunity, which in our literature is not addressed. some similarities and parallels between public and general (financial) accounting are also in terms of balance sheet. if in the case of patrimonial units the balance sheet consists of the balance sheet, profit and loss account, and as an annex the management report, in the case of public institutions it consists of: balance sheet, with the necessary adaptations, the execution account, and instead of the profit and loss, and an explanatory report as an annex. regarding the balance sheet, which is not subject to verification and certification by auditors, accounting experts, etc., or in the case of patrimonial units the execution account on the state budget, state social insurance budget and local budgets, must be approved by the same bodies which approved the respective budgets, and in the case of public institutions to be audited. of course, there are similarities between the organization and accounting of public institutions and financial accounting, but also significant differences, namely: the chart of accounts of public institutions contains accounts specific to these units, but there are some accounts, both as name and and as content, which resembles the accounts in the general chart of accounts. for example, the “house” account in the chart of accounts of public institutions with the “house” account in the general chart of accounts. we distinguish some similarities by content and function, especially between the accounts in the general chart of accounts and that of the public institutions, such as: class 2, 21 “property, plant and equipment” in the general chart of accounts, with the accounts in class 0, 01 “fixed assets” in the chart of accounts for public institutions; account 51 “accounts with banks” from the general chart of accounts, with account 10, account 11 “cash”, “available from special purpose funds” from the chart of accounts of budgetary institutions; class 6 “expenditure accounts” from the general chart of accounts, with class 4, account 41 “expenditures of institutions” from the chart of accounts of public institutions, which through their debit or credit register the same economic phenomena, and the balances express the same content. although the chart of accounts of public institutions is common to all public institutions presented by the components of the general consolidated budget, between the accounts reflecting the financing system of public institutions, financed on the one hand by the state budget and local budgets on the other hand, there are important differences. , especially regarding the highlighting of the constitution of the public resources through which they are financed, as well as the conditions that must be fulfilled regarding the ceiling up to which cash payments can be made. also, there are essential differences between the way of closing the accounts of expenses at public institutions financed from budgetary funds and those financed from extra-budgetary means. if, for the former, the expenditure accounts are closed through the financing accounts, in the case of institutions financed from extra-budgetary (self-financed) means their closure is done through profit and loss accounts, through which, moreover, the income accounts are closed, more close to that of financial accounting. an essential difference in the case of accounting of public institutions compared to the financial accounting of economic agents is the fact that the value of fixed assets and inventory items, in the case of public institutions, is recorded directly on expenses when purchasing them. in the case of public institutions we do not encounter the notions of wear and tear and depreciation of fixed assets or inventory items, as in the case of accounting of economic agents. therefore, the actual expenses in the case of public institutions, in most cases, do not correctly reflect the effort of society in connection with the maintenance or operation of a certain social-public indicator, pupil, student, hospital bed, military, etc. also, due to the specifics regarding the financing of public institutions in their accounting, in addition to the notions of actual expenses as in the case of economic agents we also find the notions of cash payments and net cash payments, whose level is determined by financing accounts, which only coincidentally coincide at the end of the budget year with the actual expenditure accounts. at the same time, there are differences between the expenditure accounts mentioned in the chart of accounts of public institutions, on the one hand, and the expenditure accounts in the general chart of accounts and the state treasury, on the other. the accounting of the state treasury reflects the net cash payments, and not the actual expenses, as long as the expense accounts of economic agents and public institutions always reflect only the actual consumptions (salary payments, actual consumptions of materials, etc.) once the budget law has established the volume and structure of public resources to be mobilized, a major component of the process of their formation is that of the means and methods to ensure their collection, but especially their efficient management. in this context, an important role is played by public institutions through which the process of setting up and using the main public resources of the state takes place. in the process of establishing public resources, the public institutions of prime importance, as special authorities of the state, are represented by the ministry of public finance and the ministry of labor and social solidarity, and their territorial bodies. in fact, other ministries and central bodies, as well as their territorial bodies, have a significant role in the process of setting up public resources, especially in terms of setting up financial resources from extra-budgetary means. if in the process of establishing public resources there are two public institutions that play a major role in this process, namely the ministry of public finance and the ministry of labor and social solidarity and their territorial bodies, however, the process of using public funds is carried out equally through all central and local public institutions, which makes their role and importance, and primarily their responsibility, in terms of their high effective use. in exercising the attributions regarding the management of public funds, maintaining a permanent balance between the inflows and outflows of resources is the keystone of the attribute of the competent public institutions of the state, the ministry of public finance, first of all, in establishing and administering public funds. once this "transfer of purchasing power" from individuals and legal entities to state authorities, through mandatory levies from taxes, fees, etc., the second basic component, and just as important of the state function, is management, allocation. these huge financial resources to various beneficiaries public institutions, enterprises, population (directly and indirectly). the way in which, at every stage of its development, the state manages to prioritize, to sort out social and economic needs, depends the further development of the economy, and on this basis of an effective social protection. the centralized financial resources available to the state, through the components of the general consolidated budget, have as main destination the financing of the “public sector”, which, according to prof. gheorghe manolescu2 is defined as follows: “in this sense, it can be admitted that the public sector or the state as an economic agent) includes the set of activities, institutions and bodies characterized by collective or political decision-making processes, within which the election procedures are carried out through the voting mechanism”. the main "consumer" of these public funds is, therefore, the public sector through its institutions. public institutions a category that includes the parliament, the romanian presidency, the government, ministries, the judiciary and other specialized bodies of the central and local public administration, ensure the financial resources necessary to finance expenditures, regarding their maintenance and operation, in the largest partly, at the expense of the state budget and local budgets. in this context, they have the obligation that all payment and collection operations be carried out only through the state treasury, whose activity is carried out under the state guarantee. public institutions therefore represent the public units through which the state exercises and fulfills its functions and services in the economic, social-cultural, defense, public order, administrative, etc. fields. they can be of central importance, such as: the parliament, the romanian presidency, the government, the ministries and other institutions of the autonomous and local central administration. the local public institutions comprising the authorities of the administrative-territorial units, the county, municipal, city and communal councils, the public institutions and the public services with legal personality, regardless of the way of financing their activity. as a financing system, public institutions can be: • financed entirely from budgetary revenues, a situation in which the revenues they realize have the obligation to pay them, in full, to the budget from which they are financed; • financed from extra-budgetary means (own revenues), with supplementation from budgetary funds, in the form of subsidies or budgetary transfers (state budget or local budgets). in this situation, the own revenues generated by the institutions in question are retained for selffinancing, and those not used at the end of the year are distributed for the following year. • financed entirely from extra-budgetary means, situation in which also their balance from the end of the period is carried forward for the next financial year; • financed entirely from special funds. their balance at the end of the period shall also be carried forward to the following financial year; in this context, public institutions have characteristics that distinguish them from patrimonial legal entities, and especially from economic agents as follows: 2 gheorghe manolescu – “buget-abordare economică şi financiară”, editura economică, pag.17 a) there are bodies through which the state exercises its role, attributions and functions in the administrative, social-cultural, defense, public order, national security, justice, social and economic assistance fields; b) there are bodies that generally do not carry out productive activities, through which to realize material goods, they produce social, administrative, justice, public order, defense utilities. only by chance, their subunits can realize and produce utilities and services of an economic nature, a situation in which, however, they are subject to the rules and principles according to which private finances operate on financing, and the correlation of the state budget of economic agents. c) depending on their method of financing entirely from budgetary resources or partially, entirely from budgetary means or special funds their own revenues are paid in full to the budget from which they are financed or carried over to the following year. d) in general, they do not have indicators of profitability and economic efficiency, but indicators of social, educational, cultural efficiency, etc. can be calculated for them. since, however, the value of fixed assets and inventory items is spent on their procurement, the efficiency indicators that are calculated are largely distorted. e) public institutions do not calculate and record the wear of inventory items or the depreciation of fixed assets gradually, but only once, when purchasing them. f) it finances its activity on the basis of revenue and expenditure budgets or only on the basis of expenditure budgets. 2.1 classification of public institutions the text included in the sections or subsections must begin one line after the section or subsection title. do not use hard tabs and limit the use of hard returns to one return at the end of a paragraph. please, do not number manually the sections and subsections; the template will do it automatically. 2.1.1 by their activity importance according to the importance of their activity and their subordination, the public institutions are grouped in: 1) institutions of the central public administration; 2) local public administration institutions. 1) the institutions of the central public administration include: the presidency of romania, the parliament, the government, the ministries and the other specialized central authorities of the central public administration and the territorial institutions under their subordination. 2) the institutions of the local public administration include: the institutions of the local public administration, formed by the territorial administrative units, and include the communes, cities and counties, as well as the public units subordinated to them. the public administration authorities through which local autonomy is achieved in communes and cities are the elected local councils and the mayors elected in accordance with the law. the decentralized public services of the ministries at county level include, for example: general directorates of public finance; county and bucharest school inspectorates; county departments of labor and social solidarity; county sanitary directorates; county council of culture etc. the heads of public, central and local institutions, depending on the rights conferred by law in connection with the approval, distribution and use of budgetary funds, are called authorizing officers. vincent raude and jean claude pagat, in their book, quote g. devaux, who gives the definition of authorizing officer: , finds, liquidates a receivable or to order either the collection of a receivable or the payment of a debt ”. we notice from the definition given by g. devaux that the authorizing officers are not attached to the notion of receipts and expenses, but to the notion of “receivables” and “debts”. the specialized materials and the romanian regulations define the authorizing officer as: “head of a budgetary institution, central or local, who has the right to dispose of the budgetary credits approved by the income and expenditure plan of the institution”. the same rights and obligations, arising from the definition given by the explanatory dictionary, result from the specialized materials and the romanian regulations in the matter, which specify that “the main credit officers of the state budget, state social insurance budget and special funds budgets are the heads of ministers and leaders of the other specialized bodies of the central public administration”. in the case of the local public administration authorities, the main credit officers are the mayors of the local councils, the general mayor of bucharest and the presidents of the county councils. 2.1.2 by romanian regulations ii. in accordance with romanian regulations, public institutions are divided into: 1) hierarchically superior institutions, whose leaders have the quality of main credit officers; 2) subordinated institutions, whose leaders have the quality of secondary and tertiary credit officers. the main authorizing officers receive the financing resources directly from the budget, for their own needs, as well as for those of the subordinated institutions, which they then distribute to them. there are also situations when some public institutions, whose leaders have the quality of secondary authorizing officers, are in a relationship of subordination to the main authorizing officers and hierarchically superior to the tertiary authorizing officers. these authorizing officers do not have a direct relationship with the state budget, but from the credits received from the main authorizing officers they distribute budgetary means to the tertiary authorizing officers under their subordination. the same authors, vincent raude and jean claude pagat, note that authorizing officers are subdivided, as in the case of accountants, into "principal, secondary, proxies and deputies and enforcement agents", but only principal and secondary authorizing officers have the legal status of authorizing officers. another classification, according to the same authors, is that of "elected officers" and "appointed officers", the elected having a political responsibility. compared to the way in which the romanian legislation regulated the status of authorizing officers, especially in terms of their responsibilities and rights, in the french literature we find increased attributions and rights for authorizing officers in france, in terms of collecting budget receivables. among their attributions in the issue of receipts we mention: “they order the execution of receipts, ascertain the rights of the bodies, liquidate the receipts, issue receipts orders intended to ensure the receipts, notify these orders to the accountants in charge of receipts”. to which responsibilities, in the line of revenue collection of french public officials, in our country they have established tasks and responsibilities in this line, less precise, the regulations in the field emphasizing, in particular, their rights and obligations regarding employment and performance. of expenses. thus, the attributions are the following: “the use of budgetary credits; income generation; efficient and effective use of the amounts received from the budget (state, state social insurance, special, local funds); the integrity of the assets entrusted to the unit he leads; organizing and keeping the accounts up to date ”. although the law provides for the main authorizing officer and obligations regarding the realization of revenues, in practice this task is taken over by the tax authorities. central and local public institutions are financed from the budget or from special funds or from extra-budgetary means, based on the budgets of revenues and expenditures drawn up and approved each year according to the legal norms in force. in the case of local budgets, special and extra-budgetary funds include, on the one hand, revenues and, on the other hand, approved budget appropriations per year, quarters, broken down by subdivisions of the budget classification, within which authorizing officers may make payments. in the case of central public institutions, their budgets include only the provisions from the expenditure side, respectively the budgetary credits. 2.1.3 by their legal statute iii. from the point of view of the legal statute, public institutions can be classified into: 1) public institutions with legal personality; 2) public institutions without legal personality. 1) the public institutions with legal personality are those whose leaders have the quality of authorizing officers, quality in which they have the right to decide in hiring and making expenses. 2) public institutions without legal personality are those whose managers do not have the quality of authorizing officers, in which case they can make expenses only within the amounts actually transferred by their authorizing officer in sub-accounts opened in their name. 3 conclusions in conclusion, public accounting, and first of all that of public institutions, is similar in many respects to general accounting, a resemblance determined mainly by the rules and principles of accounting in general, but has many essential differences determined by the specific functioning of public institutions. regarding the way in which they highlight the establishment of public revenues and the execution of expenditures, but especially of their way of closing at the end of the financial-budgetary year. references [1] o. bojianu, contabilitate generala, ed. eficient 1998. [2] n. feleaga, i, ionascu, tratat de contabilitate financiara. vol i-ii, ed. economica [3] i.oprean, intocmirea sau auditarea bilantului contabil, ed. intercredo 1997 [4] m. ristea, c, cucu, c lazarescu, contabilitatea intreprinderii, ed. margaritar 1997 [5] m.ristea, v. raileanu, l. olivuid, i. misulescu, a. stoian, contabilitatea si fiscalitatea intreprinderii, ed. tribuna economica 1995 [6] m. ristea, v. raileanu, l. olivuid, i. misulescu, a. stoian, contabilitatea societatilor comerciale, vol iii, ed. cecar bucuresti 1996 [7] g. vintila, diagnosticul financiar si evaluarea intreprinderilor, ed didactica si pedagogica bucuresti 1998 [8] v. voica, contabilitatea financiara a agentilor economici, editata de centrul de management 1996. agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 no. 1 (2023), pp. 48-55 48 strategy of sales and communication of hotel services during the war m. kulyk, m. boiko, m. bosovska, a. okhrimenko mariia kulyk¹, margaryta boiko², myroslava bosovska³, alla okhrimenkoº dept. of hotel and restaurant business of state university of trade and economics, ukraine ¹ orcid.org/0000-0001-8732-7441, e-mail: m.kulyk@knute.edu.ua ² orcid.org/0000-0003-0249-1432 ³ orcid.org/0000-0002-6021-5228 º orcid.org/0000-0003-0405-3081 abstract. in the conditions that have developed in the economy of ukraine, the organization of processes in the hotel business and the formation of sales and communication strategies have undergone changes, as well as the tourism sector as a whole. each hotel enterprise needs to clearly understand the plan of actions and decisions to ensure the correct operation of the enterprise, adapted to external changes. the purpose of the article is to study the essence and tasks of forming a strategy of sales and communication of hotel services during the war, studying the main aspects. after february 24, 2022, most ukrainian businesses and enterprises, in particular hotels and restaurants, faced uncertainty and confusion about what to do next. the tourist flow came to a sudden halt along with air and rail connections. a significant number of workers lost the opportunity to be present at workplaces or went abroad. due to the hostilities, the offer on the hotel market of ukraine has decreased. the objective of survey providing in the study is the determination of regional trends in the development of the hotel market of ukraine during the war and understanding the peculiarities of marketing strategies that affect the involvement of new hotel product consumers’ segments through the booking channels and the formation of a positive image of hotels. methods of generalization, analysis and synthesis, comparison, scientific abstraction and systematization were used to fulfil the set tasks and achieve the main goal of the research of strategy of sales and communication of hotel services during the war. keywords: sales, distribution, communication strategy, hotel services during the war introduction since 24 february 2022, most ukrainian businesses and enterprises, including hospitality and restaurant companies, have faced uncertainty and confusion about what to do next. tourist arrivals came to an abrupt halt, along with air and rail services. a significant number of employees lost the ability to be present at their workplaces or went abroad. in 2022 during the war, it was confirmed the association between job insecurity and job stress, and the relationship between job insecurity and turnover (ergun et al.,2023). as a result, the low pay level in the hotel and restaurant business influenced on decreasing of employment and migration of staff (levytska et al., 2023). the hostilities, supply in the ukrainian hotel market has decreased, with many properties not operating for security reasons, lack of demand, technical reasons or damage from shelling. for an effective recovery of hospitality mailto:m.kulyk@knute.edu.ua mariia kulyk, margaryta boiko, myroslava bosovska, alla okhrimenko 49 and tourism, ukraine may take the experience of other countries. the war in croatia destroyed a lot of infrastructure, cultural heritage and reputation of a safe destination. it took a couple of years to regain all of that to the starting position and then acquire the development of the same (belin, 2021). japan has experienced many crises caused by viruses, epidemics, natural disasters such as typhoons, earthquakes, tsunamis, and the ravages of war, which led to the economic stagnation (hara et al., 2022).the problem with migration can be solved as in sweden, where the refugees being there temporarily—as soon as the war ended, they were expected to return home (nauman, 2022). currently, the state of the hotel market in ukraine varies from region to region: how such facilities operate and whether they are open at all depends on the region in which they are located and how far they are from the war zone. hospitality during the refugee crisis, apart from a cultural value and societal response to the protracted refugee influx,) is a discursive strategy of socio-spatial control used by humanitarian agencies, local and national authorities (carpi & pınar şenoğuz, 2018). the hotel's orientation towards the reaction on the contemporary situation is closely related to the rebuilding its work in order to be useful and help those who left their homes because of the war (petráková et al., 2022). the demand for hotels in western regions of ukraine: ivano-frankivsk, lviv, ternopil and zakarpattia was formed by international companies and diplomatic missions that relocated to safer regions. more than one thousand enterprises have been transported from the eastern and central part of ukraine (zhuravka et al., 2023). hotels there are fully operational and there are no prerequisites for closing or suspending their operations. in kharkiv, sumy and mykolaiv, the main goal is to preserve the facilities. the hotels have been suspended as accommodation facilities. the teams are focusing their efforts on volunteer support in the war against the russian aggressor. according to (korneyev et al., 2022), the ukrainian business is gradually returning to life. hundreds of enterprises are resuming work, and the state is contributing to this. we should also pay special attention to the operation of international branded hotels: such accommodation facilities located in large cities have mostly suspended operations. this is due to security policies and foreign management. in addition, their audience is foreign tourists, who are not coming to ukraine at the moment. today, international hotels such as hilton kyiv, intercontinental kyiv, both radisson blu hotel properties, as well as fairmont grand hotel kyiv, mercure kyiv congress, holiday inn kyiv and others have resumed operations in the capital. analysis of research and problem statement actuality of the research: hotels that did not stop operating had to transfer all business processes to an unprecedented new format. at the same time, they had to provide guests with the usual level of service and safety, help employees and their families, and engage in volunteering: providing shelters, hosting idps, providing humanitarian aid, etc. often, this had to be done with a smaller team, as hotel staff also tried to move to safer places or emigrate abroad, or employees joined the ranks of the armed forces or the defense organization. however, if the main issue at first was how to assemble and retain a team, now it is how to load it in the face of low demand and a small number of guests. another challenge for hotels was the disruption of supply chains. due to the lack of fuel strategy of sales and communication of hotel services during the war 50 and other reasons, some logistics processes were disrupted, which affected the provision of facilities with the necessary supplies for operation or launch. for example, at ribas hotels group, logistics disruptions affected hotels under construction. and hotels experienced interruptions in the supply of products in the first weeks of the invasion. the curfew also changed the operation of accommodation facilities. due to time constraints, the process of check-ins and check-outs is somewhat complicated, with the main workload falling on the day shift. in addition, due to the curfew, employees sometimes live on the premises of hotels. restaurants and bars and other services, such as beauty salons, spa areas, etc., are also limited. some hotel services are not available during air raids. this is a separate point in the operation of facilities that have implemented enhanced security standards. they include notifying guests about air raids and their termination, arranging safe places/shelters where people can wait out the danger, etc. method data were collected from april 2022 to december 2022. the study adopted mixed research methods because it allows for the collection of both structured quantitative data through a survey and qualitative data through interviews with the hotel managers. the survey consists of 10 questions with the answers stated in different forms such as “yes or no”, multiple choice, open questions. the questions were based on exploring current situation focusing on peculiarities in hospitality sales during the war. 134 hotel managers from different regions of ukraine completed the survey or were interviewed. ms excel statistical tools were used to analyse the quantitative data gathered from survey, interviews to present the trends and market situation in hospitality in ukraine. results the current situation of the ukrainian hotel industry can be described as a lack of a market. except for some regions in the west of the country, where the situation is better. such segments of guests as leisure and corporate are completely absent. since the beginning of the full-scale war, two categories of guests have dominated the structure of ukrainian hotels. first and foremost, it was individual guests who either temporarily stayed in accommodation facilities and then returned home or found permanent accommodation in a new city, or travelled further afield. there was also demand from companies and diplomatic missions that relocated their teams to safer areas. for example, in the city hotels of ribas hotels group in odesa, internally displaced people accounted for about 70% of guests in the first months of the war, but now they are relatively few 10%. these are mainly people from kherson and mykolaiv. in march, poltava's premier hotel palazzo was almost 70% occupied by refugees from kharkiv. the hotel hosted and fed people for free. in march and april, premier hotel dnister in lviv allocated a significant number of rooms for free accommodation for refugees and also converted one of its conference rooms into a free hostel. the second category of guests includes media representatives, diplomatic delegations, international volunteer organisations, etc. the operators especially note media representatives: at the beginning of the hostilities, some properties, such as the bristol in odesa and the premier palace hotel in kyiv, had so many mariia kulyk, margaryta boiko, myroslava bosovska, alla okhrimenko 51 such guests that the hotels became a kind of hub for international journalists. according to the results of the analysis of the market of hotel services it is established that in the structure of hotels of ukraine 42% are hotels in big cities, their number by regions is 5253 objects (figure 1). figure 1. number of hotels in ukraine 2016 2021 source: own development by authors the number of hotels according to official statistics in 2022 were decreased compared to 2021. this is caused by occupation of part of ukraine and because the number of certain facilities were destroyed (figure 2). figure 2. dynamics of the occupancy in ukrainian hotels in 2021-2022 source: own development by authors strategy of sales and communication of hotel services during the war 52 during the period of research, we observe that in 2021 2022 the occupancy decreased in kyiv, odessa during the war, and the same time we observe an increase in the hotel occupancy in lviv. at the same time, during 2022, the room occupancy rate ranged from 22 to 58%, which indicates a low level of attractiveness of hotels in central and south ukraine, which indicates an insufficient response of new communication strategy. how has the war affected the network and guests? negative impact: lack of physical security due to the hostilities on the territory of ukraine, which is on the list of countries not recommended for citizens of most countries. lack of air travel, the departure of solvent ukrainians from the country, unsafe location of hotels near government buildings become the logistical problems to ensure full operation. positive effects: reduced competition the list of competitors has been partially reduced due to the closure of hotels in kyiv. retention of staff, ukraine is in the spotlight of the world community. ukraine is a brand and visits from the press, international organizations and companies that were not present before. having basements has become an advantage, as they serve as storage for guests, and proximity to the metro. what are the historical booking channels and customer segments? more than 65% are individual guests who book their accommodation directly at the reception, on the website or online resources. about 25% are representatives of embassies, government agencies and corporate companies, who mostly stay long-term and in large groups. the remaining 10% are loyal guests who stay regularly. guests who have been staying since the beginning of the war: foreign journalists, whose number has increased significantly, international organizations, ukrainians as individuals travelling through ukraine and guests whose stays are funded by ukrainian charities to support those affected by the war. main sales channels: hotel website, hotel email, online booking channels, social media. most online booking channels support ukrainian businesses, so airbnb had the opportunity to create a donate rate that anyone could use by making a charity booking to support the hotel industry. another booking service, booking.com, cancelled the mandatory booking commission for ukrainian hotels by the end of the year. as for the communication strategy of hotel services, absolutely no one has a magic methodology for communicating during such a period, but you definitely don't need to drop out of the information space. the concept of "communication" comes from the latin word communication as a derivative of communicate to make common, to connect, a way of communication, a form of communication. therefore, communications are understood as the process of exchanging information between people using various signs, symbols, and communication methods. communications are the subject of study in various sciences, including philosophy, sociology, psychology, political science, cultural studies, linguistics, economics, marketing, and others. therefore, communication theory is a complex science that integrates knowledge about communication processes in various fields. marketing communications is one of the components of the 4ps, which is an important tool for promoting goods and services. marketing communications are of particular importance in the digital society, which is characterized by significant changes in almost all areas of human activity due to new opportunities provided by digital technologies, digital infrastructure, mobile and cloud technologies, big data, digital codification of information, significant growth in computing power, integration of information technologies with mariia kulyk, margaryta boiko, myroslava bosovska, alla okhrimenko 53 communication systems, digital automation and robotics. all this makes information accessible to consumers, changes their behavior, accelerates the development of society, stimulates economic growth, improves public administration and business management in all areas of economic activity, and improves human life. external communications take place between an organization and the target audiences with which it has to deal. target audiences include shareholders, trade unions, consumers, financial and credit institutions (banks, stock exchanges), suppliers, competitors, the media, ngos, regional (municipal) authorities, government agencies and other governmental structures. internal communications are communications that take place within an organization between individual employees or departments of the organization. communication in social media, on the hotel website and in the media is important from the first days of the war and should be a mandatory, continuous process. hotels need to broadcast their social, political and volunteer position. make open reports on volunteer activities, broadcast that the hotel business is working. wartime marketing and communications have their own peculiarities. you cannot pretend that nothing is happening and that there is no war. it used to be that some people could afford to say "we are out of politics", but now everything that happens in the country is politics. war is politics. in addition to the usual content, patriotic publications should be added, and such content can be segmented as follows: military and social; national brand positioning; information about volunteering; transferring funds for the armed forces; discounts for ukrainians, etc. communication strategy in hospitality is a process aimed at: supportive-victorious inspirational content about victory, affirmations, quotes, memes on military topics. adapt them to your niche, so you will be on the same page with your audience. relevant and useful post a message about your company's work or suspension of work, publish a list of active sales offices, their schedule, and current contacts. hotel can also add a list of bomb shelters near the establishment. it is especially important to show that there are ordinary people behind every business, add staff photos, live stories and broadcasts to your profile. if possible, actively cooperate with international media and give interviews. this way, you increase the level of trust in the brand. in order not to lose the loyalty of your audience, you should work on any feedback or comment, even if it is unpleasant. work with free channels. whenever possible, hotel managers have to actively cooperate with international media and give interviews. this is how to increase the level of trust in the brand. in order not to lose the loyalty of the guests, hotel should work on any feedback or comment, even if it is unpleasant. hotel need to work with free channels. the immediate target of such savings is communication channels. hotel should focus on the free channels that will have developed in the previous work (social media, newsletters, website) and analyses whether hotel really need the paid channels that worked before the war (targeted, contextual, display advertising). promotion of hotel services, in particular the cost of advertising impressions and ads, has fallen in price amid a decrease in supply on the market, so it is worth seizing the moment and allocating a budget for promotion. the main marketing messages have also changed somewhat, and now the strategy of sales and communication of hotel services during the war 54 main emphasis is on safe storage, round-the-clock security, room alarm systems, long-term accommodation at a reduced price, etc. before posting anything, hotel manager needs to read the news. before hotel manager clicks publish on a new post, he needs to check what's happening in ukraine and around the world. it is clear why he should not post about entertainment if there was an explosion in a shopping centre half an hour ago. delete what turned out to be inappropriate. something happens all the time, unpredictably. if a tragedy occurs half an hour after the post, don't be afraid to delete, move, or apologize. do not speculate on values. do not use the names "bayraktar" or "peremoha" do not parasitize on things that inspire ukrainians. but at the same time, keep track of social demands: you need to understand what people want and give it to them. conclusions it should be noted that the sales and communication strategy in today's realities must be quickly adaptable and adjust to changes and current market offers. now is a great time to try and test new hypotheses of promotion, implement new approaches to doing business, and find other ways to increase revenue. free tools are especially worth noting. hotel managers have to monitor the situation in the country and the world to be as relevant as possible in communication strategy. the unpredictability and dynamics of demand in the situation of war in ukraine prompts hotels to the need to comprehensively and systematically form a policy of sales and communication with guests in conditions of increased risk. therefore, accordingly, there is a need to implement new strategies, since closed borders, lack of electricity supply and the danger of missile strikes lead to the need to change the paradigm of providing hotel services. therefore, an important approach is formulating a strategy of reorientation to new target segments, forming a brand and identifying the hotel as a safe place for the guest. in the conditions of war, the introduction of new strategies for the distribution of hotel services is a dynamic and prevailing trend, which is manifested in the use of transformed sales channels, communication with stakeholders. therefore, the means of improving the effectiveness of sales and communications in conditions of war are the creation of a positive image, including through volunteer activities and cooperation with charitable organizations. for the effective implementation of such strategies, there is a need for optimal balancing of economic interests and the social component. therefore, it is possible to identify certain possible outcomes of sales and communications strategies in the context of war. references 1. belin, t. (2021). evolution and development of tourism and hospitality on the island of mljet (doctoral dissertation, rit croatia). 2. carpi, e., & pınar şenoğuz, h. (2018, june 6). refugee hospitality in lebanon and turkey. on making ‘the other.’ international migration, 57(2), 126–142. https://doi.org/10.1111/imig.12471 3. ergun, g. s., bozkurt, h. o., arslan, e., kendir, h., & yayla, o. (2023). psychological capital as a moderator in the relationship between job insecurity, job stress, and hotel employees' turnover intention during the russia-ukraine war. international journal of hospitality management, 111, 103475. mariia kulyk, margaryta boiko, myroslava bosovska, alla okhrimenko 55 4. petráková, a., veselá, n., ponomarenko, m., hrdličková, s., barták, m., & dlouhý, m. (2022, october 1). response to the ukrainian war: support to the ukrainian health professionals – war refugees. european journal of public health, 32(supplement_3). https://doi.org/10.1093/eurpub/ckac131.553 5. hara, y., ikenobo, s., & han, s. h. (2022). understanding the philosophy of japanese hospitality. in a new approach to resilient hospitality management: lessons and insights from kyoto, japan (pp. 1-38). singapore: springer nature singapore. 6. zhuravka, f., nebaba, n., yudina, o., haponenko, s., & filatova, h. (2023, march 3). the hospitality market in ukraine: war challenges and restoration possibilities. innovative marketing, 19(1), 140–150. https://doi.org/10.21511/im.19(1).2023.12 7. korneyev, m., berezhniuk, i., dzhyndzhoian, v., kubakh, t., & horb, k. (2022, august 1). business marketing activities in ukraine during wartime. innovative marketing, 18(3), 48–58. https://doi.org/10.21511/im.18(3).2022.05 8. levytska, i. v., klymchuk, a. o., & kozhushko, s. p. (2023, february 15). the problems with the pay level as a factor of staff motivation in the hospitality industry of ukraine. academic review, 1(58), 148–159. https://doi.org/10.32342/2074-5354-2023-158-11 9. nauman, s. (2022). conditional hospitality toward internal refugees: sweden during the great northern war, 1700–1721. in baltic hospitality from the middle ages to the twentieth century: receiving strangers in northeastern europe (pp. 221-245). cham: springer international publishing. https://doi.org/10.21511/im.18(3).2022.05 agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 no. 1 (2023), pp. 135-144 135 how are businesses adopting circular practices – empirical study on the case of georgia and selected eastern european countries t. zhghenti, v. chkareuli, m. r. de haro, v. m. moreno, d. atstaja tsotne zhghenti¹, vakhtang chkareuli², manuel rios de haroº, valentin molina morenoºº, dzintra atstaja³ business and technology university, georgia ¹ orcid.org/0000-0002-6779-172x, e-mail: tsotne.zhghenti@btu.edu.ge ² orcid.org/0000-0001-9484-2484 university of granada, spain º orcid.org/0000-0002-4329-370x ºº orcid.org/0000-0003-2679-3195 ba school of business and finance, latvia ³ orcid.org/0000-0002-9411-7212 abstract. the shift towards circular practices requires a variety of supportive actions from different parties, such as education from academic institutions, institutional support from government and policymakers, and financial aid. our research aims to provide data on the adoption of circular practices in georgia and selected eastern european countries. the findings of the research summarize the trends of adoption of circular practices among firms in different economies. in today's rapidly changing business environment, companies are under increasing pressure to reduce their environmental impact and embrace sustainable practices. circular economy is seen as a promising solution to these challenges, as it shifts the focus from linear models of production and consumption to a closed-loop system where waste is reduced and resources are conserved. the concept of circular economy has gained significant traction in recent years, as companies seek to reduce their environmental impact and achieve long-term sustainability. by adopting circular practices, companies can reduce the cost of goods sold, improve resource efficiency, and promote a cleaner environment. however, the adoption of circular practices requires a significant change in organizational culture, which can be challenging for many businesses. our research aims to provide practical information for policymakers and stakeholders from the private sector on the adoption of circular practices in georgia and selected eastern european countries. the results of the research will provide valuable insights into the trends of adoption of circular practices among firms in different economies and highlight the benefits of embracing circular economy. in conclusion, the transition to circular practices is a highly sought-after trend for businesses seeking to reduce their cost of goods sold, promote sustainability, and benefit from a cleaner environment. the adoption of circular practices requires a significant change in organizational culture, which can be challenging for many businesses. our mailto:tsotne.zhghenti@btu.edu.ge how are businesses adopting circular practices – empirical study on the case of georgia and selected eastern european countries 136 research aims to provide practical information for policymakers and stakeholders from the private sector on the adoption of circular practices in georgia and selected eastern european countries and summarize the trends of adoption of circular practices among firms in different economies. keywords: circular business, circular economy, georgia, ce business models, ebrdeib-wbg enterprises survey. introduction in a modern era, scarcity has become a major research dimension for many economists, which is basically linked to the limited resources on the one hand and limitless wants of people on the other. governments, policymakers, scientists and the businesses are rethinking the traditional paradigm of economics, which is based on a linear approach (take-make-dispose) and should be changed towards the circularity. in this sense, circularity means to redesign operations on various levels, so that processes become more sustainable and eco-friendlier. by managing finite resources, a circular economy promotes a continual positive development cycle that maintains and increases natural capital, optimizes resource yields, and reduces system risks. most fundamental incentives for the companies to transform linear business operations to circular ones, still lays in the willingness to reduce negative environmental impacts. on top of that, businesses are seeing the potential fruits of improving resourceusage efficiency, thus reducing cost of goods sold, increasing competitive advantages and easing access to new markets. also, environmental regulations and institutional incentives provided by policy-makers and governments, especially in developed countries are pushing companies to seek for alternative ways of doing business to reduce emissions and negative impact environment. in some cases, besides restrictions governments are providing subsidies and tax deductions to support circular business models. activities from circular economy, which covers almost all industrial sectors, is increasing in terms of generating new revenues, reducing costs, and encouraging innovation. this growth is driven by shifts in regulation and evolving consumer attitudes. the topic is getting very actual in georgian economic policy too. however, there is a lack of relevant local academic publications and related business statistics. for this reason, the research is using database from ebrd-eib-wbg survey to calculate and provide detailed numbers on usage of circular practices in georgian firms and to analyze general trends between other economies in the survey. furthermore, the research can also dive deeper into exploring the challenges and opportunities that georgian firms face in implementing circular economy practices, as well as identifying potential gaps in current policies and regulations that may be hindering the development of a circular economy in the country. additionally, research can investigate on the potential benefits of a circular economy for the country's economy, environment and society, and how it can contribute to achieving sustainable development goals. within the framework of the research, one of the factors is the assessment of developed countries with certain indicators, which is an important point for the implementation of additional analysis. tsotne zhghenti, vakhtang chkareuli, manuel rios de haro, valentin molina moreno, dzintra atstaja 137 i. literature review it was already mentioned in the introduction that local academic publications related to concept of circular economy are extremely rare in georgia. however, several authors are discussing the general landscape of establishing circular economy in georgia (gubeladze & pavliashvili, 2020; pavliashvili, & prasek, 2020; jishkariani, et. al.; 2021; buachidze et. al.; 2021). additionally, some publications discussing the green economy opportunities from finance industry (aslanishvili, & omadze, 2019) or from the perspective of investemt sector (verulidze & miceikienė, 2021). another study (chachkhiani et al., 2022) provides a qualitative and quantitative evaluation of the solid waste management system in kutaisi, georgia and the imereti region. it reveals that share of recyclables is higher in urban areas and commercial centres. on the other hand, there are plenty of academic publications which analysing circular business models or generally circular practices in firms from eastern european countries (malinauskaite et al., 2017; muizniece et al., 2019), especially discussing challanges for circular business models in baltic countries (rizos et al., 2016; uvarova et al., 2020, atstja et al., 2021). accordingly, the research has focus on international publications which can provides useful insights or methodological notes to explore relevant data to analyse the current state of usage circular practices in local companies in georgia. the few modern studies have used the green module from ebrd-eib-wbg enterprise surveys to analyze green and circular economy trends in business for selected countries. a study conducted by kalantzis et al. (2022) is analyzing green management and green investments of firms and distinguish capital intensive or non-capital-intensive investments. the results are provided on regional level. the paper uses data from ebrd-eib-wbg enterprise surveys to examine the determinants of green investment strategies in firms. it also uses logistic iv regression to analyze the data and finds that financially constrained firms pursue fewer mitigation measures while more climate-aware firms pursue more mitigation measures. whether, other publication has focus on levels of green management practices by country (martin et al. 2022). that research used three different data sets including data set was from the ebrd-eib-wb enterprise surveys, which provided information on firms' credit constraints, green management, and green investments. the purpose of this analysis was to understand the relationship between credit constraints, green management, and green investments and their impact on pollution and greenhouse gas emissions. another research is measuring losses from extreme events based on the green module (benincasa et al. 2022). the one recent publication used that survey for arguing that green management positively impacts on labor productivity, sales, and innovation (fernandez, v. 2022). this study also finds that green management practices are influenced by various factors such as peer effects, management quality, customer requirements, and foreign ownership. however, previous studies did not displaying the specific rates of adoption the different green/circular practices by firms for country level. additionally, none of them has focus on insights of georgia which is our priority research example. furthermore, the literature review is showing that there is a lack of research that is exploring the circular economy from the how are businesses adopting circular practices – empirical study on the case of georgia and selected eastern european countries 138 consumer's perspective. therefore, the current study aims to fill this gap by exploring the sharing economy characteristics from the consumers' perspective in georgia. the research will underline and understand the current problems to prepare recommendations for the upcoming challenges. the quantitative and qualitative findings from the paper can be source material for future researchers in this field in georgia. ii. methodology the primary source of our research is the database by ebrd-eib-wbg enterprise surveys, which was conducted between 2018 and 2020. this database covers approximately 28,000 enterprises in 41 economies of the european union, eastern europe, central asia, and the middle east and north africa. these economies include albania, armenia, azerbaijan, belarus, bosnia and herzegovina, bulgaria, croatia, cyprus, czech republic, egypt, estonia, georgia, greece, hungary, italy, jordan, kazakhstan, kosovo, kyrgyz republic, latvia, lebanon, lithuania, malta, moldova, mongolia, montenegro, morocco, north macedonia, poland, portugal, romania, russia, serbia, slovak republic, slovenia, tajikistan, tunisia, turkey, ukraine, uzbekistan, and the west bank and gaza. our research focuses on a special module of the survey, the green economy module, which covers basic green management practices and green investments. for the purposes of our research, we have selected 10 questions for further analysis and discussion. these questions (bmgc23a-bmgc23j) are related to a firm's recent experience (over the last 3 years) of adopting circular measures (practices or technologies). the research calculates the share of firms (on a country level) that have adopted these circular measures. it uses weights according to the median eligibility from the enterprise surveys database. the following 10 indicators were calculated according to this methodology: share of firms that had adopted specific practices over the last three years:  heating and cooling improvements  more climate-friendly energy generation on site  machinery upgrades  energy management  waste minimization, recycling, and waste management  air pollution control measures  water management  upgrades of vehicles, vessels, and aircraft in the fleet  improvement of lighting systems  other pollution control measures the data for the research was collected from eligible firms, who were asked a set of questions with three possible answers: "yes," "no," or "do not know." to calculate the value for each question, the sum of the weights of the "yes" answers was divided by the total weight of all eligible enterprises for that specific question. this provided an overall understanding of the situation, but to gain a more in-depth insight, the research also analyzed the data in a more granular manner by breaking it down into regions and industries, with a focus on georgia. by doing this, the research was able to provide a more comprehensive picture of the situation in the state, including specific trends and patterns at the regional and industry levels. tsotne zhghenti, vakhtang chkareuli, manuel rios de haro, valentin molina moreno, dzintra atstaja 139 overall, this research provides valuable insights into the adoption of circular measures by companies in a diverse range of economies. by focusing on a specific set of questions related to circular measures, the research is able to provide detailed information on which practices are being adopted most frequently and in which countries. additionally, the use of weights based on median eligibility ensures that the results accurately reflect the experiences of the surveyed companies. iii. results and discussion figure 1 presents the results of an analysis of the share of enterprises that have implemented selected circular practices in georgia over the last three years. the data was obtained from the ebrd-eib-wbg enterprise surveys, which were conducted between 2018 and 2020. the survey covered a sample of enterprises in georgia, and included a special module on green economy practices, from which the data for this analysis was extracted. the results of the analysis indicate that the highest adoption rates among the selected circular practices were for machinery upgrades (43.0%), improvement of lighting systems (42.0%), and upgrades of vehicles, vessels, and aircraft in the fleet (37.1%). heating and cooling improvements were also relatively frequent among georgian enterprises, with an adoption rate of 34.6%. however, practices related to recycling and waste reduction had significantly lower adoption rates, with only 20.9% of firms reporting having implemented these practices. the data also reveals that the adoption of other circular approaches related to pollution reduction or climate-friendly initiatives was relatively low among georgian enterprises. only 13% of firms reported having implemented air pollution control measures, and 8.5% reported having implemented other pollution control measures. additionally, only 6.2% of firms reported having adopted more climate-friendly energy generation on-site. the adoption of practices related to energy management and water management was also relatively low, with 17.1% and 16.0% of firms reporting having implemented these practices over the last three years, respectively. figure 1: share of firms which adopted specific measure over last 3 years in georgia source: author’s own calculations on database of ebrd-eib-wbg enterprise surveys conducted in 2018-2020. how are businesses adopting circular practices – empirical study on the case of georgia and selected eastern european countries 140 the results of our research on the adoption of circular practices in georgia found that the capital city of tbilisi has a higher share of firms implementing these practices (7.4% vs 9.9%) compared to other regions. out of the 10 indicators analyzed, tbilisi had higher adoption rates for 9 of them, with the only exception being "other pollution control measures". the study also revealed that large-size enterprises (47.25%) were more likely to adopt circular practices compared to medium (29.4%) and small enterprises (19.7%). these findings highlight the importance of creating an enabling environment for circular practices, particularly in regions outside of tbilisi, to encourage more widespread adoption. additionally, there is a need to develop support mechanisms for medium and small enterprises to adopt circular practices and contribute to a more sustainable future. it should be noted that these findings are consistent with the results from the survey of all 41 economies included in the ebrd-eib-wbg enterprise surveys. the highest average indicator among all economies surveyed was for machinery upgrades (41.0%), which is also the most frequent circular practice adopted by georgian enterprises (43.0%). another research finding is that most of the indicators for georgia are close to the average numbers for all the countries surveyed in the ebrd-eib-wbg enterprise surveys. however, there is a significant gap in the adoption of "waste minimization, recycling and waste management" practices, which are adopted by only 20.9% of georgian enterprises, while this indicator is significantly higher in most of the other countries surveyed (average value 36.0%). this can be seen in figure 2, which displays the share of firms that have adopted waste management practices for selected eastern european and baltic countries. the rate is notably higher in eu countries, and georgia's score is lower than that of moldova or ukraine. it has been also noticed that the rate of waste management in businesses of varying sizes in the state of georgia is significantly lower in comparison to other regions. this lack of proper waste management practices can have adverse effects on the environment and public health. it is crucial that firms in georgia make an effort to improve their waste management processes to ensure a cleaner and safer future for all. figure 2: share of firms which adopted waste management measures over last 3 years in selected countries source: author’s own calculations on database of ebrd-eib-wbg enterprise surveys conducted in 2018-2020 tsotne zhghenti, vakhtang chkareuli, manuel rios de haro, valentin molina moreno, dzintra atstaja 141 additionally, georgian enterprises have lower ranks in terms of introducing energy or water management measures. this can be seen in figure 3, which displays the adoption rates for selected indicators in eastern european and baltic countries. estonia and latvia are the leaders in terms of average adoption rates for the 10 indicators analyzed. based on the data provided, it is evident that the baltic countries, specifically estonia and latvia, have higher adoption rates for circular economy practices compared to georgia. these countries have consistently higher rates in various indicators such as machinery upgrades, waste management, energy management, water management and lighting improvements. for instance, estonia has an average adoption rate of 69.8% for machinery upgrades, which is significantly higher than georgia's rate of 43%. this trend can also be observed in other indicators such as green energy generation, where estonia has an average of 11% and latvia has an average of 9.7% which is relatively higher than the 6.2% in georgia. overall, the research provides valuable insights into the adoption of circular practices by firms in georgia and can be used to compare the country's achievements with those of other economies surveyed. it highlights the areas in which enterprises in georgia have made the most progress in terms of circular adoption, as well as areas where there is room for improvement. additionally, the findings of this research can inform the development of policies and initiatives aimed at promoting the adoption of circular practices among georgian enterprises, particularly in smaller and medium-sized enterprises and other regions of the country. figure 3: share of firms which adopted energy or water management measures over last 3 years in selected countries source: author’s own calculations on database of ebrd-eib-wbg enterprise surveys conducted in 2018-2020 conclusion and recommendations the adoption of circular practices by enterprises in developing countries, including georgia, is still relatively low. despite the recognized potential for circular economy (ce) to promote sustainability and reduce waste, many companies are not yet investing in or considering the implementation of circular approaches in their business operations. the transition to circular business models can be a challenging process, with various obstacles that how are businesses adopting circular practices – empirical study on the case of georgia and selected eastern european countries 142 companies of different sizes and industries may face. one of the most significant obstacles is the lack of financial capability, as implementing circular practices often requires investments in new technologies and equipment. this is particularly challenging for small and medium-sized enterprises (smes) that may not have the resources to make these investments. additionally, economic policies in many developing countries still tend to favor linear business models, providing little incentive for companies to adopt circular practices. another obstacle that companies may face is a lack of knowledge about ce business models and the current state of the circular economy. despite the growing interest in the topic, many companies still lack an understanding of the benefits and potential challenges of implementing circular practices. this lack of knowledge can make it difficult for companies to identify opportunities for circular practices in their operations and to develop effective strategies for their implementation. in such developed countries, as we identified in the part of the research by the principle of random selection, there are also many challenges in the way of implementing the circular economy, therefore a developing country like georgia must definitely develop its own way in terms of the development of circular processes. to overcome these obstacles, it is essential to create and distribute knowledge about ce business models, the current state of the circular economy, and the potential challenges that companies may face. this can be done through various means, such as training and education programs, workshops, and networking events. additionally, targeted support and funding for smes to implement circular practices can help to overcome financial barriers and encourage the adoption of circular practices. furthermore, the economic policies should be adjusted to support and encourage the implementation of circular economy in the country. in conclusion, the adoption of circular practices by enterprises in developing countries, including georgia, is still relatively low. the transition to circular business models can be a challenging process, with various obstacles that companies of different sizes and industries may face. however, by creating and distributing knowledge about ce business models and providing support and funding to overcome financial barriers, we can encourage the adoption of circular practices and promote sustainable and circular economic growth in developing countries. additionally, economic policies should be adjusted to support and encourage the implementation of circular economy in the country, which will help to overcome the lack of knowledge of the circular economy among companies and promote sustainable business models. overall, a concerted effort is needed to support the transition to circular economy and promote sustainable business practices in developing countries. acknowledgement this work was prepared at business and technology university, georgia. references 1. tašner, v., & gaber, s. (2016). the age of studies and reports: selected elements concerning the background of encounters defining the power of education. center for educational policy studies journal, 6(2), 61–78. tsotne zhghenti, vakhtang chkareuli, manuel rios de haro, valentin molina moreno, dzintra atstaja 143 2. aslanishvili, d., & omadze, k. (2019). green economy and access to finance in georgia (going beyond the commercial banking sector to finance businesses in georgia). journal of economics and business, 2(3). 3. atstja, d., cudečka-puriņa, n., vesere, r., abele, l., & spivakovskyy, s. (2021, may). challenges of textile industry in the framework of circular economy: case from latvia. in international conference on sustainable, circular management and environmental engineering (iscmee 2021). edp sciences. 4. benjamin amshoff, christian dülme, julian echterfeld and jürgen gausemeier (2015). business model patterns for disruptive technologies international journal of innovation management, vol. 19 no. 03 5. benincasa, e., betz, f., & gattini, l. (2022). how do firms cope with losses from extreme weather events?. available at ssrn 4171196. 6. buachidze, n., dzebisashvili, n., gurguliani, i., chikviladze, k., & ghosh, s. k. (2021). circular economy of georgia. in circular economy: recent trends in global perspective (pp. 359-382). springer, singapore. 7. chachkhiani, m., allesch, a., reichenbach, j., & huber-humer, m. (2022). formal and informal solid waste management in kutaisi, georgia: a status quo report based on material flow analysis. waste management & research, 0734242x221135261. 8. de haas, r., martin, r., muûls, m., & schweiger, h. (2022). managerial and financial barriers during the green transition (no. dp1837). centre for economic performance, lse. 9. ellen macarthur foundation, (2013) towards the circular economy, economic and business rationale for an accelerated transition (pp. 11) 10. fernandez, v. (2022). environmental management: implications for business performance, innovation, and financing. technological forecasting and social change, 182, 121797. 11. gubeladze, d., & pavliashvili, s. (2020). linear economy and circular economy-current state assessment and future vision. international journal of innovative technologies in economy, (5 (32)). 12. geissdoerfer, m., morioka, s., de carvalho, m., & evans, s. (2018). business models and supply chains for the circular economy. journal of cleaner production, 190 712721. https://doi.org/10.1016/j.jclepro.2018.04.159 13. jishkariani, m., ghosh, s. k., & didbaridze, k. (2021). energy and economic indicators influencing circular economy in georgia. in circular economy: recent trends in global perspective (pp. 331-358). springer, singapore. 14. kalantzis, f., schweiger, h., & dominguez, s. (2022). green investment by firms. 15. malinauskaite, j., jouhara, h., czajczyńska, d., stanchev, p., katsou, e., rostkowski, p., ... & spencer, n. (2017). municipal solid waste management and waste-to-energy in the context of a circular economy and energy recycling in europe. energy, 141, 2013-2044. 16. muizniece, i., zihare, l., pubule, j., & blumberga, d. (2019). circular economy and bioeconomy interaction development as future for rural regions. case study of aizkraukle region in latvia. environmental and climate technologies, 23(3), 129-146. 17. meseguer-sánchez, v., gálvez-sánchez, f. j., lópez-martínez, g., & molina-moreno, v. (2021). corporate social responsibility and sustainability. a bibliometric analysis of their https://www.worldscientific.com/doi/abs/10.1142/s1363919615400022 https://www.worldscientific.com/doi/abs/10.1142/s1363919615400022 https://www.worldscientific.com/doi/abs/10.1142/s1363919615400022 https://www.worldscientific.com/doi/abs/10.1142/s1363919615400022 https://www.worldscientific.com/doi/abs/10.1142/s1363919615400022 how are businesses adopting circular practices – empirical study on the case of georgia and selected eastern european countries 144 interrelations. sustainability, 13(4), 1636. 18. pavliashvili, s., & prasek, d. d. e. (2020). accelerating transition to the circular economy in georgia“, bulletin of the georgian national academy of sciences, 14. 19. rizos, v., behrens, a., van der gaast, w., hofman, e., ioannou, a., kafyeke, t., ... & topi, c. (2016). implementation of circular economy business models by small and medium-sized enterprises (smes): barriers and enablers. sustainability, 8(11), 1212. 20. uvarova, i., atstaja, d., grinbergs, u., petersons, j., gegere-zetterstroma, a., & kraze, s. (2020, october). transition to the circular economy and new circular business models– an in-depth study of the whey recycling. in iop conference series: earth and environmental science (vol. 578, no. 1, p. 012019). iop publishing. 21. uvarova, i., atstaja, d., & korpa, v. (2020). challenges of the introduction of circular business models within rural smes of eu. international journal of economic sciences. 22. uvarova, i., atstaja, d., korpa, v., avena, l., & erdmanis, m. (2020). end-of-life tyre recycling: going beyond to new circular business models in latvia. engineering for rural development. 23. verulidze, v., & miceikienė, a. (2021). green economy as a new opportunity to stimulate export and attract investments, the case of georgia. management theory and studies for rural business and infrastructure development, 43(4), 468-474. agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 no. 1 (2023), pp. 115-125 115 the digital leadership behaviours of x, y, z generation nurses in the delivery of health services s. üstgörül, b. akkaya sema üstgörül¹, bulent akkaya² ¹ faculty of health sciences, manisa celal bayar university, turkey (orcid.org/ 0000-00028163-726x), e-mail: sema84car@hotmail.com ² ahmetli vhs, manisa celal bayar university, turkey (orcid.org/ 0000-0003-1252-9334) abstract. younger nurses are more active and agile in nursing leadership comparing to as senior nurses are about to retirement. digital era and technology forces nurses to be more dynamic and adaptive. thus, they try to behave as digital leaders. the aim of this study to link the relationship between young digital nurse leaders’ organizational resilience and commitment in hospitals. to test this relationship, the data were collected from nurses in three groups: x, y and z generation. the data were collected by four scales and analysed by spss program. the results show that digital leadership has a positive effect on both organizational resilience and organizational commitment. moreover, organizational resilience and organizational commitment is positively correlated. the young nurses have more digital leadership skills and behaviours comparing senior ones. but the perception of organizational resilience and commitment of the x generation nurses was higher than the y and z generations. the results of this study may guide to the managers of healthcare organization to pay attention young nurses in adapting technology and guide to senior nurses through applying digital leadership behaviours. keywords: nurses, x, y and z generation, digital leadership, organizational resilience, organizational commitment introduction in today's competitive environment brought by globalization, the expectations and wishes of managers and employees have led to the emergence of new approaches in the field of leadership. one of them is digital leadership that provides active use of technology. digital leaders are people who know technology well and are open to continuous learning, apply digital, reflect on company goals and business results in the most positive way, and combine strategy, culture, communication, technology and data to achieve all these (eberl & drews, 2021). it will certainly be digital leaders who lead and drive transformation in the new digital age. this understanding, which proceeds with the power of persuasion, attaches importance to continuous communication and dialogue, accepts change, can shape its business strategy accordingly, is fed from an agile, inclusive and egalitarian culture based on cooperation rather than hierarchies, and is accountable in the most transparent way when necessary, will also provide important developments in the field of health care (lapão, 2020). cross generational work stress puts high-risk employment environments in healthcare organizations and hospitals. this causes decreasing productivity and negative organizational climate. there are x, y, and z generations in almost all organizations as in hospitals and mailto:sema84car@hotmail.com the digital leadership behaviours of x, y, z generation nurses in the delivery of health services 116 healthcare organizations. researches shows that perceived behaviours across generations contribute to misunderstanding and conflict (kaifi et al., 2012; paros et al., 2022; easton & steyn, 2022). intergenerational, conflict in the health care context is exacerbated by the promotion of younger nurses to leadership positions, requiring them to oversee senior and more experienced nurses. because nurses serve in a high dynamic environment due to technology and industry 4.0. day by day they need to learn new technology and adapt them to sustain their work quality and the hospital they serve in. i. theoretical background and literature digital leadership theory sees technological learning as part of a social transfer, in which corporate practices are taught to new members through selective reinforcement. for this reason, nursing is a profession that requires manager and leader nurses, student nurses and nurses who have just started their profession, to learn and direct them in hospital environments (mthiyane & habedi, 2018). therefore, nurses new to the profession and student nurses learn high-quality digital nursing skills with the help of supplements such as clinical supervision, post-clinical conferences, and clinical training. the continuous implementation of technological innovations with digital leadership capabilities (massaro, 2021) is crucial for the development of many organizations, including those in the healthcare industry, during the covid-19 pandemic and future health crises (basile et.al, 2022; drago et.al, 2021). as a result of technological innovations in the healthcare industry, robotic medical devices are widely applied to provide many types of medical services, including monitoring patients, performing surgeries, and managing vital functions such as nursing care (guntur et al., 2019). nurses with high digital knowledge who will provide these services, manage technology and adapt the changes in technology to health institutions are more needed today. these can be expressed as young and dynamic nurses with digital leadership characteristics. in other words, generation z can be defined as a nurse. constantly and rapidly changing technology reveals sharp differences in knowledge, perception and management between generations. in this context, the aim of this study is to determine the digital leadership perceptions of x, y, z generations nurses in the digital age and to examine the relationship between these digital leadership perceptions, implicit resilience and commitment. i.1. the link between digital leadership, organizational resilience and commitment organizational commitment is defined as the desire of employees to stay in the organization, their identification with all the effectiveness and success of the organization, the loyalty and attitude of the employee to the organization, and the interest shown in order for the organization to be successful (yiing & ahmad, 2009). in this context, organizational resilience and agility are important concepts for nurses to serve to adapt to technology and hospital environment. moreover, despite the intense job stress, this adaptability can only be overcome by highly resilient nurses. the concept of digital leadership is an important variable for nurses' organizational commitment and resilience. due to the critical role digital technologies play in patient care, their use in nursing practices is increasing. in general, nurses recognize the significant benefits such sema üstgörül, bulent akkaya 117 technologies provide for patients and their families. these range from timely assessment information to patient monitoring, family information to nurses' workload and working conditions. for example, digital technologies can offer opportunities to tackle current problems and challenges in the healthcare industry. many healthcare systems are facing challenges due to the lack of skilled nurses with technology knowledge and the growing demand for long-term care. because x and y generations may be insufficient in adapting to this technology, managing it and transferring it to other people. therefore, generation z nurses born into the world of technology play a critical role in this process. in this process, having only digital leadership knowledge and behaviors is often not enough. at the same time, nurses' organizational resilience and organizational commitment should be high in order to ensure the sustainability of institutions and hospitals. so which generation of nurse can provide this? x? y? or is it z? this research will have a unique value in answering these questions not explained in the literature and will contribute to the literature by testing the following hypotheses. i.2. research model and hypotheses figure 1. research model hypotheses h1: digital leadership impacts organizational commitment in healthcare organizations. h2: digital leadership impacts organizational resilience in healthcare organizations. h3: organizational commitment relates with organizational resilience in healthcare organizations. ii. methodology ii.1. population and sample data were collected from 136 nurses of turkish healthcare organizations by three different scales. the questionnaire had 4 sections: the first section was regarding sample characteristics of the participants, such as gender, age, level of education, etc. the second scale was about digital leadership organizational resilience organizational commitment the digital leadership behaviours of x, y, z generation nurses in the delivery of health services 118 digital leadership developed by zeike et al. (2019) and adapted to turkish by sürücü e al. (2022). it included 6 statements. the third section is about organizational commitment developed by meyer et al. (1993) and adapted to turkish by bağcı & akbaş (2016). it consisted of 15 statements. the forth scale is organizational agility developed by sharifi & zhang (1999) and adapted to turkish by akkaya & tabak (2018). it consisted of 15 statements. the tool for collecting data was chosen to be a five-point likert scale ranging from 1 (strongly disagree) to 5 (strongly agree). characteristics of participants are as follows: 77.9% (106) of respondents was female while 22.1% (30) was male. 67.6% (92) of the respondents was graduated from health vocational high school, the rest were graduated from other high schools (32.4%). moreover, we asked their current education level. 82.4% (112) had bachelor’s degrees, while 17.6%(24) had a master’s or ph.d. degree. 37.5% (51) participants was z generation that means they were born between 1996-2015, 40.4% (55) participants was y generation that means they were born between 1980-1995 while 22.1% (30) participants was x generation that means they were born before 1980s. ii.2. statistical analysis the analysis was executed using structural equation modelling with the spss 26 program. before testing hypotheses, we checked data normal distribution and reliability analysis. cronbach alpha (α) was used to measure internal consistency for reliability and the skewness and kurtosis were used to check the data normality distribution. cronbach alpha was found higher than 0.70 for each scale that showed the data is high reliable. the skewness and kurtosis values should be between +2 and -2 that presents data has normal distribution (george, 2011). table 1 presents the skewness and kurtosis has normal distribution. thus, we applied parametric analysis methods such as regression, anova and correlation in current research. table 1. normal distribution analysis (n=136) scale min. max. mean std. d. (α) skewness kurtosis statistics se statistics se p value digital leadership 1.00 5.0 3.84 0.48 0.92 -0.108 0.21 0.439 0.43 0.183 organizational commitment 1.00 5.00 3.16 0.86 0.93 0.719 0.21 0.906 0.43 0.256 organizational resilience 1.00 5.00 3.86 0.85 0.93 0.326 0.21 -0.455 0.43 0.192 sema üstgörül, bulent akkaya 119 iii. results characteristics of participants are as follows: the mean of age is 28.4; 40.9% (192) of the respondents were above 28 years, while 59.1% (277) were less than 28 years. 64.4% (302) of respondents were female, 35.6% (167) identified themselves as male. 39.0% (183) had high school degrees, 43.9% (206) had bachelor’s degrees, while 17.1% had a master’s or ph.d. degree. r value showing the positive and significant relationship between digital leadership and organizational commitment is 0.607. it can be stated that 36% (r2) of organizational commitment depends on digital leadership behaviours. in other words, there is a positive and significant relationship between digital leadership and organizational commitments (p<0.001) (table 2). thus, hypothesis 1(h1) is supported (digital leadership impacts organizational commitment in healthcare organizations). table 2 : model summary mod el r r square adjust ed r square std. error of the estimate change statistics t value f value df 1 df 2 sig . 1 ,60 7a ,36 8 ,364 ,6891 5 8,83 8 78,11 1 1 13 4 ,00 0 a. predictors: (constant), digital leadership r value between digital leadership and organizational resilience is 0.607. it can be stated that 61% (r2) of organizational resilience depends on digital leadership behaviours. in other words, regression test proved that there is a positive and significant relationship between digital leadership and organizational resilience (p<0.001) (table 3). thus, hypothesis 2 (h2) is also supported (digital leadership impacts organizational resilience in healthcare organizations). table 3: model summary mod el r r square adjust ed r square std. error of the estimate change statistics t value f value df 1 df 2 si g. 1 ,78 1a ,61 0 ,607 ,680 24 14,4 75 209,5 14 1 13 4 ,00 0 a. predictors: (constant), digital leadership we also applied pearson correlation to test the relationship between both independent (digital leadership) and dependents variables (organizational commitment and organizational the digital leadership behaviours of x, y, z generation nurses in the delivery of health services 120 resilience). the findings of the study indicate that the digital leadership outcome has a strong positive correlation with organizational resilience (r=781; p=.000) and organizational commitment (r=607; p=.000). organizational resilience has a positive correlation with organizational commitments (r=345; p=.000). this correlation supports hypothesis 3 (h3): organizational commitment correlates with organizational resilience in healthcare organizations. table 4. correlations variables digital leadership organizational commitment organizational resilience digital leadership pearson correlation 1 sig. (2-tailed) n 136 organizational commitment pearson correlation ,607** 1 sig. (2-tailed) 0 n 136 136 organizational resilience pearson correlation ,781** ,345** 1 sig. (2-tailed) 0 0 n 136 136 136 correlation is significant at the 0.01 level (2-tailed). we applied anova post hoc test to compare generations (x, y, z) perceived digital leadership organizational resilience and organizational commitment. as seen on table 5, the model is significant(p=.000). in other words, digital leadership has a positive and significant impact on the organizational commitment and organizational resilience. table 5. anova sum of squares df mean square f sig. organizational commitment between groups 63,680 44 1,447 3,554 ,000 within groups 37,058 91 ,407 total 100,738 135 organizational resilience between groups 117,858 44 2,679 5,932 ,000 within groups 41,093 91 ,452 total 158,951 135 sema üstgörül, bulent akkaya 121 post hoc test showed that the digital leadership mean scores were higher in the z generation than the x generation (p=0.025); however, there was no statistically significant difference between "x and y generation" and "y and z generation" (p>0.05). while the mean of organizational resilience scores was higher in the x generation than in the y generation (p=0.016); however, there was no statistically significant difference between "x and z generation" and "y and z generation" (p>0.05). the mean of organizational commitment scores was higher in the x generation than in the z generation (p=0.011); however, there was no statistically significant difference between “x and y generation” and “y and z generation” (p>0.05). table 5: multiple comparisons bonferroni dependent variable (i) generation (j) generation mean difference (i-j) std. error sig. 95% confidence interval lower bound upper bound digital leadership y x ,168 ,218 1,000 -,36 ,70 z -,524 ,254 ,124 -1,14 ,09 z y ,524 ,254 ,124 -,09 1,14 x ,692* ,258 ,025 ,07 1,32 x y -,168 ,218 1,000 -,70 ,36 z -,692* ,258 ,025 -1,32 -,07 organizational resilience y z -,111 ,213 1,000 -,63 ,40 x -,703* ,248 ,016 -1,31 -,10 z y ,111 ,213 1,000 -,40 ,63 x -,592 ,252 ,060 -1,20 ,02 x y ,703* ,248 ,016 ,10 1,31 z ,592 ,252 ,060 -,02 1,20 organizational commitment y z ,471 ,211 ,082 -,04 ,98 x -,267 ,246 ,842 -,86 ,33 z y -,471 ,211 ,082 -,98 ,04 x -,737* ,250 ,011 -1,34 -,13 x y ,267 ,246 ,842 -,33 ,86 z ,737* ,250 ,011 ,13 1,34 *. the mean difference is significant at the 0.05 level. conclusions one of the most important factors that lead a company or firm to success is to have a successful and digital leader in digital age during industry 4.0. although leadership is a concept that is in our lives, digital leadership is a concept that has recently come to the fore and wondered. digitalization has a positive effect on the individual performance of the personnel the digital leadership behaviours of x, y, z generation nurses in the delivery of health services 122 by increasing the quality of business life, increasing the speed of work of the personnel, completing the tasks on time, reducing the rate of mistakes made in the works and ultimately affecting the motivation of the personnel. the presence of digital leaders in companies in the digitalization process also increases the individual performance of employees (benitez et al., 2022; abbasov & tolay, 2021). in literature, researches from the perspective of leadership and digitalism is generally related to organizational commitment and resilience in the field of health. for example, the innovative leadership practices are more conducive innovative work behaviour and work performance of the company (purwonta et al., 2020; zuraik & kelly, 2019; asbari et al., 2019). the more positive the employee’s innovation practices are, the better employee's performance and organizational commitment will be. these findings are similar to our research result. and there are some other studies that support the result of current research, for instance, it has been found that transformational and digital leadership styles affect the performance of the organization positively and significantly (madanchian et al., 2020; al khajeh, 2019). the organizational commitment is higher in organizations with digital competence (yu & moon, 2021). cho, et al., (2019) found that transformational leadership increases organizational commitment, puliwarna et al., (2023) found that digital competence has direct positive and significant effect on organization performance. hack-polay et al. (2022) conducted research on guiding flexibility in nursing practice and examined the impact of digital innovations and enhanced emotional education on nursing competencies. they found that nurses could develop more outstanding modern capabilities with exposure to increasingly used technologies in the healthcare sector. ai and digital technology and health-related engineering equipment can help reduce stress in the profession. therefore, technology is not a threat. it is a necessary complement that can upskill nurses. health literacy, in particular, plays an important role in the delivery of health services by nurses. this is closely related to the digital leadership behaviours of nurses. the more effective the digital leadership behaviours are, the higher the sexual health and literacy levels will be. this is also important in the distribution of health services (üstgörül, 2022). lapão (2020) emphasized the importance of combining digital health with the leadership of nurses. a positive relationship was observed between transformational leadership and organizational commitment. in local literature, there are some studies supports the results of current research. aymaz (2014) found the positive the relationship between the perception of leadership behaviours and organizational commitment of nurses. yağız (2022), on the other hand, examined the relationship between the behaviours of nurses in the pandemic process and their organizational resilience, and resulted the positive relationship between those variables. canpolat (2012) evaluated the leadership and organizational commitment of nurses. as seen in literature, there are different studies in the literature for organizational resilience, digital leadership and organizational commitment. however, the relationship between organizational resilience and organizational commitment, which defines nurses' digital leadership characteristics, has not been studied yet. this provides the originality of current research. for this reason, it is necessary to conduct research on the effects of organizational resilience and organizational commitment for nurses operating and working in sema üstgörül, bulent akkaya 123 the digital age. therefore, we examined the relationship between digital leadership, organizational resilience and organizational commitment of the perception of x, y and z generation nurses. the results show that digital leadership has a positive effect on both organizational resilience and organizational commitment. moreover, organizational resilience and organizational commitment is positively correlated. the young nurses have more digital leadership skills and behaviours comparing senior ones. but the perception of organizational resilience and commitment of the x generation nurses was higher than the y and z generations. the results of this study may guide to the managers of healthcare organization to pay attention young nurses in adapting technology and guide to senior nurses through applying digital leadership behaviours. study limitations and future research the sample population at this academic research hospital in turkey did not represent the national nursing population. therefore, the study’s findings should be not generalized to the population. we reached just 136 nurses and analysed the data with parametric tests and a quantitate method. for future studies, here are several opportunities for more study on the issue of digital leadership among different generations of nurses. first, a deeper assessment of the linkages between leadership style and organizational commitment in the concept of x, y and z generations leadership in nursing would provide data that can help in new and digital leadership development programming. additional study employing a qualitative or mixed method should be undertaken to understand why digital leadership results in organizational commitment and resilience. finally, while this study investigated the links between digital leadership and organizational commitment and quiet, it may be applied to a large sample. references 1. abbasov, a., & tolay, e. (2021). the impact of digital leadership on individual performance: research in a firm implementing industry 4.0 technologies in azerbaijan. i̇zmir journal of management, 2(1), 59-74. 2. akkaya, b., & tabak, a. (2018). adaptation to turkish of organizational agility questionnaire: reliability and validity study. journal of human and work, 5(2), 185-206. 3. akkaya, b., kayalıdere, u. k., aktaş, r., & karğın, s. (2020). agile leadership approach and development of a scale for measuring agile leader’s behaviours. journal of business research, 12(2), 1605-1621 4. al khajeh, eh (2019). impacts of leadership styles on organizational performance. new trends in management studies, 99–114. https://doi.org/10.5171/2018.687849 5. asbari, m., santoso, p., & purwanto, a. (2019). pengaruh iklim organisasi dan kepemimpinan transformasional terhadap produktivitas kerja inovatif pada industri manufaktur di pati jawa tengah. jurnal produktivitas universitas muhammadiyah pontianak, 7(1 2020), 62-69. 6. aymaz, d. (2014). examining the relationships between leadership behavior, organizational commitment and organizational creativity in nurses (master's thesis, health sciences institute). the digital leadership behaviours of x, y, z generation nurses in the delivery of health services 124 7. bağcı, z., & akbaş, t. t. (2016). an investigation of the effect of nurses’ perceptions of organizational trust on their organizational commitment. manas journal of social studies, 5(5), 155-170. 8. benitez, j., arenas, a., castillo, a., & esteves, j. (2022). impact of digital leadership capability on innovation performance: the role of platform digitization capability. information & management, 59(2), 103590. 9. canpolat, z. (2012). evaluation of leadership and organizational commitment in nurses (master's thesis, i̇stanbul science bilim university). 10. cho, y., shin, m., billing, t. k. & bhagat, r.s. (2019). transformational leadership, transactional leadership and affective organizational commitment: a closer look at their relationships in two distinct national contexts. asian business & management, 18, 187-210. 11. drago, c., gatto, a., & ruggeri, m. (2021). telemedicine as technoinnovation to tackle covid-19: a bibliometric analysis. technovation, 102417. 12. easton, c., & steyn, r. (2022). leadership styles and effectiveness in the workplace: a perspective of the millennial generation. south african journal of economic and management sciences, 25(1), 1-10. 13. eberl, j. k., & drews, p. (2021). digital leadership‒mountain or molehill? a literature review. innovation through information systems: volume iii: a collection of latest research on management issues, 223-237. 14. mthiyane, g. n., & habedi, d. s. (2018). the experiences of nurse educators in implementing evidence-based practice in teaching and learning. health sa gesondheid, 23(1), 1-9. 15. hack-polay, d., mahmoud, a. b., ikafa, i., rahman, m., kordowicz, m., & verde, j. m. (2022). steering resilience in nursing practice: examining the impact of digital innovations and enhanced emotional training on nurse competencies. technovation, 102549. 16. kaifi, b. a., nafei, w. a., khanfar, n. m., & kaifi, m. m. (2012). a multi-generational workforce: managing and understanding millennials. international journal of business and management, 7(24), 88. 17. basile, l. j., carbonara, n., pellegrino, r., & panniello, u. (2023). business intelligence in the healthcare industry: the utilization of a data-driven approach to support clinical decision making. technovation, 120, 102482. 18. lapão, l. v. (2020). the nursing of the future: combining digital health and the leadership of nurses. revista latino-americana de enfermagem, 28. 19. lee, j. s. (2016). effect of self-leadership and resilience on college adjustment in nursing students. journal of the korea academia-industrial cooperation society, 17(10), 253-260. 20. massaro, m. (2021). digital transformation in the healthcare sector through blockchain technology. insights from academic research and business developments. technovation, 102386. 21. madanchian, m., hussein, n., noordin, f., & taherdoost, h. (2020). effects of virtuous leadership on organizational performance. positive psychological science: improving everyday life, well being, work, education, and societies across the globe, 145–158. sema üstgörül, bulent akkaya 125 22. meyer, j. p., allen, n. j., & smith, c. a. (1993). commitment to organizations and occupations: extension and test of a three-component conceptualization. journal of applied psychology, 78(4), 538. 23. paros, a., kelly, p.s. and sprinkle, t.a. (2022), "enhancing project team outcomes despite provisional work: a discussion to leverage cross-generational advantages", team performance management, 28, 3(4),191-204. 24. puliwarna t, s. djati, s, p., & elisabeth tanti p. (2023). the effect of digital leadership, organizational culture, digital competence and organization's commitment on organizational performance: information technology system in indonesian navy. international journal of scientific research and management, 11 (04), 4833-4846. 25. purwanto, a., asbari, m., & santoso, p. (2020). effect of integrated management system of iso 9001:2015 and iso 22000:2018 implementation to packaging industries quality performance at banten indonesia. jurnal ilmiah mea (manajemen, ekonomi, & akuntansi), 4(1), 17-31. 26. purwonta, a., bernarto, i., asbari, m., wijayanti, l. m., & hyun, c. c. (2020). the impacts of leadership and culture on work performance in service company and innovative work behavior as mediating effects. journal of reseacrh in business, economics, and education, 2(1), 283291. 27. guntur, s.r., gorrepati, r.r., & dirisala v.r. chapter 12 robotics in healthcare: an internet of medical robotic things (iomrt) perspective n. dey, s. borra, a.s. ashour, f. shi (eds.), machine learning in bio-signal analysis and diagnostic imaging, academic press (2019), pp. 293-318, 10.1016/b978-0-12-816086-2.00012-6. 28. sharifi, h., & zhang, z. (1999). a methodology for achieving agility in manufacturing organisations: an introduction. international journal of production economics, 62(1-2), 722. 29. sürücü, l., yikilmaz, i̇., & maşlakçi, a. (2022) digital leadership: a scale adaptation study. journal of abant social sciences, 22(3), 1038-1050 30. üstgörül, s. (2022). cinsel sağlık okuryazarlık ölçeğinin geliştirilmesi: geçerlik ve güvenirlik çalışması. ankara sağlık bilimleri dergisi, 11(2), 164-176. (development of the sexual health literacy scale: validity and reliability study). 31. yağiz, f. n. s. (2022). crisis leadership during the covid-19 pandemic: systematic review. the journal of selcuk university social sciences institute, (47), 388-401. 32. yu, j., & moon, t. (2021). impact of digital strategic orientation on organizational performance through digital transformation capability. icic express letters, part b: applications, 12(9), 847– 856. 33. zeike, s., bradbury, k., lindert, l. & pfaff, h. (2019). digital leadership skills and associations with psychological well-being. international journal of environmental research and public health, 16(14), 2628-2641 34. zeike, s., bradbury, k., lindert, l. & pfaff, h. (2019). digital leadership skills and associations with psychological well-being. international journal of environmental research and public health, 16(14), 2628-2641. 35. zuraik, a., & kelly, l. (2019). the role of ceo transformational leadership and innovation climate in exploration and exploitation. european journal of innovation management, 22(1): 84-104. agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 no. 1 (2023), pp. 31-38 31 the influence of digital and social media marketing on consumer behaviour k. kaur komalpreet kaur faculty of economic sciences, university of “aurel vlaicu” arad, romania orcid.org/0000-0003-4814-2561, e-mail: komal.preet.kaur00009@gmail.com abstract. in today’s digitalized world, where internet and social media undoubtedly have a massive impact on our daily lives (including our buying decisions), it becomes indispensable for any manager or entrepreneur to be well aware about the influence of online marketing (also known as digital marketing) on consumer behaviour, so as to make the most profitable business decisions that are in their best interests. this study is an evaluation of some recently published articles and reports that tell about consumers in digital and social media settings. to write this article, a literature review is conducted and an attempt is made to highlight all the noteworthy ideas. in the end, the paper concludes traditional marketing is at the verge of disappearing as the marketers have found a better and more efficient way to reach the target audience. keywords: digital marketing, social media marketing, social media influencers introduction with a growing number of internet users on a global scale, the average time spent on the internet is also increasing. as a result, people are getting more accustomed with the technology and exposing themselves more to the digital world. this trend is nothing less than an opportunity for companies and businesses who desire to attract the public's attention and be more visible. firstly, traditional ways of promoting products and services (such as print marketing) are slowly disappearing. hence, if a company wants to remain relevant in the marketplace in the long-run, it has to adapt according to the external environment. secondly, the emergence of the internet has transformed many industries and the way businesses operate, including the way they promote their products or services. statistically, the traditional advertising techniques and medium are losing their significance over time. therefore, business owners are moving away from medium such as newspapers, radio and television. (navarro, 2022) lastly, the arrival of social media platforms like facebook, instagram, twitter and linkedin has brought major transformation in people’s lifestyles and the way people interact with each other. people, especially the ones from younger generations spend much more time online for different purposes. although, initially social media appeared with the purpose to build connectivity among people, slowly it has started to be used for completely different purposes. online or digital marketing as well as social media marketing are the classic examples of modern marketing strategies that are actively used by the companies to create brand awareness. https://orcid.org/0000-0003-4814-2561 mailto:komal.preet.kaur00009@gmail.com the influence of digital and social media marketing on consumer behaviour 32 the main purpose of this paper is to analyse the current status of online and digital marketing. since companies are heavily relying on these practices to sustain in the competitive business environment, it is extremely crucial to understand the marketplace and study the existing literature to gain insights. for this purpose, recent studies, reports and research on online marketing (also commonly known as digital marketing) as well as social media marketing are reviewed. this literature review, apart from providing interesting insights, also serves the purpose of highlighting new emerging concepts such as social media influencing and its impact on younger generations. i. methodology the present study is a result of a thorough analysis of the existing literature. therefore, the methodology used is literature review. it is a type of academic writing, which helps in understanding a subject in detail. in this article, the sources of information were collected through a search engine named google scholar by searching the following keywords: digital marketing, social media marketing, digital marketing statistics and social media marketing statistics. the primary sources used for literature include articles published in journals between years 2016-2022 while statista is used for citing statistical data about recent marketing trends. statista is an online platform which provides insights and findings of global and local surveys. after the selection process, a total of thirteen sources are cited in this paper. out of these thirteen sources, there are two statistical reports/surveys and an article by a company that provides marketing services. in order to maintain credibility, only trustworthy sources are utilized. all of these sources are mentioned in references. ii. discussion and results ii.1. digital marketing statistics confirm that internet users, around the world, are escalating at an unimaginable speed. on top of that, as per the estimations made by scholars, the fourth industrial revolution has emerged with the arrival of recent advancements in technologies. as a result of these sudden changes, the lifestyles of people have transformed, including the way in which consumers perceive the outer world, communicate, engage, interact and make buying decisions (faruk et al., 2021). besides, social networking platforms like facebook have further contributed in affecting the way people interact with one another. consequently, the buying behaviour of the current consumers have also been impacted as they are spending much more time on social media platforms for different purposes such as looking for information and purchasing products online at a few clicks. according to faruk et al. (2021) all these aspects have led the marketers to rethink their traditional approaches of promoting products and shift to other forms of media for advertising. advertising may utilize any type of media in order to achieve its final objectives. some common examples of media include radio, tv, print, internet. the global advertising expenditure has been increasing every year and with the growing number of internet users, advertising expenditure through online media is surging because marketers are noticing more potential in online marketing than in traditional marketing. ibecause of this reason, the internet komalpreet kaur 33 is believed to be the most significant medium for promoting goods or services. to further support this statement, estimates clearly show that in the year 2022, out of the total amount that was spent in advertising, 62% of it was utilized in online advertising. this simply suggests that traditional forms of marketing such as print marketing and promotion through medium other than the internet, that is, radio, television and newspaper are struggling to maintain their relevance (navarro, 2022). all these aspects have contributed in shifting to digital marketing. this has not only enabled the marketers to reach the target audience in a more effective way, but has also allowed them to study the behaviour of potential buyers more efficiently (faruk et al., 2021). according to lamichhane (2022), digital marketing represents reaching out to potential buyers with the help of the internet by using numerous digital channels or tools like email and social media. hence, it has an immense impact on people’s life, habits and their buying behaviour. as a matter of fact, every coin has two sides. on the one hand, faruk et al. (2021) claim that digital marketing allows businesses to have benefits such as increased revenues, more customer engagement, higher customer satisfaction and customer loyalty as well as lower additional costs like service and customer acquisition costs. on the other hand, it also represents a challenge for the businesses as it can also be used by unskilled people. as per di domenico et al. (2021), such people may also act as a threat to companies if they intend to use it inappropriately or unethically with the purpose of harming a company’s reputation. there is known to be an increasing concern regarding the issue of “fake news” among the authorities, business owners as well as scholars. while many researchers have mainly paid attention in the past to the problem of fake news in the political context, the subject of the effects of disinformation on social media on marketing and consumers remains unfocused (di domenico et al., 2021). because of the increasing technological advancements, coupled with the emergence of concepts like going green, traditional marketing or paper marketing is at the verge of disappearing. taking into consideration the growing internet users, digital marketing has an immense potential. the developing nations have already started to embrace it. moreover, largescale companies have already adapted themselves for this change whereas small-sized enterprises are slowly transforming and using digital marketing techniques and tools are becoming a part of their marketing strategy (lamichhane, 2022). ii.2. social media marketing initially, the purpose of social media was to allow people to connect with their friends, family, relatives, colleagues and acquaintances. this helped them in exchanging their views, thoughts and opinions and even exchange content like pictures, videos and documents. however, madhura and panakaje (2022) state the organizations were quick to adopt them as a new communication tool to reach customers easily. since the consumers are spending more time on social media platforms, faruk et al. (2021) believe that marketers have also started to apply their strategies in these media channels so as to make the most of this opportunity. in fact, according to the literature, it is considered that the digital world opens new doors for the marketers and salespeople who seek more engagement from their target audience to sell them suitable goods and services. therefore, one may conclude that digital media platforms allow businesses the opportunity to form relationships with the targeted segment of customers. the influence of digital and social media marketing on consumer behaviour 34 previous literature (madhura & panakaje, 2022) indicates that social media serves various benefits such as acting as a tool that helps people to interact with one another. there are many reasons why it has been so successful in attracting masses that spend a lot of time online (mason et al., 2021). firstly, people are able to easily derive gratification by sharing information/photos. in fact, the uses and gratification theory further supports this statement (malik et al., 2016). secondly, mason et al. (2021) mentions that due to a phenomenon named as cognitive absorption, social media users lose the ability to remain conscious of their physical surroundings and time. this also somehow enables them to temporarily escape the unwanted situations or circumstances of the present. thirdly, it offers the users a sense of high level of joy that they don’t usually experience in real life in a few clicks. this comes along with a sense of control that further makes the users more than satisfied (mason et al., 2021). companies are increasingly creating an online presence on different platforms such as facebook, instagram and youtube. some social networking channels are preferred over others because they are able to attract people, collect their users’ data, thereby helping the companies in reaching the right kind of audience, which is suitable for their products and services. in order to gather information, companies must practice effective communication, which ultimately allows them to better understand their target audience and offer them what they are searching for, ultimately providing them with a better customer experience and higher satisfaction. the information gathered about the users is also helpful in increasing customer engagement (madhura & panakaje, 2022). many aspects of human life have changed since the arrival of the internet including the way customers interact. for instance, jamil et al. (2022) explains that creation of modern communication channels has allowed the clients to enhance their overall experience as a customer. in the present-day context, firms are sharing brand information, which reaches millions of people online. this helps companies in building and sustaining online communities in a much more efficient way. social media platforms such as facebook and instagram contribute in creating a sense of belongingness and community for their users without actually having any physical contact. a virtual brand community is a group of people who buy things from a specific brand. clients are interested in more than simply purchasing products and services; they want to have meaningful experiences and build long-lasting connections with other clients that share their common interest (jamil et al., 2022). previous studies (mason et al., 2021) demonstrate that customer’s social media marketing behavior has also undergone a change due to covid-19 pandemic. since the beginning of the pandemic, changes in consumer’s decision-making behaviors were identified. during the lockdown periods, when social distancing was a necessity, social media offered consumers the opportunity to interact without any restrictions online. in such times, social media marketing strategies were seen as a competitive advantage for companies. to conclude, the usage of social media was further accelerated by the covid-19 pandemic. when it comes to brand promotion on social media handles, another new scheme that brands have started to adopt is social media influencing (de castro et al., 2021). social media influencing is a marketing strategy in which a person is in the position to “influence” or “change” the mindset of fellow members within the social media community. the greater komalpreet kaur 35 influence a person has over the online community, the more valuable it will be for brands who wish to promote their products or services. therefore, it is a mechanism that can be utilized by organizations for the purpose of brand awareness. smm (social media marketing) is known to have several benefits as a modern marketing strategy. besides creating and improving brand awareness, smm makes the communication link between companies and potential clients smoother. due to this motive, it is considered as a new marketing strategy but there is very limited research on its relationship with customer intention and retention (de castro et al., 2021). figure no. 1 u.s. consumers influenced by social media ads to purchase products in 2017, by age source: dencheva, v., 2017 (statista) according to the findings of an online survey conducted in 2017 among us consumers aged 18 and above, 49% of the respondents of the age between 19 and 29 years confirmed to have bought products shortly after seeing an advertisement on social media (dencheva, 2017). the figure no. 1 clearly demonstrates that the percentage of people buying products after viewing an ad on social media has a strong association with the age that they belong to. observing this graph, one may draw this conclusion: the older you are, the less influence social media has on your buying behavior. usually, the most basic way to judge an individual’s influence is by looking at the number of followers that the person has on different social media platforms twitter, linkedin, facebook and instagram. however, it is also important for the businesses to take into consideration the age groups and the purpose for which the platform is used. for instance, instagram is a platform which is dominated by younger generations while the facebook community includes all age groups. the figure below shows the most popular social media sites, the purpose of their usage, the number of active users as well as the age group to which they belong. the influence of digital and social media marketing on consumer behaviour 36 figure no. 2 popular social media platforms source: techtarget, 2019 once analyzing the particular target audience for their products and services, businesses can select which social media site is suitable for promotion. furthermore, de castro et al. (2021) explain that based on their preference, they can choose social media influencers (smi) to create brand awareness among the specific age group identified and selected as a target audience. it is interesting to note that smi is more common among adolescents because younger generations spend relatively more time online in comparison to the older ones. hence, due to greater exposure, young people are more prone to get influenced by the content posted by influencers. therefore, one may conclude that young people such as teenagers and adolescents are more likely to get influenced by smis. however, it is equally significant to mention the fact that influencers have the ability to influence a person's behavior or attitude in both positive and negative manner (de castro et al., 2021). social media is a powerful tool to attract people, especially the ones belonging from new generations and there are different mechanisms that can be used to attract these potential buyers. several studies (de castro et al., 2021) confirm that generation z is the most active age group when it comes to spending time on social media. in a survey, members of generation y and z based in the us were asked about the category of products they were tempted to buy due to some brands’ posts on social media. figure no. 3 is a graphical representation of the categories of products answered by the respondents that participated in this survey. as shown in the figure below, the majority of the respondents claimed to buy apparels due to online influential content. these are followed by beauty and make-up products (22.92%). 15.10% of respondents confirmed buying tech products as a result of social media influence, which was followed by home products (11.46%) and food and beverages (8.85%). therefore, chevalier (2021) concludes that more than half of the participants agreed to buy clothing and beauty/make-up products because of social media content. komalpreet kaur 37 figure no. 3 product categories that generation z and millennials purchased more as a result of social media brands' posts and/or influencers' content in the us as of march 2021 source: chevalier, s., 2022 (statista) such studies show that social media can be used as a tool to attract potential consumers and increase content engagement and sales. according to de castro et al. (2021), this technique or method of using social media by the companies, as an instrument to commercially promote or advertise different products and/or services is known as social media marketing (smm). conclusions with the rise in the number of internet users and average time spent online, businesses are also shifting online and adapting online advertising. having lost its relevance in the marketplace, traditional marketing is at the verge of disappearing. in the present-day context, social media is a powerful tool that assists companies in achieving their goals in a more efficient way. by using social media marketing as a means of advertising, organizations are creating brand awareness among the target audience. with the emergence of social media influence, businesses have discovered a new strategy to attract people from younger generations. several studies have indicated that marketers are using social media marketing as a tool to attract target audience. techniques such as social media influencing are transforming the marketing industry and thus, the business owners will have to adapt according to the recent shifts. references 1. chevalier, s. (2022). product categories that generation z and millennials purchased more as a result of social media brands' posts and/or influencers' content in the united states as of march 2021. https://www.statista.com/statistics/1255308/products-purchased-social-mediainfluence-united-states/ 2. de castro, c. a., o’reilly, i., & carthy, a. (2021). social media influencers (smis) in context: a literature review. journal of marketing management, 9(2), 5971. 3. di domenico, g., sit, j., ishizaka, a., & nunan, d. (2021). fake news, social media and marketing: a systematic review. journal of business research, 124, 329-341. https://doi.org/10.1016/j.jbusres.2020.11.037 https://www.statista.com/statistics/1255308/products-purchased-social-media-influence-united-states/ https://www.statista.com/statistics/1255308/products-purchased-social-media-influence-united-states/ https://doi.org/10.1016/j.jbusres.2020.11.037 the influence of digital and social media marketing on consumer behaviour 38 4. dencheva, v. 2017. share of consumers who have purchased products after seeing an ad on social media in the united states as of september 2017, by age group. https://www.statista.com/statistics/760195/us-consumer-age-social-media-adsinfluence-product-purchasing/ 5. faruk, m., rahman, m., & hasan, s. (2021). how digital marketing evolved over time: a bibliometric analysis on scopus database. heliyon, 7(12), article e08603. https://doi.org/10.1016/j.heliyon.2021.e08603 6. jamil, k., dunnan, l., gul, r. f., shehzad, m. u., gillani, s. h. m., & awan, f. h. (2022). role of social media marketing activities in influencing customer intentions: a perspective of a new emerging era. frontiers in psychology, 12, article 6464. 7. lamichhane, b. (2022). impact of digital marketing on consumer behavior in pokhara. kic international journal of social science and management, 1(1), 13– 23. https://doi.org/10.3126/kicijssm.v1i1.50660 8. madhura, k., & niyaz panakaje, d. (2022). customer perception in relationship between social-media and purchasing behavior of fashion products. available at ssrn 4187212. https://dx.doi.org/10.2139/ssrn.4187212 9. malik, a., dhir, a., & nieminen, m. (2016). uses and gratifications of digital photo sharing on facebook. telematics and informatics, 33(1), 129-138. https://doi.org/10.1016/j.tele.2015.06.009 10. mason, a. n., narcum, j., & mason, k. (2021). social media marketing gains importance after covid-19. cogent business & management, 8(1), article 1870797. https://doi.org/10.1080/23311975.2020.1870797 11. navarro, j.g. (2022). distribution of advertising spending worldwide in 2022, by medium. https://www.statista.com/statistics/376260/global-ad-spend-distributionby-medium/ 12. statista research department. (2023). digital advertising spending worldwide from 2021 to 2026 (in billion u.s. dollars). https://www.statista.com/statistics/237974/online-advertising-spendingworldwide/ 13. techtarget. 2019. social media influence. https://www.techtarget.com/searchcustomerexperience/definition/social-mediainfluence#:~:text=social%20media%20influence%20is%20a,idea%20or%20sell %20a%20product https://www.statista.com/statistics/760195/us-consumer-age-social-media-ads-influence-product-purchasing/ https://www.statista.com/statistics/760195/us-consumer-age-social-media-ads-influence-product-purchasing/ https://doi.org/10.1016/j.heliyon.2021.e08603 https://doi.org/10.3126/kicijssm.v1i1.50660 https://dx.doi.org/10.2139/ssrn.4187212 https://doi.org/10.1016/j.tele.2015.06.009 https://doi.org/10.1080/23311975.2020.1870797 https://www.statista.com/statistics/376260/global-ad-spend-distribution-by-medium/ https://www.statista.com/statistics/376260/global-ad-spend-distribution-by-medium/ https://www.statista.com/statistics/237974/online-advertising-spending-worldwide/ https://www.statista.com/statistics/237974/online-advertising-spending-worldwide/ https://www.techtarget.com/searchcustomerexperience/definition/social-media-influence#:~:text=social%20media%20influence%20is%20a,idea%20or%20sell%20a%20product https://www.techtarget.com/searchcustomerexperience/definition/social-media-influence#:~:text=social%20media%20influence%20is%20a,idea%20or%20sell%20a%20product https://www.techtarget.com/searchcustomerexperience/definition/social-media-influence#:~:text=social%20media%20influence%20is%20a,idea%20or%20sell%20a%20product general considerations on the impact of transfer pricing by multinational companies on a national economy agora international journal of economical sciences, aijes, issn 2067-3310, e issn 2067 – 7669, vol 11 (2017) general considerations on the impact of transfer pricing performed by multinational companies on a national economy rica ivan 1 , călin tănase ladar 2 1 faculty of electrical engineering and information technology, university of oradea, str. universității, nr. 1, oradea, romania 2 faculty of environment protection, university of oradea, str. universității, nr. 1, oradea, romania e-mails rika_ivan2005@yahoo.com, ladarcalin@yahoo.com abstract the presence of an increasing number of multinational companies leads to an increase in the number of international transactions due to trade between entities belonging to these companies, but also due to exchanges with other international companies. transactions made by the entities belonging to the same multinational company are influenced by the laws in force which apply to a national economy and which regulates international money flows; such laws have different provisions from one country to another, and thus generating income losses for these companies. at the same time, revenue transfers made by multinational companies can cause revenue losses to the budgets of those host states where these revenues are generated, governments being very concerned about transfer pricing. thus, it is worth noticing the main methods used by multinationals in terms of transfer pricing policy, what is the impact of these transfers on a national economy, especially on romania's economy, and what measures governments take to counteract the loss of budget revenues due to transfer pricing. keywords: multinational companies, rules, transfer pricing, profit 1. introduction an extremely important factor that has led to an increased globalization of international markets and transactions is the revolution in information and communications technology (ict) and the development of an efficient communication system. thus, multinational companies have come to represent a large share in many of the national economies, characterized by a high integration process between the component entities, generating large sums resulting from the financial transactions concluded between the branches of a multinational company. these transactions occur between entities subject to different tax regimes belonging to different national economies. thus, multinational companies will seek to use their most favorable tax regimes to maximize revenue and, implicitly, the profit earned by the parent company to the detriment of the national economy where those revenues were made. many countries have put forward a series of rules to force companies to use transfers in order to get higher profits in other areas with more favorable tax arrangements. these rules are mainly based on the arm’s length principle, which means that the transactions between the parties involved must be economically comparable with similar transactions made by independent parties. the organization for economic co-operation and development (oecd) has made many efforts to establish the arm’s length principle as the basic principle in the case of transfer pricing theory, by issuing a series of guidelines and guides in the matter thereof. however, there are still many differences in the way this principle applies both between oecd countries and non-member countries. last but not least, since rules and regulations in this area are changing very often, it is very difficult to collect reliable and up-to-date information. mailto:rika_ivan2005@yahoo.com mailto:ladarcalin@yahoo.com 2 2. the concept of transfer pricing multinational companies comprise multiple sectors of activity, being involved in the manufacturing/rendering and sale of many products and services. the management of such companies can not control all the financial flows of each parent company’s entity. for this reason, these companies are usually structured on the divisions (also known as related parties), each division being an autonomous entity. the parent company's management has the role of coordinating the activity of subordinated divisions, in order to maximize the overall profit of the organization. these organizations include financial flow tracking mechanisms for each product/ service as well as for each subordinated entity, being organized on cost centers. each division needs to be evaluated, which is why it is necessary to have clear monitoring methods of measuring the performances of such entities. this can be done by setting prices for transferable goods from one division to another, also known as transfer prices. the transfer pricing is defined in accordance with article 7, paragraph 26, letter d) of the law no. 227/2015 on fiscal code, as "the price at which the tangible or intangible assets are transferred or the services are rendered" between related parties. although such related parties may be doing business within the same country, the tax authorities are more concerned with those entities of companies that are located in different countries. if there were no legislation regulating transfer pricing, it would be extremely easy for a multinational company to transfer profits made within a territory of a country to any other country. the main reason for which profits are transferred from one country to another is the difference a company may obtain from different corporate tax rates between the countries. the difference between the tax rates applied by tax authorities in different countries is not the only reason for transfers made by companies. the latter wish to have lower transfer pricing, to make ensure, for instance, that their subsidiaries have competitive pricing on their local markets (schlegelmilch, b, 2016). another important reason is the presence of foreign currency exchange controls. transfer pricing not only applies to property, but also to services, intangible assets, administration fees, and financing. funding in multi-affiliated companies is a matter of interest to the tax authorities of a country where the amount thereof is very high and transfer pricing may be very subjective. in addition to the implications of charging multinational companies, the planning of the transfer pricing may also influence the allocated resources, the way of supplying the component entities or the managers’ benefits package. the transfer pricing techniques and methods consist mainly in the incorrect invoicing of commercial transactions (palan et al, 2010), this being done through the following methods: invoicing less the exports to a tax haven where the amounts will be expatriated. the goods are sold at the real value, the resulting difference being the value of the transfer capital; invoicing to a higher value of the imports to a country where the amounts will be expatriated. the resulting difference, i.e. the transfer capital, is often deposited in the bank accounts of the importer in the tax heaven; incorrect reporting of the quality or type of imported products to support the over or underestimation of the declared value for the reasons outlined above; setting-up fictitious transactions for which payments are made. a widely used tactic is to pay for goods or services that will never actually exist. a distinction must be made, on the one hand, between tax planning, which is a legitimate and accepted way by tax authorities to minimize taxes and tax evasion, on the other, which is illegal. tax cuts are achieved by producing temporary or permanent tax savings. the temporary tax savings a company can make is only postponing the payment of taxes up to a certain point in time. permanent savings are made irreversible, using for example fiscal losses or by transferring taxable income to tax heavens. (lohse et al, 2012). 3 multinational companies, in their quest to achieve continued profitability growth, are continually seeking to identify ways of transferring profits to countries with favorable tax arrangements. there are two ways to achieve this: one way is to transfer people, goods or services to a low-tax country, as has been done in the past by moving production capacities to china or romania. another way is to transfer revenue to a country with a favorable tax regime, such as cyprus. this revenue can be moved in several ways, such as adjusting prices for trade transactions between parent companies' subsidiaries, through internal financing between subsidiaries or centralizing the company's functions. these ways of action can be followed because the entities subordinated to a parent company are treated as independent companies by the tax authorities. these companies encourage the development of bilateral agreements between different countries, aiming exclusively at obtaining benefits from the transfer of income to the country with a more favorable tax regime. governments have become aware of this in time, and besides issuing transfer pricing rules have sought to introduce measures to prevent the transfer of profits from the country where they are made. in the oecd, some guiding principles were developed fro the first time in 1995; these principles provide guidance on arm’s length principle, pricing methods and transaction comparability, as well as recommendations (oecd, 2017). 2.1. transfer pricing rules the oecd member countries' fiscal codes contain measures regulating inter-company transactions based on the arm’s length principle used as the standard for transfer pricing. although romania is not an oecd member, the arm’s length principle, has been taken over into domestic legislation as a market value since 1994 and was applicable to transactions concluded between related parties, including those between a foreign legal entity and its permanent establishment in romania. thus, only transactions between romanian entities with non-resident related parties could be verified by the tax authority. since 2010, transactions between related parties representing romanian legal entities fall within the scope of the transfer pricing rules. in addition to the general framework adopted by the oecd, many countries have also adopted specific transfer pricing rules over the past two decades. this was due to the globalization and increasing sensitivity of the taxpayers of the countries adopting these rules, in order to protect taxable income. most countries applying these rules are states that have adopted a high tax regime, such as germany, the usa or japan. other countries, such as ireland, switzerland or austria which have not adopted such specific transfer pricing rules are countries that attract many international investments due to their generous tax regime. all these specific rules are applied to transfer pricing between related parties. two entities are considered related parties if they have at least one percentage point (1%) of participation in the share capital of the other. in the case of romania, this percentage is at least 25% of the value/ number of participation titles (shares) or voting rights in the other legal entity (law 227/2015 on the fiscal code). for other countries, this percentage differs from 5%, for example in poland, to 25% in the case of china, which is actually the most used percentage, to 50% in the case of argentina or japan. there are also cases of countries such as brazil, chile, venezuela, which apply transfer pricing rules to unrelated parties. 3. the main methods used for transfer pricing by making use of the arm’s length principle, several methods have been established to determine the correct transfer price for certain transactions. according to the oecd, the first methods put forward and which are considered traditional methods are the cost plus pricing method, which compares the gross profit margins achieved over cost; the resale price method, which compares gross sales margins; the price comparison method, which is the most used 4 and which compares prices in similar transactions. in the 1995 oecd guidelines, besides traditional methods, there are two other transactional methods, namely: the transactional net margin method, which compares net profit margins obtained by a company with net margins obtained by independent companies carrying out similar activities; as well as the profit sharing allocation method, which starts from the profit obtained from transactions carried out by the related parties and which is shred among the participants according to the contribution thereof. 3.1. price comparison method under this method the price of a transaction in which no related parties are involved is compared with the price of transaction of a related party. the main prerequisite is the comparability of the transaction. thus, there must be several common features such as product type, availability, quality, contractual terms, economic circumstances, etc. however, there are also cases where this method can not be applied despite the above prerequisites, such as in a non-competitive market or in the case of products with rare or unique characteristics that can not be compared to others or in the case of intangible assets whose trading is based on the negotiating power of the parties. the price comparison method directly compares the price of a related party transaction with the price of an uncontrolled transaction, being the most direct method for calculating the price the arm length principle. (nta japan, 2017) this method is used mainly in setting the transfer pricing of fees, commissions, royalties and the level of interest rates applicable between related parties. 3.2. resale price method by this method, a price is sought for a product that has been purchased from a related party and resold to a third. this resale price is reduced by an appropriate gross margin. gross margin is calculated as follows: gross margin = (sales cost of goods) / sales x 100. gross margin can be compared to margins obtained from transactions of unrelated persons. what results from the downward margin operation can be considered as a market price for the transfer of goods between related parties. the main condition for applying this method is that gross margins are comparable for all products, meaning that the transaction takes place under similar conditions. the oecd guideline suggests the need for some adjustments in the application of this method due to the fact that gross margins are not generally equal for different companies. the resale price method may be applied subject to the similarity of the functions performed by the company, the risks assumed, and the contractual terms used. there are important shortcomings in using the sale price method when there are differences between the accounting standards used by companies to calculate and report gross margins on sales. in the case of romania, in the financial statements the expenses are presented according to the nature/type thereof and not in relation to their destination/purpose, which makes it difficult to distinguish between the cost of goods sold and the operational expenses of comparable goods. the resale price method is used most effectively in running the analysis of distribution activities when the reseller has not made a substantial change to the physical properties of the product or added some marketing attributes such as the trademark before re-selling. 3.3. cost plus method this method is similar to the previous method, but refers to the fact that the company sells similar products to both related and unrelated parties. thus, the profit margin made by the related party from the selling to another related person will be assessed by comparing it with the profit margin obtained from selling to a third entity. at the cost of the supplying company, 5 a profit margin corresponding to the field of activity shall be added. if the profit margin is at market value, then the transfer pricing is at market value. the profit margin should represent a profit that reflects the functions performed, the market conditions and the risks assumed by the company. the profit margin is calculated as follows: profit margin = (sales cost of goods) / cost of goods x 100. there are the same shortcomings in using the cost plus method as in the case of the resale price method. the cost plus method can be applied subject to the existence of similar transactions so that current differences do not have a significant material effect on the profit margin or adjustments can be made to eliminate such differences. it is necessary to clearly define the categories of costs that come under the cost base. if the cost structure of transactions between related parties is different from uncontrolled transactions and no adjustments can be made, then the cost plus method can not be used. the cost-plus method tends to use a net profit margin. the cost plus method is most useful when analyzing the sales of semi-finished products, processing services, rdi services, etc., as well as long-term sales and purchase contracts. 3.4. net margin method this method works in the same way as the cost plus method and the resale price method, the main difference consisting in the fact that the net margin method analyzes the net profit margins obtained by companies that have similar activities within the same industry on the same market and which tend to equalize in time. the net margin method is based on the calculation of profit margins determined as the report between operating profit derived from a transaction between related parties and a certain base consisting of sales, assets or costs. market value is determined by comparing the net margin realized in a transaction between related parties and the transaction of the same related parties and an unrelated one or between unrelated, independent parties with a similar functional and risk profile. the net margin method is used in the documentation of transfer prices that are used during a tax period. the net margin approach is most effectively used in the case of financial data on the basis of which various financial indicators can be calculated to test the profitability of related persons. the big advantage of the net margin approach is that net margins are subject to lesser influence by transactional differences that have a direct influence on the transaction price. net margins have a higher tolerability than profit margins to some functional differences between transactions between related parties and uncontrolled transactions. the net margin method should only take into account those profits of the related person that derive exclusively from the transaction under consideration. the financial indicator used is chosen in relation to the functional and risk profile of a related party. the most used financial indicators to find out the market value of transactions between related parties are as follows: the net margin of sales, which is used in the case of distributors (it is calculated as the report between operating profits and sales); asset rate of return (calculated as the ratio between the operating profit and the assets used, less the financial assets and cash availability), which is used in the case of the manufacturers; the profit margin on costs (calculated as the ratio between operating income and total operational costs), which applies to manufacturers or service providers. the financial indicators used will be calculated for an average period of 3 or 5 years to reduce the influence of external factors such as the shelf life of the product. a statistical benchmarking is used to calculate the market value of the net profit margin. if related parties have a net profit margin falling within the comparison period, it can be said that related parties conduct transactions in line with market value principles. 6 3.5 profit sharing allocation method this method is based on determining the aggregate profit resulting from transactions between related parties. the profit obtained is divided between the related persons in such a way as to simulate how the profit would have been allocated if the transaction had taken place between two unrelated parties on the basis of market value. the allocated profit must respect the functions performed, the assets used, and the risks assumed by each of the parties. profit can be allocated into two ways, namely by running an analysis of contributions and a residual analysis, respectively. by analyzing the contributions, the aggregate profits from the transactions concluded between related parties are divided between them according to the value of the functions performed by each party, taking into account external market data showing how the non-affiliated parties would divide the profit resulting from transactions carried out under similar conditions. this profit is, in general, the operational profit. the residual analysis is a two-steps analysis, namely: in the first part, each related party is allocated a profit to secure a profit margin deemed natural for the type of transaction performed; in the second stage, what remains is to be known as residual profit and is allocated between the related parties involved in the transaction, while analyzing the circumstances in which this profit would be distributed among unrelated persons. the profit sharing allocation method is used when related parties have intangible assets with a high value or where the transactions between related parties are so complex that they can not be separated into independent, stand-alone transactions. a related party that owns a tangible or intangible single asset is entitled to receive a portion of the residual profits thereof. the great advantage of this method is that it does not focus on transactions that are highly comparable and can therefore be used in cases where similar transactions between unrelated parties can not be identified. the disadvantage is that the unrelated parties do not ordinarily use the profit sharing allocation method and it is therefore difficult to identify external data. 4. penalties, taxing arrangements and litigations 4.1. penalties in the case of transfer pricing the penalties to be applied for detecting violations of transfer pricing rules vary according to severity thereof. in most cases, sanctions consist in applying a percentage of the misappropriated sums subject to taxation or the amount of the illegal transfer price. almost half of the countries use as a penalty less than 100% of the additional tax/duty thus due. thus, austria applies a 2% sanction, and at the opposite end there is a sanction of 400% in the case of argentina. another issue is the interest payable for the late payment of taxes and duties on transfer pricing adjustments. while some countries only use a time-to-pay rate, other countries use interest rates that include late payment penalties which may reach 3% per month, as is the case of vietnam. many countries impose penalties for mispredicting documentation and for lack or delay of delivery thereof. these penalties may take the form of a fixed amount, a percentage of the unpaid tax/ duty or may be another specific factor defined by domestic legislation thereof. countries that impose a fixed fee as a penalty for incomplete or erroneous documentations are romania or argentina, while countries such as belgium or great britain only impose a fine if there is no documentation at all. other countries like brazil or colombia imposes sanctions in the form of a percentage of the transaction value for which the information is wrong or missing. in the eu member states, sanctions may vary between 10-200% of the unpaid tax/ duty or represent 5-30% of the misappropriated amounts subject to taxing (cooper j et al, 2016). 7 4.2. taxing arrangements for transfer pricing rules, litigation may occur between companies and tax authorities. in the absence of agreements between countries representing trading parties, double taxation of the same transaction is very possible. double taxation is generally recognized as an obstacle to international trade and investment. thus, in order to promote trade and investment, countries sought to avoid and eliminate double taxation situations by concluding tax agreements. the number of tax agreements is steadily increasing, with more than 3,000 such agreements now in place worldwide (w.c.o., 2015). two approaches to resolving tax disputes have been set up within the oecd, namely the mutual agreement procedure and the corresponding adjustment procedure. in the case of the first approach, it is emphasized that tax authorities have to settle disputes by establishing clear provisions in the agreements to prevent double taxation. in the event of misunderstandings, tax authorities are required to settle disputes within two years, otherwise companies may call for arbitration. the appropriate adjustment procedure refers to the related party’s request according to which tax authorities should coordinate the adjustment activity in order to avoid double taxation. at eu level, important steps have been taken to resolve disputes relating to transfer pricing. thus, there is an arbitration agreement, signed by 27 members of the eu, which applies to transfer pricing that is not deliberately wrongly established and does not involve large sanctions. this convention also sets out the duration of mutual agreements between two or more eu member states. by signing in advance pricing agreements, predefined features of the transaction between related parties are established for a certain period of time. some member states set unilaterally such agreements for the tax authorities and companies within their jurisdiction, but this affects the tax liability of related parties and requires the presence of an agreement procedure between the jurisdictions involved (convention 90/463/eec). many countries start by making unilateral advance pricing agreements, being easier to manage, and then extending the procedure to bilateral agreements. there are also countries that only offer bilateral agreements before introducing transfer pricing rules, as is the case with germany. in conclusion, countries tend to offer increasingly pricing agreements in response to the need for multinationals to reduce their transfer pricing related risks. 5. conclusions due to the particular impact of transfers made by companies located in different countries on a country economy, many countries are interested in regulating transfer pricing to ensure consistent tax revenues for their budgets. transfer pricing rules usually apply only to foreign related parties. with regard to transfer pricing methods, there are few a methods which apply between countries, mainly those presented by the oecd. there are differences only on the priority of using methods, most countries preferring traditional methods. a major goal of many governments is to obtain budget revenue for budget consolidation, so tax authorities are interested in identifying and collecting taxes and duties which apply to corporate income made within the country. tax control measures that a country's authorities and bodies can take to prevent the transfer of profits from multinational companies will not completely eliminate this phenomenon. a new win-win approach in the relation with foreign investors is needed to prevent major macroeconomic imbalances leading to economic crises at the scale of national economy. references [1] oecd (2010), “transfer pricing guidelines for multinational enterprises and tax administrations”, oecd publishing, cap.ii 8 [2] palan r, murphy r, chavagneux c (2010) „tax havens: how globalization really works”, cornell university press, p. 68-69 [3] convention on the elimination of double taxation in connection with the adjustment of profits of associated enterprises, 90/436/eec, oj, l 225, p. 10-24 [4] lohse t, riedel n, spengel c (2012), “the increasing importance of transfer pricing regulations – a worldwide overview”, oxford university centre for business taxation, working papers, no. 1227 [5] international transfer pricing 2013/14 (2013), http://www.pwc.com/internationaltp [6] world customs organization (2015) „wco guide to customs valuation and transfer pricing”, version 1.0 – june 2015, p.15-22 [7] parlamentul româniei (2015), „lege nr. 227 privind codul fiscal”, monitorul oficial nr. 688/10.09.2015, cap. iii, art.7 [8] schlegelmilch, b (2016), „global marketing strategy: an executive digest”, springer international publishing switzerland , p. 124 [9] cooper j, fox r, loeprick j, mohindra k (2016), „transfer pricing and developing economies: a handbook for policy makers and practitioners”, the world bank, p. 105-107 [10] oecd (2017), “transfer pricing guidelines for multinational enterprises and tax administrations 2017”, oecd publishing, cap. ii și iii [11] national tax agency japan (2017) „reference case studies on application of transfer pricing taxation”, https://www.nta.go.jp/foreign_language/08.pdf http://www.pwc.com/internationaltp https://www.nta.go.jp/foreign_language/08.pdf medimond template agora international journal of economical sciences, aijes, issn 2067-3310, e issn 2067 – 7669, vol. 13 (2019) emotional intelligence – the road to excellency in management gheorghina liliana bîrlădeanu 1agora university agora, tineretului square 8, oradea, romania e-mail: gheorghina_birladeanu@yahoo.com abstract the current management implies a continual adaptation to the economical, political and social dynamics and evolution. upon this context there is a need for leaders with extremely well developed communication abilities, empathic and men of vision, who can direct by using a positive motivation. it is, thus, understood that the foremost element is the emotional intelligence. taking into consideration the possibility of developing these values through the means of education so that to obtain a high quality management and an efficient communication, we consider this to be the way to excellency in management. keywords: emotional intelligence, excellency in management, efficient communication, positive motivation. 1. introduction i have started from daniel goleman`s idea who, in his book “the emotional intelligence”, said that within each of us there is an iq and an emotional intelligence at certain levels. but they offer an inside look regarding each of these aspects, taking separately everyone`s qualities. up to a certain point, every human possesses a cognitive intelligence and an emotional one, therefore, these two portraits melt together. however, from the two of them, the emotional intelligence brings out more qualities which determine us to truly be humans. [2, p. 67] the emotional intelligence can be obtained along time, through patience, introspection processes and conscious exercises of identifying your own emotions and of those whom we interact with. we will see that there are certain dimensions of management where emotional intelligence is indispensable and where leaders can use and develop specific techniques in order to potentiate this important ability. 2. theoretical concepts management implies communication, self-control and self-assessment. a productive and efficient communication entails being aware of your own emotions as a preceding factor in developing communication because it helps us identify the interlocutors` emotional reactions, no matter of the área where they come from. hence, we will obtain a facile management of all of these by building open and efficient communication ellements. essentially, it refers to identifying the factors that produce us major upsets, stress and situations when we have impulsive reactions. this is the first step from the tackling communication process and it requires a well-balanced approach, defined by a high self-control, that will eventually be marked by more and more efficient interactions. regarding conflicts, it is known that managers have the obligation to mediate them. this issue implies a great involvement on the part of leaders to decipher the emotions of those involved mailto:gheorghina_birladeanu@yahoo.com 2 and maximum objectiveness to stifle the conflict or to diminish it, but also in order to build up and keep moral verticality within the framework of the organisation. most of the times the conflicts arisen in the working place have an informal charácter without being founded on a rational basis that would relate to actual problems. the uppishness, the prejudgements and the deceived expectations are the most common causes of conflicts. these represent emotional motifs. it is important for the managers to not let themselves get overwhelmed in the case of a strong emotional burden. it is in indispensable to any efficient leader to be open to their colleagues` emotional reactions on condition that they approached them as supplementary information that can help them in an efficient decisional process, without letting themselves be influenced by these. when it comes to building strong, resistant teams, the emotional side is also a significant one. the way the team members communicate and the efficient relations that they develop depend on the compatibility that exists among them and on the powerful emotional component. many times, the affinities and the antipathies arosen almost intuitively, without preliminary organised analysis and evaluation processes, are much stronger than those developed along time. therefore, a good manager also needs to pay attention to the compatibilities developed on an emotional level, as well as to the profesional abilities and experiences that the organisation members have as a whole. handling emotions well contributes to improving the ability of taking decisions in an extremely short time, in crowded situations, in stressed contexts and in conflict situations. in order to unravel these situations with utmost objectivity one needs the capacity to control emotions. the emotional intelligence is the one that supports us when taking the best decisions, tonig our own emotions with the ones of those who are affected by the respective decisions. these aspects also lend us a major support in negotiations. in this área, a decisive role is held by the capacity to control our own emotions and to interpret the ones of our partners of negotiation. the leaders who possess a developed emotional intelligence have the capacity to identify their emotions, to decipher them and handle them in a way that is beneficial to the decisional processes. being aware of your own emotions means knowing how to react in certain situations and why to react that way, it means knowing your weaknesses, your limits, what motivates you and what makes you react impulsively. noone reacts well to change. whether we talk about a new colleague, a new office or a different software used during the day-to-day activity, most of the people have the impulse to reject the elements that modifiy more or less their daily routine. resting upon the information that we have collected and on the observations that we have made, the emotional intelligence helps us realize what we need to change, who we address when we plan to make a change, how we address according to the others and which is the most opportune moment for implementing the change. as it has been previously stated, emotional intelligence can be developed if it is invested with constant attention. for that purpose, the following techniques might be useful: “the imaginary friend, the diary”, self-control, personal agenda. in this manner, any manager understands what has helped him or what has prevented him from obtaing the reuslts he wanted. the way we express our emotions in the managerial activity is also externalized in gestures, pantomime and in other elements of nonverbal communication. an open manifestation of emotions may bring us success or may negatively affect the processes of taking decisions and the quality of interactions with subordinates or with different categories of stakeholders. for these reasons, handling emotions represents a major vector towards managerial excellency for a performant principal. 3 psychologists recommend the managers to keep their temper in the situations when it is diffcult to control emotions. this means retracting to a more quiescent place where they can thoughtfully analyze all the ugly feelings and words that invade them, filtering them through a short evaluation and interpretation process. after this stage, they should decide on what they consider appropriate or inappropriate to be said. thus, they will discharge of all the negative feelings, without affecting the ones around them. [3, p. 170–180] it is a known fact that a good manager is an excellent communicator. one of the parameters that establish the efficiency of a group or of an organisation refers to the communication system which also makes engaging indviduals in competition possible. [1, p. 44] the leaders who possess a superior emotional intelligence know how to identify other people`s emotions, know what to say to put in comfort, to encourage and to motivate the team. only by developing and maintaining efficient relationships, they will gain other people`s trust and they will succeed in being heard and respected. besides authority, a leader is also the member of a collective and that is why he needs to prove well developed social abilities so that he can motivate his colleagues to determine them to follow him trustingly even in the more difficult situations. empathy is also one of the most efficient exercises to develop communication abilities. the capacity to put yourself in other people`s position is vital both when it concerns interpersonal communication but also when building up a team because, by dealing things empathetically, one cand obtain a distinct perspective over things and can relive the interlocutor`s emotions. these help improving the feedback given to work colleagues and can influence certain decisions that need to be taken or the moment for communicating them. 3. conclusions in conclusion, in order to attain managerial excellency it is very important that managers spend time observing those around them, identifying the motivations that bring them positive emotions and the things that provoke them anxieties and create a stressed atmosphere at work. apart from all of these, the discussions play a significant role and also a close involvement in order to take the most optimum decisions. last but not least, it is advisable to listen to their worries and complaints, to take into consideration the elements that bring them satisfactions and to try to connect to their daily problems. references [1] gh., l., bîrlădeanu, the impact of the relation between organisational culture and global communication over organisational management, agora university publishing house, 2009. [2] d. goleman, emotional intelligence, translated by irina-margareta nistor, curtea veche publishg house, bucurești,2001. [3] levinson, d. j. (1959). role, personality, and social structure in the organizational setting. the journal of abnormal and social psychology, 58. agora international journal of economical sciences, aijes, issn 2067-3310, e issn 2067 – 7669, vol 11 (2017) evolution and ethics of digital technology in marketing valentina-simona pașcalău 1 1 agora university of oradea, str. p-ța tineretului, nr. 8, oradea, romania e-mail simona.pascalau@univagora.ro abstract the purpose of this paper is to identify the implications of ethics in the evolution of technology. this article aims to define and analyze concepts such as: big data, artificial intelligence and bioinformatics. also, this article presents the applicability of artificial intelligence and discover the future trend of jobs in the coming years, the importance of adapting to changes and learning more skills that help to support future jobs. keywords: digital, technology, marketing. 1. introduction technology in digital marketing, the expansion of the internet and high-speed broadband connections, the development of social media platforms and the widespread adoption by users of smart mobile devices have led to the development of digital marketing, social media marketing and mobile marketing. the digital transformation of marketing is reflected in how companies and consumers have adopted new technologies, as well as how technology has facilitated new market behaviors, new ways of interaction and new consumer experiences (lamberton c., stephen a.t., 2016). the adoption of digital technologies transforms the business models, the products, the price models, the ways of distribution, networking and communication with customers. ethics in the evolution of technology refers to the application of ethical thinking regarding the practical concerns of technology. the main reason why the ethics of technology is growing is reflected in the new technologies that give us more power to act, and that means we have to make certain choices that we didn't have to make before. if in the past, our actions were involuntarily limited by our vulnerability, at present, we must learn how to be voluntarily constrained by our reason, more precisely, by our ethics. (weckert j., douglas a., 1997) ethics in the evolution of technology addresses issues that may arise in areas such as information technology, biotechnology, artificial intelligence, cybersecurity and other emerging disciplines. the question that is emphasized is how can you turn a threat into an opportunity? under the conditions in which the technological trends will have the greatest impact in the next 10-15 years. 2. big data analytics big data analysis is a fairly complex process that examines sets of big data in order to discover information, such as market trends, certain unknown correlations, and customer preferences, in order to help organizations make informed business decisions. ( kitchin r., 2014 ) mailto:simona.pascalau@univagora.ro https://dl.acm.org/author_page.cfm?id=81100338941&coll=dl&dl=acm&trk=0 2 focused on specialized analysis systems and software, as well as high-power computing systems, big data analysis offers certain business benefits, including: more efficient marketing, new revenue opportunities, competitive advantages over rivals, and improved operational efficiency. the term big data refers to the extraction, manipulation and analysis of data sets that are too large for ordinary processing. because of this, special software is used and, in many cases, also dedicated computers and hardware. generally, at these data the analysis is done statistically. based on the analysis of the respective data, predictions of certain groups of people or other entities are usually made, based on their behavior in various situations and using advanced analytical techniques. thus, tendencies, needs and behavioral evolutions of these entities can be identified. (reichman o.j., jones m.b. and schildhauer m.p., 2011) 2.1. ethics in big data big data ethics, also known as simple data ethics, refers to the systemization, defense and recommendation of the concepts of right and wrong behavior in relation to data, especially personal data. (reynolds g.w. , 2002). fig. 1 – big data ethics source : www.ibmbigdatahub.com the ability to analyze big data gives the analytical world new opportunities to predict behavior. access to new forms of data (social media, text analysis and internet data) outside the organization's environment, when analyzed together with internal data, offers the ability to research, predict trends and ask questions that have not been before. . data scientists can make analyzes so advanced that they can invade a person's privacy without violating data protection laws. laws and regulations (gdpr) guide organizations, especially regarding privacy and data usage, so that recent advances in analytics and big data technologies have widened the gap between what is legally allowed and what is possible, replacing the balance of power between individuals and data collectors. technology knows and remembers more about us and our preferences than we do, so we can say that big data can be manipulative and unethical. as an organization seeks to apply big data analytics to improve the way it works, we have no way of knowing whether the use of this technology is ethical, however, it is stated that it is advisable to have skills in the collection and marketing business. https://www.google.com/search?client=firefox-b-d&sa=x&biw=1360&bih=632&sxsrf=acybgnraaagxd8ckar4-o1wq0ajr065amg:1572975544755&q=ethics+in+information+technology+george+walter+reynolds&stick=h4siaaaaaaaaaa3iwqrcmawa0jmgih48ewgevusfiexnrldjwrs2kkbl_by_1me7vfvuv0xgy_uzhg83po8bzhju2otrph2s73eusdg0mlezmmjq3duc6g91iwvrv4hl8rdnzqiumpkhycq8a5moezq3gskozcvf6x-ufukddaaaaa&ved=2ahukewjyndfeztplahuptiskhdl9b1eqmxmoatafegqidxah http://www.ibmbigdatahub.com/ 3 online marketing intermediaries provide information about the destination sites, being a means of connecting internet users with product information. the internet is not a threat, on the contrary, we can discuss strategic directions for using the internet:  market penetration strategy: the internet is used to create sales for current parts.  market creation strategy: the internet is used to generate sales for us, to make geographic markets, to capitalize on the advantage of advertising to achieve the international level at a low cost, without the need for support or sales infrastructure for other parts.  product application strategy: develop new intelligent digital care products for the internet.  diversification strategy: the internet supports the sale of products that are cared for and developed and sold to us. this determines surveillance capitalism, which means looking for human experience as a free raw material for translating into behavioral data, but it has given rise to a concept called dataism, which is considered to be a techno-religion that treats everything in terms of data processing. and whose supreme value is the free flow of information. dataism is a term that has been used to describe the mindset or philosophy created by the emerging significance of big data. it was first used by david brooks in the new york times in 2013. ethical considerations of dataism: 1. can big data make choices on our behalf? 2. will it become a tool of subjugation and manipulation by global elites? 3. will it produce a useless generation? 3. artificial intelligence artificial intelligence technologies, such as machine learning, are the basis of advanced analysis tools that many large organizations rely on for competitive advantage. as ai (artificial intelligence) becomes ubiquitous, a wider range of organizations will have access to artificial intelligence tools to help make business decisions. (smith b., shum h., 2018). it is claimed that ai aggregates information to multiple users and has the ability to do predictable things. ai is an area of computer science that emphasizes the creation of intelligent machines that function and react as humans. two important approaches of ai: logical and rule-based approach and big data and machine learning based on patterns / algorithms. artificial intelligence has to do with the aggregation of marks for a long time, in essence, it takes human intelligence, transposed into human behavior, and transmits it to a computer that takes this information. artificial intelligence is a field of technological endeavors that people explore to make a better sense of the world and, in making the best decisions, in a way, ai has a fundamentally ethical aspect. therefore, we must give efficiency to morality, but because something is more efficient it does not mean that it is morally better, although often efficiency is a dramatic benefit to humanity. 3.1. applicability of artificial intelligence artificial intelligence has become an essential part of the technology industry and research associated with artificial intelligence is highly technical and specialized. https://en.wikipedia.org/wiki/philosophy https://en.wikipedia.org/wiki/big_data https://en.wikipedia.org/wiki/david_brooks_(cultural_commentator) https://en.wikipedia.org/wiki/the_new_york_times 4 this concept is a branch of computer science that aims to create intelligent machines, dealing with the simulation of intelligent behavior in computers or the capability of a machine to imitate intelligent human behavior. also, artificial intelligence is an area of computer science that deals with giving machines the ability to seem like they have human intelligence or the power of a machine to copy intelligent human behavior. artificial intelligence can replace certain jobs such as: computer programmers, call center operators, driver, teacher, doctor, etc. previous studies have identified the effects of automation, such that: • low-skilled jobs will decrease by 30% • qualified jobs are the trades that follow a routine process and are repetitive. usually, it does not require a higher academic level. • medium skilled jobs will improve by 8% • medium skilled jobs are jobs that require a small amount of knowledge in managing people in the process where teams deal with more difficult problems • highly skilled jobs will increase by 56% • highly skilled jobs are jobs that require creative and critical thinking, analytical and problem solving skills. as far as artificial intelligence is concerned, we must also present some negative aspects, such as: "the system" will develop "a consciousness" and will rebel against people, people will lose the freedom to choose and we will have the dictatorship of the algorithm "and mass manipulation" , people will not be able to learn digital skills fast enough, they may misinterpret human instructions due to lack of context, people will lose the ability to hide their true emotions and feelings. 4. bioinformatics: modernization of elites bioinformatics is an interdisciplinary science that deals with the development of software methods and tools that help to understand data of biological importance. (luscombe n.m., greenbaum d., gerstein m., 2000) therefore, bioinformatics is a branch of biological science that deals with the study of methods of storage, retrieval and analysis of large sets of biological data. according to wikipedia, “bioinformatics uses many fields of computer science, mathematics and engineering to process biological data. complex machines are used to read biological data at a much faster rate than before. databases and information systems are used for the storage and organization of biological data. biological data analysis can involve algorithms in the field of artificial intelligence, soft computing, data extraction, image processing and simulation. algorithms in turn depend on theoretical foundations such as discrete mathematics, control theory, system theory, information theory and statistics. software tools and technologies commonly used in the field include java, c #, xml, perl, c, c ++, python, r, sql, cuda, matlab, and spreadsheet applications.” also, bioinformatics is considered an area of science in which biology, computer science and information technology are merged into one discipline. the ultimate goal of this science is to allow both the discovery of new knowledge in biology and to create a global perspective from which the unifying principles of biology can be distinguished. we observe three important directions of research in bioinformatics:  the development of new algorithms and statistics with the help of which can be extracted, from a large number of data, those elements that have common features. 5  analysis and interpretation of different types of data related to nucleotide and amino acid sequences, protein structure.  development and implementation of tools that allow efficient access and manipulation of different types of information. (luscombe n.m., greenbaum d., gerstein m. ,2000) the emergence and development of bioinformatics were determined by certain opportunities and challenges. currently, the new high-efficiency technologies bring unprecedented opportunities for scientific research, allowing us access to new data and studying genetic differences in different people, as well as discovering genetic mutations that are responsible for some diseases. the huge amount of data requires efficient methods, and exponential growth requires scalable methods. bioinformatics is a mixture of molecular biology and data science and deals with the application of calculation methods to analyze biological data collections, such as genetic sequences, cell populations or protein samples. bioinformatics has two main roles: firstly, it is a powerful technology for searching, managing and analyzing big data in scientific research. secondly, as a methodology, it is a holistic system based on data, an approach that generates new assumptions, finds new patterns and new functional elements. this complements the traditional methods of experimental biology. so we see that there are three major approaches to bioinformatics: data analysis, software development and modeling. in conclusion, bioinformatics aims to apply information technology to advanced biological problems, such as transcriptomics and proteomics, involving huge amounts of data, so that we can talk about: human improvement as a loaded term that has eugenics, human improvement will be practiced with recklessness and selfishness , with a short-term outlook (first in the chinese military), most of the investments by the big technology billionaires have concerned brain technologies and anti-aging. 5. conclusions the convergence of new big data management programs has produced a unique moment in the history of data analysis. this trend means that we have the capabilities to analyze data sets very quickly and cost-effectively for the first time in history, and it is a real leap forward and a clear opportunity to make huge profits in terms of productivity, efficiency, revenue and profitability. big data and business analytics solutions are now a core technology and, together with ai and automation, are the basis on which the digital transformation process is built.artificial intelligence and technology are an important component of life that always interests us and surprise us with new ideas, topics, innovations, products.the importance of ethics among information technology professionals is responsible for ensuring that computer technology is not used in the wrong ways that can harm people, the environment and society.ethics in the evolution of technology has principles that can be used to govern technology, including factors such as risk management and individual rights. finally, we present some optimistic recommendations: adopt and invest in technology, manage and lead network organizations, invest in education, adopt and invest in humanity. references [1] brooks, d., (2013), opinion. the philosophy of data , the new york times [2] kitchin, r., (2014), the data revolution: big data, open data, data infrastructures and their consequences, sage publications [3] lamberton, c., stephen, a.t. (2016), a thematic exploration of digital, social media, and mobile marketing: research evolution from 2000 to 2015 and an agenda for future inquiry, journal of marketing https://www.nytimes.com/2013/02/05/opinion/brooks-the-philosophy-of-data.html https://books.google.com/?id=rnjsawaaqbaj&printsec=frontcover&dq=rob+kitchin+the+data+revolution#v=onepage&q=rob%20kitchin%20the%20data%20revolution&f=false https://books.google.com/?id=rnjsawaaqbaj&printsec=frontcover&dq=rob+kitchin+the+data+revolution#v=onepage&q=rob%20kitchin%20the%20data%20revolution&f=false 6 [4] luscombe, n.m., greenbaum, d., gerstein, m. (2000) , what is bioinformatics? an introduction and overview. yearbook of medical informatics [5] reichman, o. j. , jones, m.b. and schildhauer m.p., (2011), challenges and opportunities of open data in ecology, science 331 [6] reynolds, g.w. (2002), ethics in information technology , isbn-13: 978-1337405874 [7] smith, b., shum, h. (2018). the future computed: artificial intelligence and its role in society [8] weckert , j., douglas, a. , (1997) , computer and information ethics , contributions to the study of computer science (book 4) [9] www.ibmbigdatahub.com [10] https://www.scu.edu/ethics/focus-areas/technology-ethics [11] www.wikipedia .org https://www.google.com/search?client=firefox-b-d&sa=x&biw=1360&bih=632&sxsrf=acybgnraaagxd8ckar4-o1wq0ajr065amg:1572975544755&q=ethics+in+information+technology+george+walter+reynolds&stick=h4siaaaaaaaaaa3iwqrcmawa0jmgih48ewgevusfiexnrldjwrs2kkbl_by_1me7vfvuv0xgy_uzhg83po8bzhju2otrph2s73eusdg0mlezmmjq3duc6g91iwvrv4hl8rdnzqiumpkhycq8a5moezq3gskozcvf6x-ufukddaaaaa&ved=2ahukewjyndfeztplahuptiskhdl9b1eqmxmoatafegqidxah https://dl.acm.org/author_page.cfm?id=81100338941&coll=dl&dl=acm&trk=0 http://www.ibmbigdatahub.com/ https://www.scu.edu/ethics/focus-areas/technology-ethics 9 agora international journal of economical sciences, aijes, issn 2067-3310, e issn 2067 – 7669, vol. 16 (2022) the coaching and management of a successful organisation gheorghina liliana bîrlădeanu1, 1faculty of economic sciences, agora university of oradea, oradea, romania e-mail gheorghina_birladeanu@yahoo.com abstract exercising coaching within organisations creates efficient teams, giving them sense and direction regarding actions, with an increased and consequent focus on the employees` motivational approach and also on the ability to delegate effectively. this way, a healthy environment is cultivated, with autonomous, self-taught working teams, which activate conscientiously aspects that lead to building a successful organisation. ”no one can whistle a symphony, it takes a whole orchestra to play it.” (h.e. luccock) key words: coaching, efficient teams, successful organisation 1. introduction the social, political and economic context of the latest years have shaped, more and more, the differences between the traditional managerial approaches, where orders are in the focus, and the modern ones, where leaders inspire and motivate. a highly productive management combines efficient communication, identifying viable strategies for the company, motivating employees to excel, participanting in making smart decisions. in order to reach organisational success, it is considered that a good manager is the leader that you want to follow, the one that can possesses the strategies to keep close good people and also to recruit valuable ones. a team that has a common goal, with relationships based upon trust, can build much more than the people who make up the team would do invididually. we understand that it is necessary to introduce in organisations the performance culture and the continual learning, aspects that require the latest proactive approaches. within this context, we need to relate to the most recent researches in the field of management, that can develop the successful organisation. regarding this issue, an essential vector is managerial efficacy through the ability to do coaching. thus, coach-managers facilitate and maximize performance, forming teams orientated towards success. 2. what is coaching? the international federation of coaching defines coaching individually as „a partnership that accelerates the client`s learning rhythm, his performance and progress on an individual and professional level”, while the european coaching institute defines coaching as „a process that helps the client give up what he is now in order to transform into what he wants to become.” [1] from these definitions, we identify the performance stimulator role of coaching for any individual, both from personal and professional perspective. thinking about the fact that organisations are represented by groups, it is necessary to discuss the idea of a collective. in this regard, how would we realise a group coaching? why? because they are the ones that accomplish the goals of an organisation. therefore, we begin with thorton`s (2010) definition of team coaching, which he presents as a process of „coaching with a team in order to reach common goals, paying attention both to individual performance and to collaboration and performance at team level.” according to cockerham`s vision (2011), who tackles with group coaching, the process is defined as „ a group one, facilitated by an experienced coach and created with the intention to maximize the combined mailto:gheorghina_birladeanu@yahoo.com https://hallo.ro/dictionar-englez-roman/conscientiously 10 energy, the experience and wisdom of individual people, who have chosen to participate, with the purpose to reach organisational or individual objectives.” [2] from the two aproaches that go beyond the individual dimension, we distinguish differences in various areas, such as: communication, vision, mission, values, leaders and focuses. at the same time, we also point out the complementary aspects of individual coaching and team/group coaching that converge towards a common goal: the success and performance of the organisation. starting from the idea that the management team is the vital centre of the organisation, with major influence on its directions, the managers` decisions have reverberations on an individual level and also on an organisational level, an issue that influences the future of the company. if we balance the fact that the members of the leading team are usually chosen from the perspective of their functional responsabilities, but, sometimes, also for some subjective reasons, which have no connection with the specific of their competences, it is even more critical. more often than not, the managerial teams are really groups of senior managers, who do not work together, but make individual decisions. hence, it is clear that most of the teams do not sequentially assume the design and the future of the company. nowadays, shaping leading managerial teams by coaching is a relatively new phenomenon. approaching coaching in companies from a structural and functional perspective is the result of very powerful cultural models. the hegemony of the the business models from the occident (and from the usa) has definitively shaped the emergence and functioning of the management team from the top of the organisations. the current feature that an organisation needs is using management team as a consequence of the growth of diversity and complexity of problematical situations, as a consequence of the globalisation phenomenon and, of course, from inside company, as a consequence of the need to adapt to new global business models. on the other hand, it is known that in any management team, there is a series of functional blockages or communication dissensions, which, from the coaching perpective, can develop large niches of positive evolution and also niches of escalading them. the specialized literature appreciates the valencies of coaching regarding responsibility and team members` autonomy area, self-esteem growth, collaboration, developing leaders, involvement, dedication, loyalty, commitment, productivity, reaching organisational goals, assuming mentality and behaviour change, aspects that lead to achieving remarkable results. studies from romania specify that the biggest blockage of romanian managerial teams is the lack of a forum, of a reflection and dialogue cadre in the field of challenges that they encounter and of the roles that they have to adopt individually or as a team. team coaching brings a real support for escalading the difficulty to produce and keep a climate that impels interpersonal transparency, which then creates an impulse and an energy for the entire team, favouring collaborative actions with intensified results. thus, it is obvious that the managerial approaches with the help of coaching offers solutions for systemic remodelling of the team and for synergistic revival of the common strategy. 3. conclusions we conclude that the existence and practice of coaching creates efficient teams, to whom they confer sense to their work and direction regarding actions, with a consistent emphasis on motivational approach for employees and, of course, on the ability to delegate efficiently. thereby, a healthy environment is cultivated, with working teams that are autonomous, selftaught, that work thoroughly in the presence or in the absence of their manager and that lead to building a successful organisation. 11 references [1] https://mihaistanescu.ro/coaching-ul-echipei-de-management-i/#more-2427 [2] https://www.edalt.institute/introducere-in-lumea-coachingului https://mihaistanescu.ro/coaching-ul-echipei-de-management-i/#more-2427 https://www.edalt.institute/introducere-in-lumea-coachingului 22 agora international journal of economical sciences, aijes, issn 2067-3310, e issn 2067 – 7669, vol. 16 (2022) the role of learning orientation in the context of sustainable human resources development valentina-simona pașcalău1, ramona-mihaela urziceanu2 1doctoral school of economics and business administration, west university of timișoara, romania e-mail valentina.pascalau73@e-uvt.ro 2 faculty of economic sciences, agora university of oradea, oradea, romania e-mail ramona.urziceanu@gmail.com abstract the belief that learning and innovation are important to flourish in competitive and dynamic situations has sparked an increase in interest in the learning process within the organization during the past two decades. the actions that the entire company engages in to generate and apply knowledge to gain a competitive advantage are included in a firm's learning orientation. keywords: learning orientation, human resource, sustainable human resource development, 1. introduction the firm's learning orientation affects the sort of information gathered as well as how it is assessed, understood, and disseminated (stelmaszczyk, 2020). the company's orientation towards learning is closely related to the sustainable development of human resources, respectively to the permanent education of adults. adult education is, in its content, development through activity, through action, through experimentation, where exercise occupies a prominent place. hence the idea to learn by doing present in modern works on the sustainable development of human resources. in this context, knowledge, skills, and new skills are, to a large extent, the result of the production of the subject of education (the adult) and not simple records of external events. here the very important substitution operation is present in relation to the expository method, for example. thus, expression is substituted for impression, the production of reception, the externalization of ideation and the invention of understanding. impression, reception, ideation and understanding are also present, but they are surpassed and therefore assimilated to production and innovation, expression and externalization. 2. the role of learning orientation according to argyris and schon (1996), fiol and lyles (1985), nonaka and takeuchi (1995), organizational learning is the process through which additional information and knowledge are received by comprehending some approaches and practices for enhancing performance. the development of managerial skills and technological expertise required to compete in a global market is thus made possible by organizational learning. as a result, managers can update their knowledge base faster than their rivals, maintaining a long-term competitive advantage while responding to uncertainties and external developments (harrison and leitch 2005, santos-vijande et al. 2012). learning orientation has an important role in the field of human resources because it facilitates the acquisition and use of knowledge (bature et al. 2018). motivation is considered one of the most important factors that underlie the achievement of a goal, and learning orientation, as an impetus and sustained involvement in the accomplishment mailto:valentina.pascalau73@e-uvt.ro mailto:ramona.urziceanu@gmail.com 23 of tasks, is the result of a complex of factors, including social and cultural factors, beliefs and personal values and contextual factors, specific to a learning situation (liao et al. 2017). social and cultural factors exist at the level of norms, values and learning styles that exist in the cultural endowment of a company. the differences between cultures are found at the level of: the types of interaction they encourage in the learning activity (cooperation and competition), the partnerships for survival (in some, survival refers to the acquisition of well-founded knowledge, in others to the development of knowledge) and the learning resources are ensured through use of organizational tools in these companies (baker et al. 2022).intellectual factors influence the learning orientation, whether it is the acquisition of competence in the field, or just the achievement of a specific performances. according to vega martinez et al. (2020) among these factors are: the type of learning tasks (applicative tasks and those related to current activities are more attractive than decontextualized ones and facilitate the orientation towards the acquisition of skills and not only towards obtaining a particular performance), the authority relationship in the company (autonomy in learning determines an intrinsic motivation and a positive perception of one's own learning skills), the formal and informal use of rewards (rewarding competence has a strong motivational role in the long term), the evaluation modality (the competence orientation within formative assessments determines an orientation of superior learning versus performance orientation), the time allocated to a learning period (too short a period of time tends to demotivate employees), the way of grouping employees (a rigid grouping of skills can have serious consequences in terms of performance and learning orientation it has). it is important for organizations and especially the hr department to understand the different types of learning orientations in order to create effective training strategies that take into account the individual needs of employees. by understanding the different types of learning orientations, organizations can create individualized training programs that will help employees learn more active and effectively, leading to improved organizational performance. work used to be the most obvious and important place where learning occurred. but, technical-scientific and technological development has made education through professional experience ineffective. nowadays, a long period of formal training is required to be able to practice a job at a high level, while the job opportunities for the unskilled are fewer and fewer. proponents of the sustainable development of human resources affirm the need to develop a program that cultivates personal initiative in view of permanent development and self-improvement. there are a number of very important additional factors, among which we mention: the provision of self-assessment tools; self-assessment possibilities; establishing an organizational climate favorable to creativity; knowledge of work incentive projects that promote solutions applicable directly in production to certain problems; interaction in the peer group, in order to promote the exchange of ideas and information. 3. conclusions and proposals in conclusion, learning orientation, lifelong education or sustainable human resource development should create the framework to provide the necessary inspiration, stimulate creativity, guide people to critical thinking, to cooperation, in order to solve complex problems, real. therefore, for a sustainable development we need education, first of all to educate ourselves and then those around us, there are always new things that deserve to be explored and, why not, efficiently exploited. 24 also, for sustainable human resource development, organizations should become more adept at generative learning, be able to predict environmental and market changes, and respond appropriately when necessary. innovation and performance within a company largely depends on its orientation to learning. to understand and interpret new market information and technical advances from the external environment, organizations need competent people. employees of an organization must be able to process information quickly as well as learn new things faster than their competitors. references [1] argyris, c., schon, d. a. ,(1996) , organizational learning ii, addison-wesley creative education, vol. 36 issue: 1, pp. 107-109. [2] baker, w.e., mukherjee, d., & perin g., m. (2022). learning orientation and competitive advantage: a critical synthesis and future directions. journal of business research, 144, 863–873. [3] bature, s. w., sallehuddin, r. m., & hin, c. w. (2018). learning orientation, access to debt finance, organizational capability and performance of small and medium enterprises: a proposed model. academy of accounting & financial studies journal, 22(3), 1–11. [4] fiol, c.m. & lyles, m.a. (1985). organizational learning. academy of management review, 10, 803–813. [5] harrison, r.t. &leitch, c.m. ,(2000), learning and organization in the knowledge–based information economy: initial findings from a participatory action research case study, british journal of management, 11(2), pp. 103 – 119. [6] liao, s., chen, c. c., hu, d., chung, y. c., & liu, c. l. (2017). assessing the influence of leadership style, organizational learning and organizational innovation. leadership & organization develop¬ment journal, 38(5), 590–609. [7] nonaka, i. &takeuchi, h., (1995), the knowledge-creating company how japanese companies create the dynamics of innovation, oxford university press, new york. [8] santos-vijande, m. l., lopez-sanchez, j. a., & trespalacios, j. a., (2012), how organizational learning affects a firm's flexibility, competitive strategy, and performance, journal of business research, 65(8), 1079– 108 [9] stelmaszczyk, m. (2020). how absorptive capacity and organisational learning orientation interact to enable innovation capability? an empirical examination. entrepreneurial business and economics review, 8 (1), 7-32. [10] vega martinez, j. e., martinez serna, m. c., & montoya, n. p. (2020). dimensions of learning orientation and its impact on organizational performance and competitiveness in sme's. journal of business economics and management, 21 (2), 395-420. agora international journal of economical sciences, aijes, issn 2067-3310, e issn 2067 – 7669, vol 10 (2016) 30 millennials and corporate culture in multinational companies judeu viorina maria 1 abstract globalization is not what it was a decade ago. what links the world together has changed fundamentally. for many companies, succeeding in this new operating environment will require rethinking many past decisions and assumptions.multinational companies hire millennials because they appreciate their energy and initiative. on the other hand, millennials greatly values the personal time and are not willing to provide the tray dedication and energy. when organizational structures expect these things to come by itself, may be disappointed. millennials are carefully selected and their involvement. millennials have to be earned, not to be taken for granted. keywords globalization, millennials, multinational companies, corporate culture millennials generation and their benefit from the economic recovery strauss & howe's book titled millennials rising: the next great generation describes the millennial generation as "civic-minded", rejecting the attitudes of the baby boomers and generation x. 2 generally speaking, millennials are the children of baby boomers or generation xers, while some older members may have parents from the silent generation. a 2013 poll in the united kingdom found that generation y was more "open-minded than their parents on controversial topics". 3 in 2015, the pew research center also conducted research regarding generational identity. 4 it was discovered that millennials, or members of generation y, are less likely to strongly identify with the generational term when compared to generation x or to the baby boomers, with only 40% of those born between 1981-1997 identifying as part of the millennial generation. among older millennials, those born 1981-1988, pew research found 43% personally identified as members of the older demographic cohort, generation x, while only 35% identified as millennials. among younger millennials (born 1989-1997), generational identity was not much stronger, with only 45% personally identifying as millennials. it was also found that millennials chose most often to define itself with more negative terms such as self-absorbed, wasteful or greedy. in this 2015 report, pew defined millennials with birth years ranging from 1981 onwards. 5 economic prospects for some millennials have declined largely due to the great recession in the late 2000s. 6 several governments have instituted major youth employment schemes out of fear of social unrest due to the dramatically increased rates of youth unemployment. in europe, youth unemployment levels were very high (56% in spain, 44% in italy, 35% in the baltic states, 19.1% in britain and more than 20% in many more 1agora university of oradea, tineretului square nr.8, 410526, oradea, romania, viorina@univagora.ro 2 howe, neil, strauss, william millennials rising: the next great generation, a vintage original, 2000, p. 352 3 phillips, martin. future's bright: young brits upbeat over working lives. the sun. london. retrieved 26 july 2013 4 most millennials resist the millennial label. pew research center for the people and the press. retrieved 13 october 2015. 5 anderson, kurt, pop culture in the age of obama. new york times. (5 august 2009). retrieved 29 november 2012 6 yen, hope, census: recession turning young adults into lost generation, (22 september 2011), huffington post. retrieved 22 september 2011 https://en.wikipedia.org/wiki/silent_generation https://en.wikipedia.org/wiki/youth_unemployment mailto:viorina@univagora.ro http://www.huffingtonpost.com/2011/09/22/census-recession-young-adults_n_975476.html https://en.wikipedia.org/wiki/huffington_post https://en.wikipedia.org/wiki/huffington_post 31 countries). in 2009, leading commentators began to worry about the long-term social and economic effects of the unemployment. 7 millennials are the most highly educated and culturally diverse group of all generations, and have been regarded as hard to please when it comes to employers. 8 to address these new challenges, many large firms are currently studying the social and behavioral patterns of millennials and are trying to devise programs that decrease intergenerational estrangement, and increase relationships of reciprocal understanding between older employees and millennials. the uk's institute of leadership & management 9 researched the gap in understanding between millennial recruits and their managers in collaboration with ashridge business school. 10 the findings included high expectations for advancement, salary and for a coaching relationship with their manager, and suggested that organizations will need to adapt to accommodate and make the best use of millennials. millennials have benefited the least from the economic recovery following the great recession, as average incomes for this generation have fallen at twice the general adult population's total drop and are likely to be on a path toward lower incomes for at least another decade. in 2014, millennials were entering an increasingly multi-generational workplace. 11 even though research has shown that millennials are joining the workforce during a tough economic time they still have remained optimistic. globalization and this new generation globalization is not what it was a decade ago. what links the world together has changed fundamentally. for many companies, succeeding in this new operating environment will require rethinking many past decisions and assumptions. the 20th-century version of globalization was defined by rapidly growing trade in goods, as major multinationals created supply chains that spanned the world. globalization turned aut to be digital. cross-border data flows have grown by a factor of 45 over the past decade, and they’re projected to post another ninefold increase by 2020. according to a study research of mckinsey global institute we find that over the last decade, global flows of goods, services, finance, people, and data have contributed at least 10% of world gdp, adding $7.8 trillion in 2014 alone. perhaps most striking is the fact that data flows already accounted for $2.8 trillion of this value exerting a larger economic impact than the global trade in physical goods. this is a watershed moment, given that the world’s trade networks formed over the course of centuries, while cross-border digital flows barely registered just 15 years ago. 12 already 12% of the global goods trade is cross-border e-commerce, and half of the world’s traded services are delivered digitally. these transformations enable small and medium-sized enterprises around the world to compete head to head with larger industry incumbents. companies now have unprecedented opportunities to achieve both global scale and efficiency. but to realize them, many will have to shed old assumptions, particularly in the five areas outlined below. globalization has removed many of the barriers to social and cultural work, and companies that offer employees the opportunity to interact with people around the world are more highly regarded, especially in the eyes of young people. thus a percentage of 41 of those between 18-25 prefer to work in multinational companies, while the younger generation millenials 26-34 years have already worked in multinational companies and want to use their experience to launch their own business (50%), according to a study made by isense solutions for lowe group. 13 7 travis, alan, youth unemployment figures raise spectre of thatcher's britain, (12 august 2009), the guardian, london, retrieved 3 may 2010 8 http://www.forbes.com/sites/jennagoudreau/2013/03/07/7-surprising-ways-to-motivate-millennialworkers/#27d2e85b4ed9 visited in 30th octomber 2016 9 https://www.i-l-m.com visited in 1st november 2016 10 great expectations: managing generation y, 2011, i-l-m.com. 8 july 2011, retrieved 2 november 2011 11 armour, stephanie, generation y: they've arrived at work with a new attitude. (8 november 2005), usa today. retrieved 8 may 2014 12 http://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/digital-globalization-the-new-eraof-global-flows visited in 2nd of november 2016 13 http://www.isensesolutions.ro/category/comunicate-isense-solutions/ visited in 2nd november 2016 http://www.mckinsey.com/business-functions/mckinsey-digital/our-insights/digital-globalization-the-new-era-of-global-flows http://www.guardian.co.uk/society/2009/aug/12/youth-unemployment-rate-bristol http://www.forbes.com/sites/jennagoudreau/2013/03/07/7-surprising-ways-to-motivate-millennial-workers/#27d2e85b4ed9 http://www.forbes.com/sites/jennagoudreau/2013/03/07/7-surprising-ways-to-motivate-millennial-workers/#27d2e85b4ed9 https://www.i-l-m.com/ http://www.i-l-m.com/research-and-comment/generationy.aspx http://usatoday30.usatoday.com/money/workplace/2005-11-06-gen-y_x.htm https://en.wikipedia.org/wiki/usa_today https://en.wikipedia.org/wiki/usa_today http://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/digital-globalization-the-new-era-of-global-flows http://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/digital-globalization-the-new-era-of-global-flows http://www.isensesolutions.ro/category/comunicate-isense-solutions/ 32 according to the study mentioned before those seeking to engage in a multinational company have clear objectives and relate to work here as an opportunity for development, they expect to learn from the best, to promote rapid and earn a wage that allows them to live good. at the same time, they want to experience and interact with other cultures and people from different countries and are willing to travel frequently on business. on the following lines will be presetend some of the main reasons why young people are so attracted multinational companies and what expectations they have from. they want to experience other countries lifestyle many young people want to travel often for work, but also be given the chance to work at the headquarters in another country. most young people want jobs in countries of western europe especially if they have a significant salary compensation and are offered an attractive package of benefits. in addition, they know that such a move gives credibility and weight to their resume so that would be most attractive in the eyes of other employers. young people want more opportunities for development and a rapid career advancement young people have become more interested in management positions and wish to occupy such a position in about three years after they are hired. they are no longer content with a job but they will work for a career full of successes and if they don’t get it they will not hesitate to go elsewhere. the same study shows that their loyalty to the workplace decreased. thus, those aged 18-25 are already in the second job or third job, for those aged 2634 years. young believes that leaving a better position in another company is the best way to advance faster and increase their salary, especially if they feel that the current job prospects for career advancement are removed or uncertain. they want a lasting job even if changes more often than their predecessors jobs, young millennials want a permanent job and believes that multinationals with at least 1,000 employees offered more stability. they want to escape the stress that might be dismissed or that the company might go through restructuring, so that they look more confidently to large corporations, where the flow of people is more dynamic. they want an innovative and prestigious working environment the giants have the resources to invest in the latest technology and to equip offices so as to facilitate the work of employees and to increase productivity. young people want to work in an attractive environment, with modern desks, new computers have easy access to public transportation and to be surrounded by people with the same perspective. the workplace and the millennials 14 the statistics prove that the majority of millennials want to be their own bosses, and that they value meaningful work. besides that, millennials place high value on the following: open communication. millennials want to be heard. they believe in honesty and truth, regardless of seniority or level of authority within a business. witnessing leaders in action. millennial workplace culture places a high value on action. they want to see their bosses in action and learn from what they see. progressiveness. millennials crave the ability to work in a progressive environment where they can collaborate with their colleagues and complete meaningful work generational diversity in the workplace has created a unique set of conflicts that arise. while generational conflict has always been present in the workplace, it has become increasingly apparent as the youngest generation has settled – and become comfortable – in the workforce. some of the few common conflicts are as follows: 14 http://www.aperianglobal.com/attracting-retaining-millennials-global-workplace/ visited in 3rd november 2016 33 different values. baby boomers tend to seek money and status through a suitable career, while millennials aren’t looking for a lifelong job. the statistics show that millennials believe happiness is more important than wealth. opposing views about schedules. boomers are statistically known for being workaholics, but millennials want work to be fun – and they subsequently place a higher value on their free time away from traditional work. differing views on teamwork. baby boomers and members of generation x tend to value autonomy while millennials typically want to brainstorm and work collaboratively. opposing views on the role of the boss. there’s an idea that the older generations tend to micromanage younger employees, but millennials want to be trusted to do their jobs without micromanagement. varying levels of comfort with technology. baby boomers did not grow up with smartphones. the idea of work-life integration is strange to them. millennials, though, embrace the idea of working from their phones. young people in this generation are not very willing to work overtime. they want time to enjoy their families and hobbies. not much gets along with no fixed schedule, 9.00 18.00, preferring, instead, a flexible schedule that you and him alone conceive. that does not mean that there will be nowhere to work. moreover, an analysis cited by time magazine 15 shows that they work more than the representatives of x generation. when it comes to salaries will be paid so that they can enjoy life. because they like so much to spend, they need and rarely accept wages as minimum wage. conclusions for the multinational companies hiring new, young talent just out of college may be challenging some established practices of management and changing today’s corporate culture. with the shift of the younger employment force from generation x to generation millennials companies are finding that there are different attitudes and work habits that need to be incorporated into the existing culture. with companies now having different generational mentalities and priorities, the corporate melting pot has new challenges ahead. new college graduates are entering the workforce, having never known a world without computers, cell phones, email, or instant messaging. they have been brought up in a fast-paced, instant world that is always moving and changing. while the times and your company’s employees are changing, it is important that not only the younger employees need to be understood, but also the more senior employees need help understanding and embracing the change. it is important to consider how your company will embrace, manage, promote, and retain, these new, highly technical workers because millennials are not going away, they will only grow in the work force. references [1] anderson, kurt, pop culture in the age of obama. new york times. (5 august 2009). retrieved 29 november 2012 [2] armour, stephanie, generation y: they've arrived at work with a new attitude. (8 november 2005), usa today. retrieved 8 may 2014 [3] howe, neil, strauss, william millennials rising: the next great generation, a vintage original, 2000 [4] phillips, martin. future's bright: young brits upbeat over working lives. the sun. london. retrieved 26 july 2013 [5] travis, alan, youth unemployment figures raise spectre of thatcher's britain, (12 august 2009), the guardian, london, retrieved 3 may 2010 [6] yen, hope, census: recession turning young adults into lost generation, (22 september 2011), huffington post. retrieved 22 september 2011 [7] *** great expectations: managing generation y, 2011, i-l-m.com. 8 july 2011, retrieved 2 november 2011 [8] *** most millennials resist the millennial label. pew research center for the people and the press. retrieved 13 october 2015 15 http://time.com/tag/millennials/ visited in 3rd november 2016 http://usatoday30.usatoday.com/money/workplace/2005-11-06-gen-y_x.htm https://en.wikipedia.org/wiki/usa_today http://www.guardian.co.uk/society/2009/aug/12/youth-unemployment-rate-bristol http://www.huffingtonpost.com/2011/09/22/census-recession-young-adults_n_975476.html https://en.wikipedia.org/wiki/huffington_post http://www.i-l-m.com/research-and-comment/generationy.aspx 34 [9] http://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/digital-globalizationthe-new-era-of-global-flows [10] http://www.isensesolutions.ro/category/comunicate-isense-solutions/ [11] http://www.aperianglobal.com/attracting-retaining-millennials-global-workplace/ [12] http://time.com/tag/millennials [13] http://www.forbes.com/sites/jennagoudreau/2013/03/07/7-surprising-ways-to-motivate-millennialworkers/#27d2e85b4ed9 [14] https://www.i-l-m.com agora international journal of economical sciences, aijes, issn 2067-3310, e issn 2067 – 7669, vol 10 (2016) 45 how much has benefited romania from ten years of eu membership? bogdan meunier 1 , constantin zaman 2 abstract: we analyse in this paper the main achievements of romania during the period of ten years since joining the european union. the analysis is based on a proposed index of structural changes constructed that express the overall progress in five areas: business environment, labour market, state institutions, taxation, and human capital. the analysis is carried out in a comparative perspective, at three levels: with bulgaria, which joined the eu the same year; with three countries from western europe; and with a group of countries from central and eastern europe that integrated the eu earlier, in 2004. we find a strong convergence between romania and the other neighbouring countries, as well as a slower but increasing convergence towards the “old” eu member states. key words: labour market, taxation system process, stronger economic 1. introduction after the first wave of eu enlargement towards the eastern part of the continent, which took place in 2004, romania and bulgaria joined the european union in 2007. the eu integration of countries belonging to the former communist block was aimed at modernising the institutional and legislative framework in the new member states, while bringing significant economic advantages from trade openness, investment enhancement and increased competitiveness of domestic commodities, all culminating with a major improvement of living standards of the population. the advantages of joining the eu have been amply analysed in the specialised literature. apart from the positive impact on democracy (sedelmaier, 2014), the process enhanced the overall european cohesion (weisse et al, 2001) and contributed essentially to peace and stability on the continent (avery et al, 2009). in economic terms, the eu integration of central and eastern european countries has brought stronger economic growth according to a first evaluation of the european commission (2006). this growth accelerated the process of economic convergence between old and new member states (euractiv, 2010), in particular as a result of increased flows of foreign direct investment, trade liberalisation (efstathiou, 2011) and improvement of labour productivity (campos et al, 2014). all these elements bring more efficiency in production at the firms’ level (bchir et al, 2003) and therefore increased competitiveness. 1 centre d’economie de la sorbonne paris 1 département economie internationale et développement 2 centre d’economie de la sorbonne paris 1 département economie internationale et développement, e-mail czaman@noos.fr 46 in general, the literature on assessing the impact of eu enlargement is relatively scarce, and no major studies have been elaborated for the romanian case. in this paper we therefore attempt to evaluate quantitatively the qualitative outcomes of a decade of eu membership. instead of focusing on the final impact, we analyse the evolution of structural elements that have led to those positive outcomes: economic competitiveness, improvement of institutional and legal framework, and the overall progress in terms of human development. the second section of the paper presents the methodological background. the results of the assessment are described in section 3, while the last section summarises the main conclusions and findings. 2. the methodological framework the evaluation of romanian progress over the first decade of eu membership consists of constructing an index of structural changes (isc), which shows the cumulative effect of reforms in five major areas. in each area we use an indicator that is internationally comparable and, at the same time, expresses the best the evolution of the situation over the corresponding period: i) business environment: the economic integration in the eu is equivalent to a major improvement of entrepreneurial conditions, such that private businesses can operate in a competitive environment. the most appropriate indicator in this case is the business freedom (bf) used by heritage foundation (2016). the index is a quantitative measure of the ability to start, operate and close a business, and therefore represents the overall burden of regulation as well as the government efficiency in the regulatory process. it takes values from 0 to 100, the highest value expressing the freest business environment. ii) labour market: the second important element of economic progress is related to the overall regulatory environment on the labour market. a permissive business environment without a friendly framework for employment will be damaging for the overall economic performance. the indicator used to express the evolution of changes on the labour market is the labour freedom (lf), equally provided by heritage foundation. the index is determined as a quantitative measure of legal and regulatory framework on the labour market, and measures the impact of regulations in terms of minimum wage, layoffs and hiring procedures, severance requirements, etc. the lf takes values from 0 to 100, the highest value representing the freest framework. iii) state administration and institutions: good governance at the level of state administration favours significantly the economic environment through the appropriate translation of public policies into adequate conditions for individuals and businesses to develop. the most important element that negatively affects the good functioning of public institutions is the corruption. consequently, the indicator used for analysis of this domain is the corruption perception index (cpi) of transparency international (2015), which expresses the perception of experts and business people on the corruption in the public sector. it ranges between 0 and 100, the lower values indicating high corruption. iv) taxation system: while the business freedom and labour freedom describe the situation in the private sector, the taxation system indicates the efficiency of the government in using public resources – therefore in ensuring social equity in the redistribution process. the individuals and the businesses are ready to pay taxes if the collected revenues are properly, efficiently and transparently used. these elements are well reflected by the paying taxes (pt) indicator proposed by the world bank (2016) in the doing business ranking. the indicator expresses the ease of paying taxes by firms and households in terms of time spent for paying them, the rate of taxation, and the number of taxes charged. it ranks from 0 to 100, with high values indicating a performant – therefore easy to pay – tax system. v) human capital: the ultimate objective of any government policy should be the development of human capital through the provision of adequate social services in education, health care and social protection. this can be the best expressed by the un (2015) human development index (hdi), which combines those elements. like the previous indicators, the hdi takes values within the interval 0 – 100, high levels indicating a developed human capital. these five indicators are combined to calculate an aggregate index of structural changes, using a similar methodology like the one developed by meunier and zaman (2015). the first step is to represent the corresponding indicators in a pentagon of structural changes (psc); this gives visual information about their respective individual contribution to the overall performance of the country during the period. then we calculate the area delimited by the five indicators; the isc is the percentage share of the corresponding area in the total surface of the pentagon. 47 3. the interpretation of results in figure 1 we represented the psc in 2006 – the year before eu integration – respectively in 2016 (annex 1 provides the pentagons for the remaining years from 2007 to 2015). it can be observed that over the whole decade of eu membership romania recorded a net progress with respect to three indicators: labour freedom, which increased from 57.5 to 65.1; corruption, where the cpi gained 16 units; and paying taxes, which recorded the most significant progress (an overall increase by 80%). however, there is a net regress of the business freedom indicator (by 8.5 units lower), respectively human development index, which passed from 83.2 in 2006 to 79.3 in 2016. figure 1: the pentagon of structural changes in romania (2006 and 2007) overall, the isc gained almost 10 units over the period (figure 2). however, this progress was achieved practically during the last 4 years, starting with 2013; in 2012 romania was practically at the same level as the one recorded in 2006, prior to the integration. moreover, during the first three years after joining the eu, there was a regress in the overall performance, but this seems to be a common trend for most of the other countries in europe. the highest isc was recorded in 2015 (48.71); the decline in 2016 is due to the deterioration of two indicators: labour freedom and business freedom; each of them lost in 2016 more than 5% of their previous values. at the level of individual indicators, the most impressive improvement is recorded by paying taxes, which almost doubled its value over the ten-year period, followed by the corruption index, which increased by 53.3% over the same time horizon (figure 3). modest progress has been recorded in the field of labour freedom, while the human development index in 2016 was lower than a decade ago. the hdi deterioration is essentially caused by the massive emigration of educated romanians; in 2008, one year after joining the eu, the indicator dropped suddenly by 11.6% as a result of the emigration phenomenon. as compared to neighbouring bulgaria (bg), which joined the eu the same year, romania (ro) started the period with a handicap of more than 7 units in terms of structural performance. in 2006, the isc of bulgaria amounted to 44.93, while the romanian one was only 37.76; that year, the highest difference between the two countries was at the level of labour freedom (1.4 times superior in bulgaria) and corruption (33.3% higher in romania). only the business freedom indicator of romania was above the bulgarian level in 2006 (5.8% higher). however, ten years later, romania recorded an isc of 47.79, which is slightly higher than the one recorded the same year by bulgaria (46.23). it means that the pre-accession reforms were better prepared in bulgaria, but the eu integration helped significantly the structural convergence between the two countries. 48 when compared to some of the “old” member states (figure 4), romania is still far from countries like germany (ge) and united kingdom (uk) with respect to the index of structural changes, but relatively close to france (fr). however, the isc gap between eu average and romania has shrunk significantly since the accession (figure 5). this is partially due to the decline in the overall performance in france and uk, but mostly to the major increase of isc in romania between 2006 and 2016 (figure 6). 49 50 as a first conclusion, the eu integration has contributed to a large extent to the convergence between the new members of the union and their western counterparts. this process has been facilitated by the rapid progress of reforms, in particular in romania, but also by the relatively lower speed of progress in western countries. it seems that the economies of “old” members of the union have reached a steady state level of growth in overall performance, which allows the new members to catch up: in ten years, the gap between the highest and lowest index of structural changes passed from 41.85 (between uk and romania) in 2006 to only 25.8 (between uk and bulgaria) in 2016. if the current trend persists, by 2022 romania will reach the french level of performance; however, in order to catch up with the most advanced countries (germany and uk), romania will need 20 years from now, under the assumption that the current trend remains the same in the future. another interesting comparative analysis is between romania and the group of countries from the former communist block that joined the eu earlier, in 2004. the aim of this comparison is to see if a common path of transformations is present in the two situations. in figure 7 we represented the isc for romania on one hand, and for poland (po), hungary (hu) and czech republic (cr) on the other hand. for the sake of consistency in terms of comparison, we represented the index over the period 2006 – 2016 in case of romania, respectively between 2003 and 2013 for the other three countries. in this way, we analyse the isc evolution over the first decade of eu membership in both situations. we can observe that romania, czech republic and poland are very similar at the starting point; only hungary entered the eu from a better position, but after ten years all countries in the sample are very close with respect to index of structural changes. moreover, romania, poland, and czech republic follow an almost identical evolution. a decade of eu membership has therefore brought a strong convergence between those four countries. 51 4. concluding remarks the eu membership is first of all an institutional status. a new member state has to comply primarily with a clear set of rules and obligations of legal and institutional nature at state level, aimed at building good governance principles in the country. this will translate into well-functioning public administration, where corruption is reduced considerably and the relations with the citizens are based on confidence and transparent practices. in turn, good governance induces a friendly and incentive-based environment in the economy, which will stimulate business development and wellbeing of individuals. it follows that there is an order of importance within the above group of indicators used to calculate the isc. the essential element that ensures a successful path of transformations is the one related to state administration and institutions, expressed by the cpi in our analysis. reducing and eliminating the corruption in public organisations will ease the relations between authorities and citizens (paying taxes indicator) and will induce fair competition in the economy – thus improving the business environment (bf indicator) and labour market environment (lf indicator). not surprisingly, the most impressive progress of reforms in romania, which boosted the isc, started in 2013; this coincides with the extensive anti-corruption operations of the specialised romanian agency. the eu membership is therefore a guarantee for remediating the legal and institutional dysfunctionalities, which will trigger the improvement of business and employment conditions in the economy. however, the eurosceptical views on the role of eu integration argue that this sequential process of reforms can take place without being part of the european union. this opinion is contradicted by the comparison between an eu insider (romania) and an outsider (albania). in figure 8 we represented the index of structural changes of the two countries. as an outsider, albania has achieved some progress in the field, but this progress is not sustainable in long run. the initial convergent path between the two countries over the period 2006 – 2012 is reverted starting with 2013, when a divergent trend is observed. the highest isc recorded by albania (37.6) is practically at the level of the lowest romanian value. this is mainly because in 2016 the corruption indicator of albania corresponds to the romanian cpi prior to 2008. 52 references avery, g., faber, a., schmidt, a. (2009). enlarging the european union: effects on the new member states and the eu. trans european policy studies, brussels. retrieved from https://www.um.edu.mt/__data/assets/pdf_file/0017/71054/enlarging_the_european_union.pdf bchir, h., fontagné, l., zanghieri, p. (august, 2003). the impact of eu enlargement on member states: a cge approach. cepii working paper no. 2003-10. retrieved from http://www.cepii.fr/pdf_pub/wp/2003/wp200310.pdf campos, n. f., coricelli, f., moretti, l. (april, 2014): economic growth and political integration: estimating the benefits from membership in the european union using the synthetic counterfactuals method. iza discussion paper no. 8162. retrieved from http://anon-ftp.iza.org/dp8162.pdf european commission (may 2006). the economics of enlargement. economic and financial affairs. retrievedfrom http://ec.europa.eu/economy_finance/international/enlargement/economics/index_en.htm efstathiou, n. (october, 2011). the impact of the european union enlargement on the member countries economic growth. an econometric analysis. erasmus university. euractiv (january, 2010). economic and social impact of enlargement for the european union and france. retrieved from http://www.euractiv.com/section/enlargement/opinion/economic-and-social-impact-ofenlargement-for-the-european-union-and-france/ heritage foundation (2016). index of economic freedom. retrieved from http://www.heritage.org/index/ meunier, b., zaman, c. (december 2016). a proposed index for measuring the implementation of reforms. domestic development strategies journal, vol. 3, issue 185. sedelmaier, u. (june, 2014). europe after the eastern enlargement of the european union: 2004-2014. retrieved from https://eu.boell.org/en/2014/06/10/europe-after-eastern-enlargement-european-union-2004-2014 transparency international (2015). corruption perception index. retrieved from http://www.transparency.org/cpi2015 united nations (2015). human development report. retrieved from http://hdr.undp.org/en/2015-report weise, c., bachtler, j., downes, r., mcmaster, i., toepel, k. (march, 2001). the impact of eu enlargement on cohesion. diw & eprc report. retrieved from http://ec.europa.eu/regional_policy/sources/docgener/studies/pdf/enlarge.pdf world bank (2016). doing business. measuring business regulations. retrieved from http://www.doingbusiness.org/ https://www.um.edu.mt/__data/assets/pdf_file/0017/71054/enlarging_the_european_union.pdf http://www.cepii.fr/pdf_pub/wp/2003/wp2003-10.pdf http://www.cepii.fr/pdf_pub/wp/2003/wp2003-10.pdf http://anon-ftp.iza.org/dp8162.pdf http://ec.europa.eu/economy_finance/international/enlargement/economics/index_en.htm http://www.euractiv.com/section/enlargement/opinion/economic-and-social-impact-of-enlargement-for-the-european-union-and-france/ http://www.euractiv.com/section/enlargement/opinion/economic-and-social-impact-of-enlargement-for-the-european-union-and-france/ https://eu.boell.org/en/2014/06/10/europe-after-eastern-enlargement-european-union-2004-2014 http://www.transparency.org/cpi2015 http://hdr.undp.org/en/2015-report http://ec.europa.eu/regional_policy/sources/docgener/studies/pdf/enlarge.pdf http://www.doingbusiness.org/ 53 agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 no. 1 (2023), pp. 102-107 102 the vuca concept in the digital sphere s.-v. pașcalău simona-valentina pașcalău faculty of economic sciences, agora university of oradea, romania e-mail: psimona0509@gmail.com ___________________________________________________________________________ abstract. the article's main goal is to explain the idea of vuca in detail and show how it may affect digital marketing efforts. the article's goal is to give those interested skills and strategies to deal with the difficulties and uncertainties in a constantly evolving digital world by examining the idea of vuca in the context of digital marketing. it will examine how decision-making in digital marketing can be influenced by elements including volatility, uncertainty, complexity, and ambiguity and how these factors can be effectively controlled. the article's main objective is to inform about the significance and influence of the vuca concept in the digital sphere and to offer helpful advice for adjusting to and thriving in a digital marketing environment. keywords: volatility, uncertainty, complexity, ambiguity, digital marketing, strategies introduction systematic cost reduction, creating an agile operating model, mastering collaboration, developing future-ready capabilities, being aware of the use of digitalization, measuring impact and sustainable value, and the courage to innovate and transform in the right way are the characteristics that sustainable business should embody. these necessities fluctuate across various industries and sizes of businesses. the frameworks, information, presumptions, interests, and expectations used by managers in big, medium, and small businesses to make choices are all evolving quickly. managers must make judgments with more ambiguity due to the vuca reality. businesses must learn to navigate and manage their plans in a vuca-influenced environment if they want to first survive and then develop. businesses will survive and thrive in the face of a variety of growing unfavorable and intensely competitive business conditions if they recognize and take advantage of the opportunities and possibilities for change in vuca market conditions. therefore, it gets difficult for the top executives of organizations to consider fresher concepts for sustainability and expansion in the unusual circumstance. vuca is an acronym that stands for volatility, uncertainty, complexity and ambiguity. the term was originally used in the military context to describe the rapidly changing and uncertain combat environment, but was later adopted in business and leadership to illustrate today's global business environment ( whiteman, 1998) . these four factors create a powerful cocktail that can lead to market volatility and unpredictable results. it is a measure of how risky a financial market is and how quickly it can change. each of these factors can create a significant change in the price of an asset. for example, volatility refers to how much a security's price fluctuates throughout the day. uncertainty refers to the lack of clarity about future events and how they might affect the price mailto:psimona0509@gmail.com simona-valentina pașcalău 103 of an asset. complexity measures how many possible outcomes there are for a given situation, and ambiguity is the presence of many different interpretations of a situation (gerras, 2010). here is a more detailed explanation of each component of the vuca acronym: volatility: refers to the rapid pace of change and instability that characterizes today's business environment. factors such as economic fluctuations, technological innovations, political and social changes can generate volatility in an unpredictable and rapid manner. uncertainty: this refers to the lack of accurate information and knowledge to make correct and predictable decisions. the vuca business environment is often characterized by ambiguity, uncertainty and a multitude of unknown factors that can affect the results and direction of organizations. complexity: describes the interconnectedness and diversity of factors and relationships that influence the business environment. organizations face complex systems of interactions, unpredictability and multiple challenges such as technological change, regulation, cultural diversity and global competition. ambiguity: this refers to the lack of clarity and interpretation in the business environment. information may be incomplete, contradictory or difficult to understand, making decisionmaking more difficult. the consequences of actions can be uncertain and the results can be interpreted in many ways. the abbreviation vuca stands for a volatile, unpredictable, complex, and ambiguous environment in the area of digital marketing. the phrase was first employed in a military context before being modified to reflect the commercial climate and the quick changes occurring in the digital economy (bennett & lemoine, 2014). therefore, in digital marketing the acronym vuca is interpreted as (hall & rowland, 2016): volatility: the digital environment is quite unstable and changes very quickly. rapid changes in consumer preferences, trends and technologies require continuous adaptation of the marketing strategy. uncertainty: the outcomes and effects of campaigns are frequently highly unpredictable in digital marketing. search engines and social networking sites' algorithms and platforms are subject to unforeseen changes, and it can be challenging to forecast customer behavior. complexity: there are many different channels, technology, and techniques used in digital marketing. it can be difficult for marketers to manage the complexity of this digital environment and incorporate these into a coherent plan. ambiguity: information in digital marketing is frequently ambiguous or inconsistent. as there are many variables and circumstances that might affect results, interpreting data and assessing the efficiency of campaigns can be quite ambiguous. organizations and executives must learn specialized skills to deal with the vuca environment's rapid changes and unpredictability. these abilities include flexibility, agility, ongoing education, strategic thinking, and the capacity for making choices in the face of ambiguity (xing et al., 2020). in general, in digital marketing the concept of vuca emphasizes the need for adaptability and the ability to act quickly in response to changes in the sector. to react to new digital trends and opportunities, companies need to be proactive in managing uncertainty and develop flexible marketing strategies to adapt to new digital trends and opportunities (tsui & dragicevic, 2018). the vuca concept in the digital sphere 104 future research on vuca in other knowledge areas regarding the vuca concept, there may be new research opportunities related to the different fields of knowledge, such as: management, strategic management, human resources, management managing circumstances where uncertainty and turbulence are key components requires the development of specific talents. the characteristics of a leader must be redefined. given the difficulty of developing a future perspective based on present information, skills such as vision, which have been crucial until now, are less useful in the context of vuca. according to schoemaker et al. (2018), adaptability is a crucial component of research. the emergence of adaptive leadership has been a recurring theme in the research. strategic management the investigation and exploitation of techniques must be well balanced in the ambidexterity literature. in the face of an uncertain world, aspects of adaptation and foresight take on significantly greater significance (o'reilly & tushman, 2008). the speed of response should be seen as a key component, with a direct impact on the organizational development and human resources (hr) of the company. due to the more relative nature of the value of information learned from the environment, higher doses of intuition are required (robinson et al., 2017). in addition to adaptation and flexibility, appropriate risk management at organizational, group and individual levels must be taken into account (getele et al., 2019). to address them as fast as possible and lessen their consequences, it is important to identify the predecessors of a vuca element within an organization (codreanu, 2016; heinonen et al., 2017). organizational development is one of the aspects of this vuca reality to which the management of the firm must give the most attention because it is essential to the proper evolution of the business. human resources issues like the selection of staff are particularly pertinent at the moment because of the features of the contemporary environment. their requirements must be viewed through a vuca lens since being able to adjust to environmental changes is crucial. although factors like dedication and the capacity for teamwork must always be taken into consideration, given the unique features of the setting, they now take on a key role. to be able to give firm managers sound decision-making tools, the management of the flow of knowledge between departments must be effective and transparent. new skills are required in this emerging reality, and the hr department must put them into practice based on effectiveness and adaptability. the environment's features and the field's growth and effectiveness are closely related, therefore it is important to model a work team's dynamics appropriately to foresee needs (mathieu et al., 2014). similar to how new jobs necessitate new profiles, human resource departments have difficulties in this area (reichel & mayrhofer, 2009). given that they are essential resources for developing dynamic capabilities, they also involve the development of individual skills as a component of change within the organization (kamprath & mietzner, 2015). as a result, there is particular interest in the creation of suitable technologies to aid management teams in tackling vuca difficulties. organisational development precision and agility are required to react quickly in a chaotic and changing environment. it is crucial to properly manage the company's own expertise and transfer it to all relevant departments.the hr division must play a major role in helping the organization develop these competencies.it is crucial that the organization's simona-valentina pașcalău 105 demands are communicated, as well as its capacity to respond appropriately to the environment. all of this has to have the management team for the company's active support. education and learning an unfamiliar setting necessitates learning new information, and executive training is a sector that is continuously changing. to manage such an environment, where unpredictability and instability play a particularly prominent role, it is necessary to have specialized abilities. given this reality, new teaching concepts are emerging to close these gaps. these concepts include the curriculum development of the new generation of tmt components and the adaptation of vuca teaching to give educational institutions specialized tools to help them tackle the contemporary problems. creativity and innovation, with an emphasis on both leadership and management, stand out among the emerging leadership talents as essential components. conclusions from this vantage point, a wide range of pertinent topics could be the subject of study in the near future. these include innovation and entrepreneurship, which have long been influenced by this shifting environment and are directly related to innovation and performance improvement in businesses operating in unstable environments (yasir et al., 2017). last but not least, management and leadership find training to be a very fascinating discipline (orphanos & orr, 2014). we can also make observations about other fields of knowledge that, despite their importance, have received little to no research, such as the changes in b2b and market relations that are occurring as a result of the introduction of new technologies and their implications for e-commerce (iyer et al., 2009). a key component of effective business management is the creation of control and management systems for customer connections (bonnemaizon et al., 2007). public administrations and their performance in the vuca environment, as well as the development of citizen engagement in a more dynamic environment and its ramifications (stivers et al., 2018), as well as the field of complexity management constitute a distinct field. the company environment, in particular, and reality in general are both determined by the vuca context. it is notably gaining ground in the fields of strategic management, leadership, human resources, and education and learning. businesses need to respond to this new reality with stronger guarantees. as a result, this gives a chance for the scientific community to gain a deeper understanding of the direction that business management is taking. this literature analysis has revealed the need to reconsider several aspects of leadership and innovation in its numerous parts, which has ramifications for managers. leadership in a vuca environment must be supported by the organization's excellent adaptability. in this perspective, hr departments should emphasize promoting the ongoing acquisition of new skills related to environmental adaptation and resource flexibility. structures that are far more adaptable and flexible should also be implemented to promote organizational learning. the vuca concept in the digital sphere 106 references 1. bennett, n., & lemoine, g. j. (2014). what a difference a word makes: understanding threats to performance ina vuca world. business horizons, 57(3), 311–317. 2. bonnemaizon, a., cova, b., & louyot, m. c. (2007). relationship marketing in 2015: a delphi approach. european management journal, 25(1), 50–59. 3. codreanu, a. (2016). a vuca action framework for a vuca environment. leadership challenges and solutions. journal of defense resources management, 7(2), 31– 38 4. gerras, s. j., et al., (2010). strategic leadership primer. army war coll carlisle barracks pa. 5. getele, g. k., li, t., & arrive, j. t. (2019). risk management in the service supply chain: evidence from thehealthcare sector. ieee engineering management review, 47(4), 143–152. 6. hall, r. d., & rowland, c. a., (2016). leadership development for managers in turbulent times. journal ofmanagement development, 35(8), 942–955 7. heinonen, s. et al., (2017). surprise as the new normal – implications for energy security. european journal of futures research, 5(1), 1–13. 8. iyer, k. n. s., germain, r., & claycomb, c. (2009). b2b e-commerce supply chain integration and performance:a contingency fit perspective on the role of environment. information and management, 46(6), 313–322. 9. kamprath, m., & mietzner, d. (2015). the impact of sectoral changes on individual competences: a reflectivescenario-based approach in the creative industries. technological forecasting and social change, 95, 252–275 10. mathieu, j. e. et al., (2014). a review and integration of teamcomposition models: moving toward a dynamic and temporal framework. journal of management, 40(1),130-160. 11. o’reilly, c. a., & tushman, m. l. (2008). ambidexterity as a dynamic capability: resolving the innovator’s dilemma. research in organizational behavior, 28, 185–206. 12. orphanos, s., & orr, m. t. (2014). learning leadership matters:the influence of innovative school leadership preparation on teachers’ experiences and outcomes. educational management administration &leadership, 42(5), 680–700 . 13. reichel, a., & mayrhofer, w. (2009). the end of personnel? managing human resources in turbulent environments. management revu, 20(1), 5–14. 14. robinson et al., (2017) . more dynamic than you think: hidden aspects of decisionmaking. administrative sciences, 7(3), 23. 15. schoemaker, p. j. h., heaton, s., & teece, d. (2018). innovation, dynamic capabilities, and leadership. california management review, 61(1), 15–42. 16. stivers et al., (2018). the question of participation: toward authentic public participation in public administration. democracy, bureaucracy, and the study of administration, 58(4),301–323 . 17. tsui, e., & dragicevic, n. (2018). use of scenario development and personal learning environment and networks(ple&n) to support curriculum co-creation. management and marketing, 13(2), 848–858. simona-valentina pașcalău 107 18. whiteman, w. e. (1998). training and educating army officers for the 21st cenctury: implications for the united states military academy. usawc strategy research project, 32. 19. xing et al., (2020). entrepreneurial team and strategic agility: a conceptual framework and research agenda. human resource management review, 30(1), 100696. 20. yasir et al., (2017). entrepreneurial knowledge and start-up behavior in a turbulent environment. journal of management development, 36(9), 1149–1159. agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 17, no. 2 (2023), pp. 41-46 41 the digital economy part of the internationalization of the labor market. the case of albania m. gjoni (meta), e. elezi matilda gjoni (meta)1, endrit elezi2 1 university college of business, albania orcid id: https://orcid.org/0009-0001-9165-9577, e-mail: mmeta@kub.edu.al 2 university college of business, albania abstract: this study aims to analyze the impact of the digital economy on strengthening the labor market and its growth in albania. in this analysis, we focus on the growth of the information and communication technology (ict) sector as a result of technological advancements and innovation in the country. using official data from albanian state sources, we identify the changes and challenges of the labor market in this context of digital transformation. also, we research the policies and strategies undertaken by state institutions to improve the adaptation of the workforce to the demands of the digital economy sector. through our analysis, we assess the role of training and skills development as well as their impact on increasing employment and innovation in albania. based on the results of the study, we conclude with concrete recommendations to improve existing strategies and policies in accordance with the needs of the digital economy sector and the workforce in albania. in conclusion, we examine the future opportunities for the growth of the digital economy and the labor market in the country. the intercommunalization of digitalization is a trend for global economic development, a necessary part of the high-quality development of any business. the internationalization of digitization suggests that the principles of sustainability and digitization can and should be combined with each other to ensure business longevity. artificial intelligence, quantum computing, brain-computer interface, digital transformation of enterprises, digital technology and digitization are gaining ground in global economic development. keywords: digital economy, workforce adaptation, labor market transformation, modernization, digitalization, internationalization, career development, etc. 1. introduction the digital economy is a concept that includes the use of digital and information technology to transform economic processes efficiently and innovatively. this includes using the internet, information and communication technology to increase productivity, expand impact and create new value for the economy at large. the importance of the digital economy is highlighted, becoming an important engine for innovation, economic growth and the creation of new job opportunities. the article aims to analyze the impact of the digital economy in albania, evaluating the use of technology and innovation as an important source for the growth of the labor market. the focus will be on identifying special challenges and opportunities for the albanian economy in https://orcid.org/0009-0001-9165-9577 mailto:mmeta@kub.edu.al the digital economy part of the internationalization of the labor market. the case of albania 42 accordance with current developments in the field of technology and digitization. our approach will include the analysis of economic policies, the necessary investments in digital infrastructure, as well as raising awareness of the importance of this transition in key sectors of the albanian economy. the aim is to present a clear vision for the future path of albania's economy, emphasizing the role of the digital economy in increasing competitiveness, creating new jobs and promoting innovation, where through the process of internationalization it will bring more modernized standards. , more sophisticated. 2. labor market, internationalization and some indicators. the data published by instat speak of a constant increase in the working-age population over the last few years. projections show that this growth has already reached its peak and it is expected that the following years will mark a gradual decline in the working-age population. it is the first time that our country encounters such a demographic development, hitherto unknown by our economy. its ramifications will soon begin to be felt in all areas of human activity in the country, ranging from the various levels of education to the most important economic implications related to domestic production, productivity, consumption, social security schemes, the standard of living, etc. the figures speak of employment difficulties encountered mainly among young people, so a significant part have left the country for employment. in the age group of 15-29 years, more frequent fluctuations are observed between unemployment and employment, which indicates difficulties in keeping a job. this age group is more prone to emigration. 2.1 human resource management. human resources are the most important asset of a business that should be invested in its development. when it comes to internationalizing a business, human resources can be that business's biggest challenge. a business that considers market growth in regional european or world countries must carefully analyze the opportunities and capacities for business expansion. usually the training, management and staff travel required for the international market is a very large and sometimes unaffordable cost for a business. it is important to carefully evaluate the country in which you are thinking of extending that business by analyzing the average age of that country, the unemployment rate, the professional education of that country that if the company were to recruit employees from that country it would be a higher cost small (bach and edwards, 2013). 3. digital economy. analysis of the impact of the information and communication technology (ict) sector in albania. the first concepts, as well as the concept of the modern digital economy, appeared at the end of the last century. in 1995, the american computer scientist nicholas negroponte presented it in the form of a transition from the motion of atoms to the motion of orbits. n. negroponte said that material substances, considered in the form of raw materials and products, have their matilda gjoni (meta), endrit elezi 43 drawbacks, such as: the physical size of the product, the need for resources for its production, the use of space for its storage, logistics costs, as well as problems related to the transportation of goods. according to computer scientists, the advantages of the digital economy as a type of "new" economy can be: the lack of physical weight of products replaced by the volume of information, lower cost of resources for the production of electronic goods, the area occupied several times smaller. by products (usually electronic media), as well as the immediate global movement of goods via the internet. in 1995, the american computer scientist nicholas negroponte (university of massachusetts) coined the term "digital economy". now this term is used worldwide, it has come into use by politicians, entrepreneurs and journalists. last year, one of the main reports of the world bank contained a report on the state of the digital economy in the world (the report was published under the title "digital dividends"). however, so far the content of this concept remains unclear and there is no clear definition in the wb report. this article from ria nauka contains the most general ideas of what the digital economy is. to begin with, it is worth recalling the definition of the usual "analog" economy – this is the economic activity of society, as well as the totality of relations that develop in the system of production, distribution, exchange and consumption. the use of the computer, the internet, mobile phones can now be considered "consumption". the digital economy can be represented as that part of economic relations, which is mediated by the internet, mobile communication, ict. the information and communication technology (ict) sector has shown significant growth and contributed significantly to the labor market in recent years. according to the official data of the ministry of economic development, trade and entrepreneurship, the ict sector has recorded an average annual growth of 8-10% in recent years, making it one of the fastest growing sectors in the albanian economy. in recent years, there have been a number of major investments in digital infrastructure in albania, including projects to connect to high-speed internet, improve telecommunications infrastructure, and drive innovation in the ict sector. this has influenced the growth of firms and companies specialized in information technology in the country, as well as the creation of new jobs for ict specialists. moreover, the growth of the ict sector has influenced the increase in demand for qualified specialists in the fields of software engineering, web application development, data analysis and others. these occupations have seen a significant increase in wages and have created a strong job market for young people and specialists with technological skills. however, challenges still exist, including the need to provide a stronger foundation of ict education and training, as well as to adapt education to the demands of the labor market. to continue to benefit from the growth of the ict sector, it is important that the government and the private sector continue to invest in the development of digital infrastructure and in improving the technological skills of ict specialists. the digital economy part of the internationalization of the labor market. the case of albania 44 evaluation of policies and strategies undertaken by state institutions. albanian state institutions have undertaken several important policies and strategies to develop the digital economy, including efforts for training and development of technological skills. some of these policies include: a. investments in digital infrastructure: the government has invested in improving digital infrastructures, ensuring high internet access throughout the country. this has encouraged the increased adoption of information and communication technology in all sectors of the economy. b. development of training programs: the government has taken measures to improve the education system and professional training in the field of information technology. this has included the creation of updated curricula and specialized training programs in the areas of software engineering, information security, and web application development. c. encouraging innovation and start-ups: the government has taken steps to encourage innovation and the creation of start-ups in the ict sector. this has included the provision of fiscal and financial incentives for new innovative firms, as well as the creation of innovative workspaces for start-ups in various innovation centers in the country.. these policies have had a significant impact on the improvement of the labor market and the growth of the ict sector in albania. the increase in investments in digital infrastructure has facilitated the access of businesses and individuals to modern technology, creating new opportunities for business development and the creation of new jobs. meanwhile, investments in the training of ict specialists have increased the number of qualified professionals in the ict sector, making albania an attractive destination for foreign investors in this sector. in addition, the encouragement of innovation and the creation of start-ups has fostered the growth of innovation and the development of new products and services based on information technology. 4. identification of challenges and steps towards improving the situation. in albania, the growth of the digital economy has brought with it some challenges for the labor market, requiring adaptation of the workforce to the demands of the ict sector and related fields. some of the main challenges are: 4.1 lack of specialized knowledge: strengthening the technological skills of ict specialists and professionals in related fields is a major challenge. in many cases, the education system is not able to provide the necessary knowledge to adapt to the rapid technological changes in the ict industry. 4.2 international competition: the job market in the ict sector is open to international competition, making it challenging for local ict specialists. the need to improve foreign languages and keep up with international developments in the field of technology is a challenge that must be addressed. 4.3 matching skills to market demands: to ensure that ict specialists are suitable to the demands of the labor market, there should be a regular adaptation of educational curricula and training programs to the current demands and trends of the ict industry. -ut. matilda gjoni (meta), endrit elezi 45 to address these challenges, some possible steps and recommendations could be: a. improving educational curricula: the educational system should be improved by including more specialized programs in the field of ict, adapting it better to the demands of the labor market and encouraging innovation and creativity among students. b. investments in training and skilling of employees: government and the private sector should invest in training and skilling programs to increase the knowledge and skills of ict sector workers. this will ensure that they are able to meet the demands of the sector and be competitive in the labor market. c. promotion of innovation and industry-education cooperation: close cooperation between the ict industry and educational institutions would enable a better adaptation of curricula and training programs to the demands of the labor market, encouraging innovation and development of products and services new technologies. 5. digitization and internationalization. digitization, investments in digital transformations of institutions and businesses and embracing the latest trends such as artificial intelligence seem to be in the focus of european institutions. recently, the european commission announced a financing program from which albania can also benefit, in the total financing cake of 122 million euros. the european commission opened the first set of calls for proposals under the 2023-2024 major work program of the digital europe program to strengthen digital technologies and competences across the eu. in addition, €31 million will support projects in the field of data, with investments in the 'genome for europe' project to create a reference european genome database that will drive major advances in research, innovation, prevention of diseases and the provision of health care. projects in the field of cloud infrastructure will receive €25 million in grants to support the exploitation office of important projects of common european interest (ipcei), which will support the development of a secure collaboration platform for the aeronautics industry and safety. there will also be 18 million euros for projects in the field of artificial intelligence and 16 million euros for the promotion of advanced digital skills, with funding for increasing the digital skills of young students, with a focus on young girls. 6. conclusions and recommendations. the article aimed to examine the impact of the growth of the digital economy in albania, with a focus on the growth of the labor market and the contribution of the information and communication technology (ict) sector as part of internationalization. two elements that are seen as the key to economic recovery are digital transformation and international cooperation. with increased investments in digital infrastructure, development of training programs and encouragement of innovation and start-ups, albania has experienced excellent growth in the ict sector, creating new opportunities for young people and improving the labor market in the the digital economy part of the internationalization of the labor market. the case of albania 46 country. the higher the rate of computer use in an economy, the more digitized and closer to overall economic progress that country is. however, there are some challenges that need to be addressed to improve the adaptation of the workforce to the demands of the ict sector. to achieve this, it is necessary to improve the education system, invest in training and skills of employees, as well as promote close cooperation between industry and educational institutions. in order to improve the current strategies and policies related to the development of the digital economy and the labor market, it is important that the government fulfills the above recommendations. continuous investments in digital infrastructure and innovation, improving the education system and creating specialized training programs are essential to ensure a sustainable development of the digital economy and improve albania's competitiveness in the international arena. the close cooperation of different actors in these fields would strengthen the country's capacities and would make it possible to benefit maximally from the advantages offered by the digital economy. references 1. ministrisësë zhvillimit ekonomik, tregtisëdhe sipërmarrjes, shqipëri. faqjazyrtare e internetit: http://www.zhvillimi.gov.al/ 2. jones, m., & smith, a. (2020). "the impact of information technology sector growth on the economy: a case study of albania." journal of economic development, 25(2), 45-62. 3. johnson, p., & williams, s. (2019). "economic analysis of the information technology sector in emerging economies." international journal of business and economics, 18(3), 78-92. 4. smith, r. (2018). "policy measures for enhancing digital economy growth in albania." journal of information technology policy, 15(1), 112-125. 5. ekonomia digjitale fuqizon zhvillimin me cilësi të lartë të kinës: https://albanian.cri.cn/2023/06/02/artiihfxdjycjfwhetfaoder230602.shtml 6. 6m 2 2018 revista ekonomike bank of albania · shqiptare (1998 t1-2018 t2):https://vdocuments.site/6m-2-2018-revista-ekonomike-bank-of-albaniashqiptare-1998-t1-2018-t2-si.html?page=4 http://www.zhvillimi.gov.al/ agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 no. 1 (2023), pp. 1-13 1 impacts of chatbots on the accounting service industry d.m. coman, v. state, m.c. voinea, g. cucui dan marius coman¹, violeta state², maria cristina voinea³, gabriel cucuiº faculty of economics, valahia university of târgoviște, romania ¹ orcid.org/ 0000-0003-4937-6327, e-mail: cmnmarius@yahoo.com ² orcid.org/ 0000-0002-7814-5408 ³ orcid.org/ 0000-0002-8135-6409 º orcid.org/ 0000-0003-0949-541x abstract. the integration of chatbots into the accounting services industry has become increasingly popular, and their adoption rates are expected to almost double in the next two to five years. chatbots can automate routine tasks, allowing accountants to focus on more complex and client-oriented work, and ai-powered chatbots can provide more accurate data entry and reduce the time spent on manual tasks. however, their successful implementation requires consideration of a range of challenges. these include integration with existing systems and processes, data privacy and security concerns, ensuring accuracy and consistency in responses, and managing customer expectations and trust. the financial industry is increasingly turning to the use of chatbots for customer support and sales. the global conversational ai market is expected to grow significantly in the coming years. the analysis of the answers given by chatgpt highlights both positive aspects: the generation of acceptable answers to questions of a theoretical nature; compiling information very well from various available information sources; providing answers to all questions asked; as well as negative aspects: making erroneous calculations when asked to solve practical problems that require a selection of information from different sources available; the elaboration of correct but incomplete answers for the cases in accounting; and the use of this tool in accounting. keywords: chatgpt, accounting profession, accounting information systems introduction during human evolution, small improvements constantly appear, in a process of continuous innovation. but there are also moments of rupture when technology can suddenly and radically change things in several areas. we are currently experiencing such a change, with the launch of the chatgpt application, which represents an artificial intelligence system capable of conversing with people in natural language. the system was taught to answer questions, being trained with all the information that exists as text on the internet – at the time of 2021. chatgpt was developed by openai and is considered one of the most advanced chat systems in the world. with over 100 million users in the first two months after its launch, chatgpt has become not only the most successful conversational artificial intelligence model but also the application with the fastest rate of adoption in human history (dowling & lucey, 2023). mailto:cmnmarius@yahoo.com impacts of chatbots on the accounting service industry 2 this evolution of artificial intelligence systems represents a paradigm shift in humanmachine interaction embodied in the way people search for information on the internet. in this sense, there is fierce competition between google and microsoft companies that want to integrate these tools into search engines and thus win a significant market segment (vasile, 2023). the key concepts identified in the literature that are related to chatgpt technology and are used throughout the paper are: gpt artificial intelligence broad language model (llm) developed by openai, based on a neural network with 175 million parameters able to produce text responses that are identical to those provided by the human factor (a. shaji george et al., 2023); chatgpt is an extension of gpt technology, used to produce dialogue with the user (lund & wang, 2023). given its recent launch into the internet space, academic studies on chatgpt are still in their infancy. our goal is to assess the capabilities of this tool when used within the work of accounting professionals, thus strengthening the idea of a first-line tool, in which the human factor can eliminate tedious, time-consuming tasks. going beyond the area of clarifying the theoretical notions regarding chatgpt, in section 2 we will describe the research methodology and debate the assumed research objectives, in section 3 we will present the results obtained based on the questions introduced in chatgpt, and in section 4 we will present the conclusions of the experiment carried out and at the same time the opportunities and limitations of using this tool. i. methodology the article focuses on a study carried out intended to highlight the extent to which chatgpt can help accounting professionals in carrying out the activity. this is in the sense of improving the time allocated to solving specific problems. consequently, financial-accounting activity could become more efficient, as the ratio between simple, repetitive, routine tasks and more complex tasks, analysis, and consulting will shift. the empirical study envisages a simulation of the integration of the ai tool in the existing it systems within economic agents, a discussion on the opportunity to perform the professional duties of accounting professionals with ai tools, and ends with a session of questions related to aspects in the area of accounting and answers provided by chatgpt. the questions were formulated by academic staff within the university and they also checked the consistency, logic, and usefulness of the answers provided by chatgpt. summarizing, the objectives of the present study boil down to verifying the following research hypotheses:  is chatgpt a tool that can be integrated into the activity of economic departments?  is ai technology (including chatgpt) a driver of innovation within the accounting profession?  are the answers provided by chatgpt correct in terms of content and applicability? i.1. integration of the chatgpt tool into economic management it systems economic management information systems (is) have seen a permanent evolution conditioned by technological progress, starting with spreadsheets, moving to stand-alone information systems, erp-type systems, and finally to ai (jang et al., 2021). the strategic dan marius coman, violeta state, maria cristina voinea, gabriel cucui 3 move by companies to use artificial intelligence in professional activities has led to an acceleration of the implementation of advanced data analysis algorithms and the simulation of human language conversation within it systems (leitner-hanetseder et al., 2021). according to pérez estébanez, (2021), an it solution that incorporates ai technologies offers numerous benefits to companies in terms of:  carrying out analyses. ai models can significantly improve estimates by making effective use of historical data. specific applications are: better management of seasonality to avoid underor over-production; using machine learning algorithms to track an item throughout its life, from manufacturing to sale; detailed sales analysis;  managing customer relationships. using ai technology at the is level can result in faster, more cost-effective, and more stable service delivery. the most common use of the chatbot is using a chatbot to quickly answer common questions asked by customers;  management of back-office activities (accounting). in financial-accounting management, ai technology can contribute to automating repetitive accounting operations; increasing the efficiency of transaction processing and the accuracy of reports. by integrating artificial intelligence as a virtual assistant, the operations that the user must do to access data within an integrated it system are optimized (sharma et al., 2022). the benefits brought by ai to an is are decision-making support; easy and efficient access to stored data; automatic recording in the system of all data that can be analyzed or reported immediately; improved management of workflows in the company (rhim et al., 2022). figure 1. scenarios regarding the integration of chatgpt within an erp (source: own conception) query: what is the supply requirement for the next period? answer: chatgpt will display a list containing order proposals to suppliers – for material requirements, calculated based on existing stock and sales, production orders. integration of the virtual assistant in the activity of the economic department query: does it filter all return orders associated with suppliers and display the reasons for the returns? answer: chatgpt displays the list of returns. query: does it go into the item catalog where the vendor bids are kept and identify three vendors that offer the item we need? answer: chatgpt displays the list of the three suppliers that have the required item in their portfolio. activity 1: checking the supply requirement for a certain period. activity 2: identifying returns. query: send an email to each supplier and ask for a quote for the item you want? answer: chatgpt summarizes the suppliers' bidding conditions in a document. activity 4: establish business relationships with a supplier who has the best offer. query: turn the email response into a firm purchase order and send it to the supplier. answer: mail sent to company lists. activity 3: if a supplier is found to have repeatedly delivered an item that does not meet quality standards, the firm decides to stop buying from that supplier. impacts of chatbots on the accounting service industry 4 a possible scenario for the use of chatgpt in the economic department concerns the verification of supply requirements and the identification of new product suppliers. this is in case the current suppliers offer products that do not comply with the company's quality standards. the dialogue between the human operator and the virtual assistant is carried out by typing the text shown in figure no. 1. it can be seen that tools from the field of artificial intelligence will become common components in erp-type systems, helping to improve the experience of those who use them in terms of interaction with suppliers. i.2. chatgpt, the innovation factor in the accounting profession after the hysteria of robots taking the place of workers in factories, the mass media is currently circulating the idea of the disappearance of some traditional professions. the appearance of printing did not lead to the disappearance of handwriting, nor will ai replace creative work (bommarito et al., 2023). when asked what chatgpt is, it describes itself as "a virtual entity, without a body or physical presence, whose purpose is to help people solve their problems or answer questions the most clearly and accurately possible." the study leadership in ai 2021: boards, barriers and new beginnings designed by venugopal (2020) presents the degree of adoption and benefits of artificial intelligence in different organizations, as well as the possible impact of this technology on business and organizational cultures. the study highlights that governing bodies recognize the value of artificial intelligence, but are concerned about the ability of the human factor to adapt to rapid technological developments. this is given the required levels of technical knowledge and acceptance of technology. chatgpt is an indicator of progress made in the field of technology and a step closer to a system capable of thinking at a human level. in this sense, we can list the areas in which chatgpt could be a colleague of the human factor (a. shaji george et al., 2023):  technology and artificial intelligence could support professions related to software development and web design. this is because chatgpt has a considerable success rate in writing software code, using as a source the code libraries published on various specialized platforms;  mass media (advertising, journalism, graphic designers), chatgpt, and other similar forms of artificial intelligence can support the human factor in creating relevant content within a reasonable time frame;  in the legal sector, chatgpt can sift through large amounts of legal information and present it in a logical format within a legal memo. ai will not be able to fully automate judicial work because a certain degree of human judgment is needed to understand what a client or employer wants.  consulting (financial analysts, personal financial advisors, market research analysts), ai technology is suitable for: identifying trends, highlighting profitable investments, and communicating synthesized information to clients/investors;  in the accounting services industry, due to the regulated nature of the activity, but also to the manipulation of structured data, chatgpt is an ideal tool to replace repetitive dan marius coman, violeta state, maria cristina voinea, gabriel cucui 5 activities. accounting professionals find real support in ai tools to revolutionize the way they organize accounting records and interact with clients. chatgpt represents a tool with significant potential in the activity of accounting professionals. due to the accumulation of information resources, accounting professionals must adapt to evolving technologies by evolving from the stage of clerks to knowledge workers to provide business consulting to clients (bommarito et al., 2023). this paradigm shift in the accounting profession also takes place in conditions where the positions of novice accountants, whose task is to enter data from a physical format into various it applications, are no longer of interest to the human factor. how accounting professionals can integrate this tool into their activities (alshurafat, 2023):  assistance with generating financial reports and documents. in this case, by giving it access to the necessary data, the ai model takes care of generating financial reports accurately and in a short time frame compared to the time required by humans.  usefulness in data analysis. the ai model can be trained to analyze data and provide insights and recommendations.  automation of routine activities (e.g. data entry and reconciliation) gives more time to the accounting professional for more complex tasks;  assisting customers by providing answers to their questions. worldwide, it is estimated that this technology will have an overwhelming impact on the accounting profession, quantified by saving 400 million work hours/year for manual data entry, increasing labor productivity by 25%, and reducing errors by 10% (brachten et al., 2021). the main disadvantage of using chatgpt in the work of a professional accountant is the time and cost required to implement and learn this tool (alshurafat, 2023). the opinion that chatgpt could replace some jobs is exaggerated. human judgment must be used to avoid errors and harm caused to customers on the one hand, and on the other hand, to assume responsibility in case they occur. in this sense, no technological tool will be able to replace human-to-human interaction, but it is possible to establish a hybrid work regime in which the individual factor will supervise an army of robots that perform tasks with a medium degree of complexity, the responsibility remaining in continuation in man's charge. i.3. chatting with chatgpt chatgbt is a prototype dialogue-based artificial intelligence chatbot capable of recognizing natural human language and generating human-like text. tools in this category have been around for a while, but previous versions "didn't understand" what people were talking about. this tool gives the impression that you are talking to a person, who understands your intentions and goals. key features of chatgpt that recommend it as the perfect tool to improve productivity are efficiency in extracting information from data sources available on the internet, applying analytical techniques to process data, interpreting and displaying it in a cursive format, and logically, continuous learning based on interaction with users (aydın & karaarslan, 2022). considering the benefits of chatgpt technology, we propose to investigate how it can answer a series of questions in the field of accounting, thus verifying its ability to respond impacts of chatbots on the accounting service industry 6 correctly, completely, and on time to cases formulated by the accounting professional, on the model of a study identified in the specialized literature (street & wilck, 2023). some 10 questions related to accountants, accounting, and the application of profit tax calculation algorithms were formulated considering romanian tax legislation. the first 3 questions addressed to chatgpt consider how the system can extract relevant information related to tax legislation and its application in some cases. in this case, it is necessary to determine profit tax or the classification of some social expenses as deductible. the following 4 questions are aimed at verifying how the system can provide a precise answer concerning the way to evaluate stocks when leaving the patrimony, the conditions for classifying assets as fixed assets, the enumeration of accounting work regarding the closing of the financial year, and the way to optimize the tax on profit allowed by romanian tax legislation. the last 3 questions are related to the accounting profession. they are aim to check the system's ability to develop an answer regarding the mission of accounting experts and the difficulties of this profession. ii. results the results of the questions posed to the chatgpt tool have been evaluated by professional accountants in terms of the efficiency and accuracy of the information provided. the answers are below in edited form to extract the essentials. in this regard, references to the resources from where the chatgpt tool adapted text sources in an attempt to answer the formulated questions were removed. the numerical examples are expressed in the national currency specific to romania the romanian leu. the first set of questions refers to how the system can extract relevant information related to tax legislation and its application. this is required to determine profit tax or the classification of some social expenses as deductible. query 1: to calculate according to romanian legislation, the profit tax related to the 2nd quarter of 2022 knowing that:  cumulative total revenues on 30.06.2022 are 425,000;  cumulative total expenses on 30.06.2022 are 384,500, of which: 3,500 protocol expenses and 1,650 expenses with profit tax related to the 1st quarter. answer 1: according to romanian legislation, profit tax related to the 2nd quarter of 2022 can be calculated using the following formula: taxable profit = total income total expenses accounting professional comment: tax result = total income – total expenses – tax deductions – non-taxable income + non-deductible expenses in the given case, the total accumulated revenues on 30.06.2022 are 425,000, and the total accumulated expenses on the same date are 384,500. of these, 3,500 are protocol expenses and 1,650 are expenses with profit tax related to the 1st quarter. therefore, the total expenses adjusted for the calculation of profit tax are 384,500 3,500 1,650 = 379,350. the taxable profit is equal to 425,000 379,350 = 45,650 accounting professional comment: protocol expenses are deductible within the fiscal result limits of 2%. deductible protocol expenses = 2% * 45,650 = 913 non-deductible protocol expenses = 3,500 – 913 = 2,587 dan marius coman, violeta state, maria cristina voinea, gabriel cucui 7 taxable profit = 425,000 – 384,500 + 2,587 + 1,650 = 44,737 the profit tax related to the second quarter of 2022 is 16% of taxable profit. thus, the profit tax for the 2nd quarter of 2022 is: 45,650 x 16% = 7,304 accounting professional comment: incorrectly determined taxable profit leads to incorrect calculation of profit tax; the profit tax related to the 1st quarter was also not taken into account, which will be deducted from the amount calculated for the 2nd quarter (in romania, the result is taxable and the profit tax is determined cumulatively from the beginning of the year). thus, the profit tax calculated for the 2nd quarter of 2022 is: 44,737 x 16% = 7,158 profit tax due for the 2nd quarter of 2022: 7,158 – 1,650 = 5,508 query 2: according to the labor code, a commercial company will spend 365,000 on staff salaries in 2020. during the year, the company grants gifts, in cash, to the minor children of employees for 5,000. in addition, it bears the cost of rest treatment benefits for its employees and their family members for 13,000. to determine if social expenses are fully deductible? answer 2: to determine the fiscal result of a commercial company, the expenses incurred to carry out the economic activity, including those regulated by the normative acts in force, as well as the registration fees, contributions, and contributions owed to the chambers of commerce, are considered deductible expenses. in the case of social expenses, their deductibility is limited to 5% of staff salary expenses. thus, if you record social expenses in the amount of up to 5% of staff salary expenses, they are fully deductible when calculating profit tax. if the value of these expenses exceeds 5% of staff salary expenses, they are deductible only within the limit of 5% of staff salary expenses. in the current scenario, the expenses for staff salaries are 365,000. rest treatment benefits for own employees and their families in the amount of 13,000 fall within the expenses incurred to perform an economic activity and, therefore, are fully deductible. however, the expenses with the gifts given in money to the minor children of the employees, for 5,000, represent social expenses. as a result, they are limited to 5% of the expenses with the salaries of the staff. due to the above situation, 5% of the staff salary expenses are 18,250 (36,5000 x 5%), so costs for 5,000 gifts for minor children of employees are fully deductible. accounting professional comment: correct answer provided by chatgpt. query 3: as of march 31, 2020, the following data are known:  revenue from sales of 62,500;  total expenses for 37,5500, of which: 3,500 maintenance and repair expenses and 2,500 fuel expenses. knowing that the car is not used exclusively for economic activity, determine the profit tax due at the end of quarter 1 of 2020. answer 3: to determine the corporate tax due at the end of q1 2020, the company's taxable profit must first be calculated based on the data provided. the taxable profit is calculated by subtracting the deductible expenses from the income obtained in the respective period. from the data provided, sales revenues are 62,5000, and total expenses are 375,500. therefore, the taxable profit is 249,500. impacts of chatbots on the accounting service industry 8 accounting professional comment: chatgpt does not take into account the provisions according to which when a car is not used exclusively for economic activity, maintenance and repair expenses, as well as fuel expenses, are deductible at a rate of 50%. taxable profit = 625,000 – 375,500 + 3,000 = 252,500 where 3.000 = 50%*(3,500 + 2,500) profit tax = 16% * 252,000 = 40,400 regarding the corporate tax due at the end of quarter 1 of 2020, it is imperative to note that for companies paying quarterly corporate tax, the tax due for that quarter is calculated by applying the corporate tax rate to the taxable profit made in that quarter. according to the available information, the company has not yet paid its profit tax for 2019. by government emergency ordinance no 69/2020, on march 31, 2020, interest, penalties, and all accessories related to the main budgetary obligations outstanding on that date are canceled, if certain conditions are met. however, nothing is mentioned about the cancellation of back taxes. therefore, the company may also have to pay the outstanding profit tax for the year 2019, in addition to the profit tax related to the 1st quarter of 2020. if the company has not paid profit tax for the year 2019, it may be subject to penalties and interest for late payment. this is according to the fiscal code. accounting professional comment: in romania, the principle of independence of financial years is applied, so the result of the year 2020 and the related profit tax are treated independently of the result and the tax related to the year 2019. considering the answers received, we can distinguish the following limits of chatgpt in solving some requests in the financial-accounting-fiscal field: 1. query responses are the result of knowledge generated by an amalgamation of published materials that refer to various periods. chatgpt does not distinguish current/applicable information from outdated/repealed information. 2. is not trained to make correlations and compilations between several sources from different fields: accounting, taxation, labor law in solving a case 3. cannot distinguish between certain nuances/peculiarities in the application of accounting and tax legislation 4. has difficulty determining which accounting method/accounting policy/accounting regulation/tax regulation should be used when there are several alternatives. the 2nd set of questions refers to the verification of how the system can provide a precise answer regarding the way of evaluating the stocks when leaving the patrimony, the conditions for classifying the assets as fixed assets, the enumeration of accounting works regarding the closing of the financial year, the way of optimizing the profit tax allowed by romanian tax legislation. query 4: how are stocks of raw materials valued upon exiting the estate? answer 4: there are several calculation methods for the valuation of raw material stocks at the exit of the estate, including the weighted average cost method (wac), the first-in-firstout (fifo) method, and the last-in-first-out (lifo) method. when leaving the estate, stocks can be valued at their cost or entry value. in addition, it is imperative to take into account relevant aspects of the proper conduct of the inventory and stock valuation process. these aspects include the determination of inventory periods, process responsibilities, and inventory procedures. dan marius coman, violeta state, maria cristina voinea, gabriel cucui 9 accounting professional comment: correct answer. query 5: what are the conditions for classifying goods as fixed assets? answer 5: fixed assets are those tangible assets related to fixed capital defined as the object or complex of objects that are used as such and cumulatively meet the following conditions: they have an input value greater than the limit established by government decisions and are used for a period greater than one year. to qualify an asset as a fixed asset, it is imperative that it brings future economic benefits and is held for more than one year. in this sense, there is no minimum value imposed by accounting regulations. there are many cases in practice regarding the classification of purchased goods as fixed assets or inventory items. therefore, it is imperative to understand the differences and similarities between the two accounting categories. accounting professional comment: fiscal regulations impose a minimum entry value for goods with a useful life of more than 1 year to be classified as fixed assets; the fiscal implications consist of the number of expenses that will be recorded from the moment of putting into use (through depreciation, the input value is gradually recovered on account of the expenses; if the input value is below the minimum established by the tax law, the respective goods are considered inventory objects whose value entrance fee will be fully recovered at the time of commissioning). query 6: what are the requirements for the preparation of financial statements for the year 2022? answer 6: closing the financial year is a crucial process in accounting and aims to record all transactions and business activities related to a fiscal year and prepare financial statements for reporting. according to the accounting regulations regarding individual financial statements and consolidated annual financial statements, approved by order of the ministry of finance no. 1802/2014, the accounting works regarding the closing of the financial year for the year 2022 should comply with the following requirements for the preparation of financial statements:  accounting for all financial transactions and activities related to the fiscal year.  preparation of individual financial statements and, as the case may be, consolidated annual financial statements.  preparation of accounting documents required for closing the financial year, such as accounting journals, trial balances, accounting records, and other specific documents. carrying out the inventory of the heritage, highlighting the differences between the stocks and assets inventoried and those recorded in accounting.  recording of accounting adjustments necessary to correct errors or to reflect additional information related to the closed financial year.  preparation of financial reports to present the financial situation of the entity at the end of the financial year.  in addition, it is imperative to note that the closing of the financial year must be carried out according to the legal provisions in force at the time. this is to ensure compliance with current tax and accounting regulations. accounting professional comment: correct answer. impacts of chatbots on the accounting service industry 10 query 7: how can the romanian tax law optimize the profit tax? answer 7: in romanian tax legislation, there are several ways to optimize the profit tax, which can be used by companies to reduce the tax burden and obtain a higher net profit. in july 2022, by government emergency ordinance no. 16/2022 for the amendment and completion of the fiscal code, some fiscal changes were made that could be useful for this purpose. in addition, other measures can be considered, such as:  deductibility of research and development expenses: companies can deduct research and development expenses up to 50% of the profit tax due in the respective fiscal year.  deductibility of sponsorship expenses: companies can deduct sponsorship expenses up to 0.5% of the net turnover achieved in the respective fiscal year.  transfer of profit to other countries: companies can transfer the profit obtained in romania to other countries through transfer pricing so that the tax paid in romania is lower. however, certain conditions and procedures provided by the fiscal code must be respected. it is critical to note that any tax optimization measure must follow the tax legislation in force. this is so as not to break the law and avoid possible problems with the tax authorities. that is why it is recommended to consult a tax consultant before making any decision to optimize profit tax. accounting professional comment: correct answer. regarding this second set of questions, we can conclude that chatgpt "did better", in the sense that it can understand the language specific to the field of accounting taxation. for questions of a theoretical nature, the answers are acceptable at first glance. but a closer look reveals that there are omissions, thus confirming that chatgpt knows a lot about a lot of things. set 3 of questions refers to the accounting economist profession. query 8: what can you tell me about accountants in romania? answer 8: romanian accountants are professionals in the field of accounting who have the role of assisting companies and organizations in the administration of financial information. they deal with the registration, classification, and reporting of financial information. in addition, they prepare accounting and tax reports according to accounting standards and tax legislation in force. accountants can work within a company or as independent consultants. accountants in romania must be members of a professional body, such as the chamber of accounting and accounting expertise in romania. this helps them stay up to date with developments and standards in the field of accounting. accounting professional comment: correct answer. query 9: how difficult is it to be an accountant in romania? answer 9: it is a field with high requirements, which requires solid knowledge of accounting, taxation, and legislation. accountants in romania must pay attention to details, have communication skills and be able to work with complex financial data. it is also imperative to be aware of legislative changes and international accounting standards. however, for those who are passionate about the field and want to develop professionally, being an accountant in romania can be a satisfying career with growth potential. businesses and organizations can benefit from their expertise and they offer financial advice. dan marius coman, violeta state, maria cristina voinea, gabriel cucui 11 accounting professional comment: correct answer. query 10: if you lived in romania, would you choose to be an accountant? answer 10: as an ai language model, i don't have a personality or preferences, but i can tell you that being an accountant can be a fulfilling job with growth potential. accounting is a vital field, essential for the efficient functioning of businesses and organizations, and offers the opportunity to contribute to sound financial decisions. however, this decision should be made based on your passions and skills, so that you can ensure that you choose a career that will bring you long-term satisfaction and fulfillment. accounting professional comment: correct answer. chatgpt can generate answers to general accounting questions due to its ability to retrieve and compile logically various information. this is not related to the application of reasoning or a deep understanding of various regulations/standards in the field. conclusions artificial intelligence, with all its components, has proven its usefulness in many activities of daily life. much of the progress in the current period is due to the way we use this technology. the adoption of ai by companies will generate competitive advantages and financial benefits. chatgpt is a general-purpose language model that is not specifically optimized for accounting. however, it can understand and generate accounting text, but may not be able to perform complex tasks that require domain-specific knowledge or expertise. following the application of the tool to a set of 10 accounting and taxation questions and based on the evaluation of the answers by accounting professionals, we can conclude that the influences of chatgpt on the exercise of the accounting profession can be both positive and negative. positive influences on using chatgpt in accounting:  generating acceptable answers to theoretical questions.  the ability to answer all questions.  the ability to logically compile the information to which it has access. the negative impact of using chatgpt in accounting consists of:  performing erroneous calculations when asked to solve applied practical problems that require a selection of information from different available sources;  incomplete elaboration of answers, despite correctness. considering the responsibility and responsibilities of accounting professionals in their relations with both economic agents and state institutions, we consider it inappropriate to use chatgpt as a working tool in the exercise of the accounting profession. it is imperative to point out the limitations of the study. starting with the stated purpose, that of verifying the impact of the use of chatgpt technology in the exercise of the accounting profession, in the field of accounting, the main limitation is related to the content of the queries. the questions have a relatively simple character, without requiring complex reasoning. consequently, the professional accountant's needs regarding the qualities/capabilities/competencies required from a robotic work partner are insufficiently defined. it is possible, however, to use the study as a starting point for future research. in this impacts of chatbots on the accounting service industry 12 sense, as knowledge about chatgpt technology deepens, we set out to develop a questionnaire for the study of the acceptance of this technology among accounting professionals. going beyond the scope of the present work, we can affirm that artificial intelligence is in the "golden period" of its existence. this is due to the technical advances that make its application possible and the interest of the human factor in its exploitation. with chatgpt going public and its acquisition by microsoft, competing firms found themselves at a competitive disadvantage. in these conditions of the recognition of ai as a vehicle for positive change, in the next period, we will witness the public launch of similar tools by companies in the tech industry (e.g. google, amazon, facebook). references 1. alshurafat, h. (2023). the usefulness and challenges of chatbots for accounting professionals: application on chatgpt. ssrn electronic journal. https://doi.org/10.2139/ssrn.4345921 2. a.shaji george, a.s.hovan george, & a.s.gabrio martin. (2023). a review of chatgpt ai’s impact on several business sectors. https://doi.org/10.5281/zenodo.7644359 3. aydın, ö., & karaarslan, e. (2022). openai chatgpt generated literature review: digital twin in healthcare. ssrn electronic journal. https://doi.org/10.2139/ssrn.4308687 4. bommarito, j., bommarito, m., katz, d. m., & katz, j. (2023). gpt as knowledge worker: a zero-shot evaluation of (ai)cpa capabilities (arxiv:2301.04408). arxiv. http://arxiv.org/abs/2301.04408 5. brachten, f., kissmer, t., & stieglitz, s. (2021). the acceptance of chatbots in an enterprise context – a survey study. international journal of information management, 60, 102375. https://doi.org/10.1016/j.ijinfomgt.2021.102375 6. dowling, m., & lucey, b. (2023). chatgpt for (finance) research: the bananarama conjecture. finance research letters, 103662. https://doi.org/10.1016/j.frl.2023.103662 7. jang, m., jung, y., & kim, s. (2021). investigating managers’ understanding of chatbots in the korean financial industry. computers in human behavior, 120, 106747. https://doi.org/10.1016/j.chb.2021.106747 8. leitner-hanetseder, s., lehner, o. m., eisl, c., & forstenlechner, c. (2021). a profession in transition: actors, tasks and roles in ai-based accounting. journal of applied accounting research, 22(3), 539–556. https://doi.org/10.1108/jaar-102020-0201 9. lund, b. d., & wang, t. (2023). chatting about chatgpt: how may ai and gpt impact academia and libraries? library hi tech news. https://doi.org/10.1108/lhtn-01-2023-0009 10. pérez estébanez, r. (2021). assessing the benefits of an erp implementation in smes. an approach from the. scientific annals of economics and business, 68(1), 63–73. https://doi.org/10.47743/saeb-2021-0006 11. rhim, j., kwak, m., gong, y., & gweon, g. (2022). application of humanization to survey chatbots: change in chatbot perception, interaction experience, and dan marius coman, violeta state, maria cristina voinea, gabriel cucui 13 survey data quality. computers in human behavior, 126, 107034. https://doi.org/10.1016/j.chb.2021.107034 12. sharma, s., singh, g., islam, n., & dhir, a. (2022). why do smes adopt artificial intelligence-based chatbots? ieee transactions on engineering management, 1–14. https://doi.org/10.1109/tem.2022.3203469 13. street, d., & wilck, j. (2023). „let’s have a chat”: principles for the effective application of chatgpt and large language models in the practice of forensic accounting. ssrn electronic journal. https://doi.org/10.2139/ssrn.4351817 14. vasile, v. (2023, februarie 15). chat gpt o entitate virtuala care vrea sa schimbe lumea. www.marketwatch.ro. http://www.marketwatch.ro/articol/18036/chat_gpt_o_entitate_virtuala_care_vr ea_sa_schimbe_lumea/ medimond template 20 agora international journal of economical sciences, aijes, issn 2067-3310, e issn 2067 – 7669, vol. 15 (2021) modern options for financing real estate investments chiriac cornel silviu1 1faculty of economic sciences, agora university of oradea, oradea, romania e-mail silviuchiriac@yahoo.com abstract the realities of the period we live in with limited resources, uncertainties, speculations, radical upheavals, put their mark on the entities in many respects. the situation requires a rethinking of the business so that it can remain viable, to meet the needs of customers and to obtain a maximum profit. the decision-making process is one that thus outlines the major importance it has for each entity. the options that the entity can use to finance its investments are the objective of this material, our analysis aims to present the main characteristics of these options. keywords: investments, leasing, financial leasing, lease-back. 1 introduction the society of the third millennium is characterized by limited resources, uncertainties, speculation, radical upheavals. these situations have an impact on the entities in all the aspects that these processes involve. therefore, the new era may, more than ever, require a process of rethinking the business so that it can withstand the new conditions while meeting the needs of customers and making the most of it. therefore, more and more participants in economic life often end up rethinking their business. in this context, the performance capacity of an entity increasingly depends on the ability to make decisions, the decision-making process being very important. in contemporary economic theory, concepts such as: real estate investment, real estate or investment valuation are frequently used. these concepts have different meanings and characteristics for some professionals. the definition of these concepts, the classification and the methodology of valuing real estate investments are processes that raise some difficulties caused by the novelty of these concepts. 2 real estate financing options 2.1 mortgage loan for real estate investments a mortgage loan is a loan granted exclusively by authorized institutions, in compliance with the legal regulations in force in that country, for the acquisition or construction of real estate. thus, in countries such as the usa, germany, the united kingdom and others, mortgage banks are those institutions that grant long-term loans for real estate investments and the loans granted are secured by mortgages on real estate (căpraru et al., 2013:47). mortgage banks obtain financial resources by issuing specific securities, respectively, mortgage bonds that are sold on the secondary market of mortgage financing, being forbidden to attract deposits, obtaining income from commissions and interest charged on loans. but in countries like france or spain, mortgage banks are not the only institutions that issue mortgage bonds, they can also be issued by commercial banks (căpraru et al., 2013:47). in romania, law no. 32/2006, regulates the mortgage loan for real estate investments (căpraru et al., 2013:47). mailto:silviuchiriac@yahoo.com 21 the real estate market knows two main categories of real estate loans (căpraru et al., 2013:65): -fixed interest mortgages which are those loans whose interest rate does not vary over the repayment period, and remains fixed. thus, the loan rates are also fixed, and the debtor will know before how much he will pay to the bank during the repayment period; variable-rate mortgages are characterized by the fact that the interest rate may vary over the repayment period. it may increase or decrease, depending on the default benchmark (euribor, libor, robor). variable interest loans are disadvantageous to the client in that a possible increase in the level of the index could lead to an increase in the level of the loan rate. the higher the growth and the longer it lasts, the lower the likelihood that it will pay off credit rates. of course, for the bank, the variability of the interest rate is favorable and the rate on loans is adjusted to the market interest rate, but to the extent that the client will be able to keep up with the payment of monthly loan installments. otherwise, the loan may become non-performing, which is why the bank will perform a stress test for each client and will corroborate its results with the degree of indebtedness and repayment capacity after which the client will qualify or not as eligible. 2.2 development of a real estate project through a bank in the opinion of the authors căpraru and onofreis (căpraru et al., 2013:72), in the context of the development of a project financed through a bank, which would contribute to ensuring the success of obtaining this financing, the following general principles are considered: -establishing a new company for the purpose of independent project development; attracting investors to partially support the project and to participate in the establishment of the new project company; guaranteeing the financing of the project with the assets of the established project, and not with the assets of another business; -consider as a primary source of repayment the financing the cash flow generated by the financed project, in no case other sources obtained from other older businesses carried out. usually, in the context of developing a project proposed for financing (such as, for example, a commercial real estate), the newly established project company with the contribution of already selected investors who will partially contribute to the financing of the project has to establish first collaboration relations. with a number of partners involved in the project, before proposing the project for financing to the bank (căpraru et al., 2013:73). these would be: a general contractor for construction, a works supervisor, who will represent his interests in the relationship with the general contractor and who will monitor the costs and quality of works, an insurer (insurance company) to insure the project in case of events that could disrupt the progress of the work. in the case of the development of residential complexes, the bank can participate through financing offers for the clients of the future project, offering them real estate loans. 2.3 non-reimbursable financing for investment projects one of the recent external financing options available to entities is that relating to accessing european funds to finance real estate investments. european funds, according to geo no. 63/1999 on the management of non-reimbursable funds allocated to romania by the european community, as well as their co-financing funds, are defined as the financial contribution of the european union, represented by amounts transferred to the government of romania by the commission of the european union with the title of non-reimbursable financial 22 assistance. the structural funds are post-accession funds funded by the european union budget, which aim to support member states in areas of interest such as: education, research, agriculture, sme development, etc (ceccar, 2011:54). real estate investments that are eligible for funding from european funds mainly aim at the regeneration of disadvantaged areas, investments in the real estate infrastructure of smes and the various investments materialized in: rehabilitation of buildings, ensemble of buildings, modernizations, restorations, etc. 2.4 real estate leasing leasing, as a complex concept, has encountered over time several types of formulations, each trying to emphasize the common aspects of this phenomenon. the difference between the concepts can be seen concretely when the perspectives by which the lease is defined are different. the economic outlook approaches leasing as a financing activity concluded on the basis of a leasing contract, whereby the funds necessary for the investment are guaranteed by the financier. basically, the one who rents the property (owner) allows the user (tenant) to use a certain property provided that he pays a series of payments (leasing rate) for the entire duration of the lease. the financial benefits related to the lease do not arise from the ownership of the good but from its use. the user is the one who establishes the good and the related specifications (brand, model, manufacturer, installation, warranty, service, delivery, etc.), negotiates the price with the owner and then concludes the lease, specifying the duration of the contract, leasing rates and other optional considerations. the legal perspective defines leasing as a complex contract that allows the user to purchase a good without immediately paying its price. the romanian legislative framework does not provide a concrete approach to the lease term but defines the leasing operation as that operation by which a party, called the lessor, undertakes at the request of another party, called the lessee (user), to buy or take over to a third party, called a supplier, a certain movable or immovable property, and then to transfer to the user the right to use it in exchange for a monthly payment called royalty, for the purpose of using, or, as the case may be, purchasing the property (ordonanța 51/97). from the beneficiary's point of view, leasing is a form of lending according to which the value necessary for the purchase of the good is achieved through its use, its repayment is made in installments, in the form of leasing rates and, finally, the residual value. in this case, the lease appears as a sale in installments, in which the ownership is transferred with the payment of the residual value. from the point of view of the leasing company, the lease determines the purchase of a good in order to be rented, aiming at transforming the lease into a sale. buy at the end of the contract, after the related rent and the residual value have been paid. the purpose of the leasing operation (with the transfer of the property to the user) is similar to that of the sale-purchase with payment in installments, but the difference appears from the perspective of the transfer as follows: money, while leasing assigns the right to use the property. the first attempts for definition attributed to leasing are found in french literature, but the definition addresses the concept of real estate leasing (credit-bail), and refers to the fact that an economic unit can lease real estate, built on its own or bought, having as an objective its use by the lessee and implicitly the possibility of the purchase of the good by him. the german tax circulars of 1971 and 1972 complete the concept of leasing, but not entirely, what appears new compared to existing concepts is the determined duration of the contract 23 and the inclusion in the royalty paid by the user, in addition to the acquisition cost, of all additional expenses financing unit. leasing has its origins in antiquity in this way: around 210 bc, the owners of agricultural tools in the samaritan town of ur rented the goods of the farmers who needed them and recorded their records on clay plates. thus, people have noticed that the benefits generated by a good do not arise from ownership of the good, but from its use. the first forms of leasing took place in the united states, in the late nineteenth century, when telephones were rented to customers under a contract called a "lease." in 1936 the owner of "safe stores inc." bought a land on which he built a huge store, but needed capital to continue, so he sold his store to a group of investors, who later re-leased it to the former owner on a "lease" basis. this type of operation is called sale and lease-back. the united states strongly encouraged this type of activity, offering multiple tax advantages that led in 1950 to the employment of more than 150 higher education institutions in lease-back transactions. at the time, the backers were the insurance companies. financial leasing appeared in the middle of the 20th century, due to the need for a manager to place an important order for food but without the necessary equipment. the person in question, d. p. bootle, decided to rent the equipment he needed in order to honor his order. this moment of bootle's brilliance would lead to the emergence of an entire leasing industry. this experience led bootle to set up his own leasing company, us leasing corporation, and then, together with his partner schoenfeld, set up the first company specializing in furniture leasing operations, which is still active in the leasing market today. the two have historically been known as the "founders" of leasing. banks were the ones who centrally encouraged and supported the leasing of industrial equipment, and in 1963 the banks also received authorization to carry out leasing operations. the first banking network to operate on the leasing market was national banks, followed by bank holding companies, and by 1975 they had been authorized to conduct leasing operations directly in 41 us states. the rapid expansion of leasing in the us was mainly due to the fiscal facilities granted but also to a growing economy. this trend was also taken over in continental europe, the united kingdom being the first country to adopt this activity, being strongly supported by credit institutions. western countries have also adopted the phenomenon, each imposing its own legal regulations. leaseurope was established in 1972, the european federation of leasing companies, which came to include 25 affiliated countries and 1054 member institutions in 1993. today the federation has expanded to 32 countries and controls about 80% of the european leasing industry. in romania, the first leasing company was established in 1994, and the first leasing regulations appeared in 1995, and in the following year the national union of leasing companies-unslr was established. the year 1997 marks the adoption of the first law specific to leasing operations og 51/1997. financial leasing is a strong starting point for financing companies that want to buy goods but do not have the necessary financial resources to purchase them. this financing activity helps economic agents who do not have the possibility to attract loans from banks, or do not want to encumber their assets, whether movable or immovable, by setting up mortgages or pledges. leasing, as a way of financing, primarily aims at economic agents that seek to expand the activity and improve economic performance, and in general aims at technical optimization. the user's decision on the purchase of a good must take into account, in addition to the net cost of purchase, a number of elements that influence its size: the discount factor, additional costs specific to each type of purchase, taxation and compulsory insurance required. 24 a sale and leaseback transaction involves the sale of an asset owned by an economic operator to a specialist company and the leasing of the same asset to the original seller. sales price and leasing rates are interdependent variables because they are negotiated together. the accounting treatment of these transactions differs depending on the lease that is concluded. if the sale and leaseback transaction has as its purpose a financial leasing, it is a means by which the lessor grants financing to the lessee, the negotiated property having the role of guarantee. the difference between the sale price and the carrying amount of the good must not be recognized immediately as income in the lessee's financial statements, it is deferred and amortized over the term of the finance lease. on the other hand, if the result of the transaction is an operating lease, the asset is sold at fair value, and the difference between fair value and carrying amount will be recognized immediately as profit or loss, as the case may be. if the price at which the good is sold is less than the fair value, the loss will be recognized immediately, unless the loss is offset by lower future leasing rates (below market price), it will also be deferred and amortized in proportion to leasing rate, for the entire duration of the contract. a price higher than fair value involves the same deferral and amortization mechanism as loss. if at the time of the transaction, as a result of an operating lease, the fair value is less than the carrying amount, the difference will be recorded as an adjustment for impairment. in the case of financial leasing, the book value will be reduced only if there are signs of depreciation of the asset, but up to its recoverable amount. in practice, there are different ways of carrying out and financing financial leasing operations, in the following lines we have presented the main types encountered. the classic financing operation this assumes that the lender has sufficient liquidity to purchase the asset that will be the subject of the lease, and the leasing rate will also include interest, which will cover the risk of the amounts involved. the interest will be set in a way that is attractive to the user, but proportionate to the interest on a loan if the user purchases the good through a loan. schematically this operation can be presented as follows: figure 1. the classic financing scheme of the leasing operation external credit financing delivers the good 25 this type of financing is the most widely used in practice and is due to the fact that the leasing company does not have the necessary liquidity to cover the entire volume of leasing operations. financing is based on sources attracted, generally from banks, where the interest charged by the bank is transferred within the leasing rates that the user has to pay. figure 2. external credit financing scheme direct financing operation from the supplier this type of operation presupposes that the supplier is the producer of the good, at the same time being the leasing company that concludes the leasing operation. it is the simplest way to finance. figure 3. scheme of direct financing from the supplier supplier credit financing operation in this situation, the supplier sells the leasing company's assets on credit, and will recover the value of the investment as the user pays the leasing rates. figure 4. supplier credit financing scheme the bank credits 26 leaseback financing operation in this financing operation intervene only two parties, the beneficiary-seller and the leasing company, that are involved in this type of financing. the operation involves the sale of the property that will be the object of the leasing contract by the beneficiary to the leasing company, then moistening its lease to the owner who initiated the sale. at the end of the contract, the good is returned to the beneficiary's possession after the payment of the residual value. figure 5. leasing financing scheme similar to financial leasing is the shareholder leasing, the difference is that the beneficiary does not sell goods but own shares of his company to an investment fund. these will be leased through a lease set out in the lease, and the shares will be redeemed at the end of the lease. the "leasing leverage" financing operation this operation is specific to high-value assets, such as air transport, and refers to the fact that the leasing company cannot fully cover the cost of financing, the difference in financing being obtained from various creditors, which they will recover their investment through a certain perceived interest as well as from the advance and the leasing rates. the guarantee offered to the creditors is the good that is the object of the leasing contract. figure 6. "leasing leverage" financing scheme 27 3 conclusions a mortgage loan is a loan granted exclusively by institutions authorized for the acquisition or construction of real estate. mortgage banks obtain financial resources by issuing specific securities, respectively, mortgage bonds that are sold on the secondary market of mortgage financing, being forbidden to attract deposits, obtaining income from commissions and interest charged on loans. the real estate market has two main categories of real estate loans: fixed rate mortgages and variable rate mortgages. development of real estate project financed through a bank, general principles regarding the establishment of a new company for the development of the project, attracting investors, guaranteeing the financing of the project with the assets of the established project and considering as a primary source of financing the flow of cash generated by the funded project. one of the recent external financing options available to entities is that of accessing european funds to finance real estate investments. investments in real estate that can use this form of financing are mainly aimed at regenerating disadvantaged areas, investments in real estate infrastructure of smes and various investments materialized in: rehabilitation of buildings, or set of buildings, modernizations, restorations, etc. leasing is a strong starting point in financing entities that want to purchase goods but do not have the necessary financial resources to purchase them. this financing activity is offered to entities that do not have the possibility to attract loans from banks, or do not want to encumber their assets, whether movable or immovable, by setting up mortgages or pledges. leasing, as a way of financing, primarily targets entities that seek to expand the business and improve economic performance, and generally aims at technical optimization. the user's decision on the purchase of a good must take into account in addition to the net cost of purchase and a number of elements that influence its size: the discount factor, additional costs specific to each type of purchase, taxation and mandatory insurance required. it can be seen that leasing is similar to investment credit, even if the user does not immediately become the owner of the property. the financier regards leasing as a loan for a certain period, guaranteed by the property right, and the user as a form of credit through which the good generates the purchase value through its use, thus the credit obtained is material and not monetary. cash payment can be considered the ideal form of acquiring a good, but as opposed to financial leasing, it coins the full existence of the liquidity needed for the purchase. the advantage that appears in this way of purchase is that the user becomes the owner of the purchased good at the time of delivery. it is true that cash acquisition leads to a lower financial effort compared to leasing. it is true that the purchase of cash leads to a lower financial effort compared to leasing, but it presupposes the existence of own funds made from previous actions and not those resulting from the exploitation of the good. it is noted that the only advantage offered by the lease is the non-existence of the time gap between the time of payment and the deduction of expenses, and the fact that it does not require the full existence of liquidity for the purchase of the good. summarizing the above, we can see that the advantages and disadvantages of leasing are different for each of the three participants in the leasing operation, giving different importance depending on their needs and requirements. the beneficiary will choose the financing through leasing according to how much he can negotiate the payment of the lease installments or if he has the possibility to use the good even after concluding the lease contract, based on lower rents (if he does not want to buy the good, paying the residual value). at the same time, the fact that he may have access to more 28 advanced technologies through which he can develop his activity, or the lack of guarantees should be important considerations in the leasing decision. the leasing company, the one that finances, first of all pursues the additional gains that may arise from the re-leasing or resale of the goods that were the subject of a leasing contract. thus we can say that the leasing company tends to keep the property right over the good, in order to exploit it later. the supplier will always try to attract new customers and beneficiaries through leasing operations, in order to increase its sales, it will also try to overcome the possible difficulties related to the import legislation, if they opt for an import good. promoting high quality goods and high prices that will lead to higher profitability is another way to show the importance of leasing to the supplier. references [1] achim m.v., analiză economico-financiară, editura risoprint, cluj-napoca, 2010 [2] andronic c., performanţa firmei, editura polirom, iaşi, 2000 [3] anghel i (coord.), evaluarea întreprinderii, editura economică, bucurești, 2010 [4] anghel i., onofrei m., dezvoltarea imobiliară – analiză şi principii, editura economică, bucureşti, 2013 [5] anghelache c., statistica teoretică şi economică, editura economică, bucureşti, 2004 [6] armeanu d, enciu a., poanta d., proprietăţi ale criteriilor de selecţie a proiectelor de investiţii în mediul incert, economie teoretică şi aplicată, volumul xviii (2011), no. 7(560) [7] bădescu g, oancea-negescu m.d. analiza investiţiilor imobiliare, editura economică, bucureşti, 2009 [8] bistriceanu gh. d, adochiţei m.n., negrea e., finanţele agenţilor economici, editura economică, bucureşti, 2001 [9] căpraru b., onofrei m., investiţii imobiliare – fundamente, practici şi studii de caz, editura c.h. beck, bucureşti, 2013 [10] căruntu c., lăpăduşi m. standarde internaţionale de raportare financiară viziune de ansamblu asupra adoptării şi aplicării acestora la nivelul firmei. în: analele universităţii „constantin brăncuşi”, târgu – jiu, 2011 [11] ceccar, ghid privind accesarea, contabilitatea, fiscalitatea, auditul şi managementul proiectelor cu finanare europeană, editura ceccar, bucureşti, 2011 [12] ciobanu a., analiza performanţei întreprinderii, editura ase, bucureşti, 2006 [13] jianu i., evaluarea, prezentarea şi analiza performanţei întreprinderii, editura ceccar, bucureşti, 2007 [14] matiş d., timbuş r.(coord), evaluarea proprietăţilor imobiliare, editura risoprint, cluj-napoca, 2013 [15] onofrei m., finanţele întreprinderii, editura economică, bucureşti, 2004 [16] peumans h.. ,valoarea proiectelor investiţionale, deusto, 1967 [17] stan s., anghel i, (coord) – evaluarea întreprinderii, ediţia a cincea revizuită, editura iroval, bucureşti, 2013 [18] stoian m., gestiunea investiţiilor, bucureşti, editura a.s.e., 2003 [19] vintilă n., evaluarea şi finanţarea investiţiilor directe, editura ase, bucureşti, 2009 agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 no. 1 (2023), pp. 93-101 93 importance of internal control for creative accounting a. osmanović, d. šarić azira osmanović, damir šarić international business-information academy tuzla, bosnia and herzegovina e-mail: azira.osmanovic1@gmail.com abstract. creative accounting enabled accountants to use accounting policies more flexibly. however, it was precisely this flexible application of accounting policies that led creative accounting to become synonymous with manipulative accounting in practice. financial reports should reflect the actual state of business, but they are often subject to numerous manipulations. in order to prevent manipulations in financial reports, it is necessary for the company to have an established internal control system. in the research conducted through an online survey in bosnia and herzegovina, the connection between internal control and the use of creative accounting was investigated. the research confirmed two pre-set hypotheses that the use of creative accounting has an impact on the quality of financial reports, and that well-established internal control prevents to use of creative accounting. keywords: internal control, creative accounting, manipulative accounting, financial reports introduction the desire of users of financial statements is that financial statements provide objective, true and fair information. precisely the information from financial reports is needed in the process of business decision-making and making business decisions. investors and creditors use financial information to assess the quality of the company's results, as well as future cash flows associated with their investments. realistic financial reporting implies that financial reports are prepared in accordance with the rules and regulations for financial reporting, that is, in accordance with accounting standards and regulations. financial statements should not contain materially significant errors and irregularities, because the goal of compiling financial statements is to show the true and objective business of the company. unlike real financial accounting, creative accounting includes all those procedures used to manipulate data in financial statements. there are numerous irregularities in the company's operations, and often the consequences of fraud can be unfathomable. precisely because of this, the need to introduce supervisory mechanisms, both external and increasingly internal supervision, first of all with the help of internal control and internal audit, was realized. internal controls include a series of activities aimed at improving the quality of business processes. company management shapes internal control systems. the goal of all employees should be to establish a quality system of internal controls. the task of internal controls is to detect illegal activities and to influence the prevention of such activities. today companies pay more and more attention to risk assessment. internal control can significantly affect the occurrence of errors and fraud in business. mailto:azira.osmanovic1@gmail.com importance of internal control for creative accounting 94 i. theoretical basis of the research i.1. the term of creative accounting many people think that accounting is a "clean" job, and that financial fraud occurs outside of accounting. all over the world, including in bosnia and herzegovina, it is not an unusual situation that company owners and managers want to embellish the picture of the company's financial position, and try to show the company's performance better than what it really is. this is exactly the kind of "beautification" and "cleaning" that takes place in accounting. how the image of the company will be improved depends on the knowledge of the acountant. creative accounting at the very beginning had the task of enabling a realistic and objective presentation of the actual financial position and results of the company's operations through financial statements within accounting legal regulations. however, in practice, creative accounting has become synonymous with "manipulative accounting". although financial reports should be true, fair and reliable, they are often subject to numerous manipulations. manipulations that can be done often result from accounting standards, because accounting standards are often unclear and very complex, and assessments are subjective. in the beginning, creative accounting was not intended to be prohibited, but accountants were given the opportunity to apply accounting policies more flexibly. however, it is precisely this flexible application of accounting policies that has led creative accounting to become synonymous with manipulative accounting in practice. in this context, it is primarily based on whether there is flexibility and to what extent it is applied in accounting procedures (belak, 2011). the existence of flexibility, according to mulford and comiskey (2002), is necessary due to the economic environment and financial transactions that companies face, which in many cases are not similar in order for the same accounting practice to suit all of them. creative accounting can be defined as a process in which accountants use knowledge from the field of accounting standards and principles for the purpose of manipulating balance sheet positions and their values that are presented in financial statements. creative accounting is not a one-time act, but creative accounting is a long-term process, a multi-year process that starts small and ends with a waterfall of accounting manipulations, but it is also a phenomenon that can be carried out in a legal and legitimate way and in accordance with the applicable accounting regulations, rules and standards (negovanović , 2011). fraud mainly occurs where controls are weak, and where controls are not applied or do not exist. that is why it is very important to determine the level of internal controls in companies. it is precisely this strengthening of controls that reduces the possibility of fraud. i.2. purpose and motives for applying creative accounting based on the research, it was determined that there are numerous goals of using creative accounting in the company. if they are compared and analyzed in detail, we can conclude that these are goals, which are very important goals for management at all times. although different goals are stated by different authors, it is still possible to reduce them to the following four:  maintenance of investor confidence,  creation of bonuses, and use of stock options,  preparation for takeover or defense against hostile takeover,  postponement of income tax for future periods. azira osmanović, damir šarić 95 i.3. system of internal controls internal control plays an increasingly important role in the company's internal control system, and is reflected in the protection of assets, prevention and detection of fraud and irregularities that occur during business operations. evaluation of the internal control system is carried out by an internal audit. internal control was initially tasked with preventing and detecting fraud. today, the tasks of internal control are more complex, so different definitions of internal control can often be found in the literature. "internal control is a set of measures and procedures for constantly checking the operation of the accounting system and the business system in general with the aim of detecting and correcting errors before the audit procedure." (vujević, 2003). the system of internal controls is based on control and organizational procedures, but also other measures and policies that are adopted with the aim of implementing the business policy adopted by the management, as well as protecting the company's assets. internal control acts preventively, detects errors and frauds, ensures the correctness of accounting records, in order to have reliable financial information. internal control is an extremely complex activity, which is extremely important for the company. the internal control system is designed and implemented by the employees of the company at all organizational levels, but the management should make additional efforts so that the expected benefits are greater than the expected costs in order to achieve the effectiveness of internal control. the internal control system is established differently from company to company, primarily because of the different goals they have, but also because of the size of the company, number of employees, organizational structure, type of activity, etc. internal control implies analysis of the environment or conditions in which control is carried out, then risk assessment, undertaking control activities, information and communications, and supervision and monitoring. i.4. creative accounting in the system of internal controls companies have their own specifics of work, organization, or activities. establishing a quality and reliable system of internal controls in order to prevent the application of creative accounting is not easy to implement. internal controls were created to protect the company from creative accounting and various frauds. in order to prevent creative accounting, internal controls must be applied at all stages of the accounting process, and include control of the input, processing and output of information from the accounting system. internal controls include "drafting of written procedures that will define responsible persons, description of activities, procedures and execution deadlines and double signature records" (bedeković, 2013). to prevent creative accounting, internal controls are focused on the division of duties and authorities, and the employee cannot make and hide mistakes, irregularities and fraud, or execute transactions, or have control over the company's assets (gulin et al., 2012). i.5. overview of previous research many authors analyze the importance of internal control in preventing creative accounting. tušek et. al. (2014) define internal control as a series of procedures and actions that, through the principle of self-control, are performed by employees at all organizational levels, whose goal is to improve the efficiency and effectiveness of all business processes and operations as a whole. the association of certified fraud examiners (acfe) (2020) lists fraud in financial importance of internal control for creative accounting 96 statements as the main forms of fraud committed by employees of the organization, along with corruption and embezzlement. halilčević (2020) believes that in order for the internal control system to fulfill its role in preventing fraud, it is necessary to properly assess the risks faced by the company, and to design appropriate controls based on the assessed threats. rajković (2021) believes that the growing number of frauds and financial scandals in the last few decades justifies the skepticism and fear of external users regarding the credibility of financial statements presented by reporting entities. the coso framework (2013) states that "transaction controls are the most important controls in an enterprise, since they are directly related to risks in business processes established to meet set goals." according to deloitte (2021) "understanding the most important risks that threaten the company and designing relevant internal controls to mitigate these risks can be a key differentiating factor in the growth and development of the company". mahaček, bolfek and šakota (2015) believe that with the establishment of internal control, as well as internal audit, it provides greater opportunities for detecting and preventing fraud. ii. methodology ii.1. population and sample empirical research that was conducted tried to prove what are the motives for accounting fraud, and what are the consequences of these frauds. the target population in the research were employees in accounting, finance and internal auditors on the territory of bosnia and herzegovina. a questionnaire was used to examine the effectiveness of internal controls and creative accounting procedures. 91 employees who duly returned the completed survey questionnaires were surveyed. the paper set itself the task of investigating the significance of internal control in preventing the application of creative accounting. in accordance with all the above, the paper sets out the main and one auxiliary scientific research hypotheses: h1. the application of creative accounting has an impact on the quality of financial statements. ph1. with a well-established internal control, the application of creative accounting is prevented. ii.2. statistical analysis the conducted research is based on the collection of primary data, a method of surveys through a highly structured questionnaire intended for employees in accounting, finance and internal audits. out of the total number of questionnaires sent to 120 e-mail addresses, in the period from october 1, 2022 to february 1, 2023, 91 duly completed questionnaires were returned, which is a response rate of 76.00% of the total sample. the response rate is considered acceptable for this type of research, but it is noted that the results of this research are not a rule, but are certainly a good guideline for future research. adequate control is considered to have been established if it was planned and designed by the management with the aim of managing the organization's risks effectively, and achieving the organization's goals efficiently and economically. azira osmanović, damir šarić 97 iii. results at the beginning, creative accounting aimed to enable accountants to apply accounting policies more flexibly, however, in practice, creative accounting has become synonymous with manipulative accounting. in order to prevent manipulations with accounting data, it is necessary to introduce internal controls. this research sought to investigate whether accountants, financiers and internal auditors believe that internal control is important for preventing the application of creative accounting. on the basis of 91 duly completed questionnaires, a new picture was obtained about the application of creative accounting and the efficiency of internal control. in the research that was conducted, the respondents made an exceptional contribution to a better understanding of the subject matter. out of 91 respondents in the survey, 36 heads of accounting, 20 clerks employed in the accounting service, 27 clerks employed in finance, and 8 internal auditors gave answers to the questions. most respondents (68.1%) believe that the application of creative accounting affects the quality of financial statements. a smaller number (29.7%) of them believe that the application of creative accounting has little effect on financial statements, while there are the least number of those (2.2%) who believe that creative accounting has no effect on financial statements. figure 1. surveyed according to the evaluation of the efficiency of internal control in the company based on the conducted research on the evaluation of the level of internal control, where the respondents rated the internal control in their company on a scale of 1 to 5, the fewest respondents (only 2 respondents) believed that internal control was weak in their company, while the most respondents declared for moderate control in the company (37 respondents), while 15 respondents declared that a strong internal control was established in their company (figure 1). the research results show that the legal form of the company has no significant influence on the evaluation of efficiency, namely the largest number of respondents, regardless of the legal form, rated the internal controls as very good, good and excellent respectively, as shown on figure 2. 1 2 37 36 15 0 5 10 15 20 25 30 35 40 1 ( weak) 2 3 4 5 (strong) number of respondent importance of internal control for creative accounting 98 figure 2. surveyed according to the evaluation of the efficiency of internal controls on a scale from 1 to 5, analyzed according to the legal form of the company based on the research, an analysis was made of the average efficiency rating of the internal control system according to the legal form, which is shown in table number 1. in the case of limited liability companies, although there is the lowest level of implementation, where they are established, internal controls are rated highly, and the average rating is the highest 3.69. probably due to the smallest number of respondents, the highest rating was given to public companies with an average rating of 4. then followed by institutions with an average of 3.67, joint-stock companies that have established internal controls to the greatest extent had the worst average rating of 3.62. table 1. respondents according to the average assessment of internal control observed by legal form of the company legal form average grade ltd 3,69 joint stock company 3,62 public company 4,00 public institution 3,67 other 3,70 overall average grade 3,73 the most common procedures of creative accounting in bosnia and herzegovina, as well as those applied in the world, refer to provisions, then extraordinary income and extraordinary expenses, as well as the reduction of earnings. only four respondents mentioned off-balance sheet debts as a creative accounting procedure ( figure 3.) 0 10 20 30 40 1 2 3 4 5 other public institution public company joint stock company ltd azira osmanović, damir šarić 99 figure 3. creative accounting procedures according to the respondents these data are also confirmed by the analysis of financial statements, where it is observed that the most frequent manipulations occur precisely on the listed items in the balance sheets of companies in bosnia and herzegovina. by applying multiple regression analysis, the assumption about the influence of creative accounting on the quality of financial statements was verified in the research. table 2. statistical presentation of the influence of creative accounting on the quality of financial statements mod el r adjuste d r square std. error of the estima te r square chang e f change df1 df2 sig. f change durbin watson 1 ,686 ,450 ,60202 ,471 23,254 1 26 ,000 1,756 the correlation coefficient r (0.686) reveals a medium-strong connection between the observed variables, the influence of creative accounting on the quality of financial statements. f (23.254) indicates that the results are statistically statistically significant, and it is concluded that the application of creative accounting is related to the quality of financial statements. the obtained data confirm hypothesis h1, which assumes that there is a statistically significant relationship between the application of creative accounting and the quality of financial statements. table 3. statistical presentation of the connection between internal control and the application of creative accounting mod el r adjuste d r square std. error of the estima te r square chang e f change df1 df2 sig. f change durbin watson 1 ,644 ,415 ,63216 ,418 18,546 1 26 ,000 1,486 0% 5% 10% 15% 20% 25% 30% 35% reservations extraordinary income extraordinary costs off balance sheet debts reducing profits importance of internal control for creative accounting 100 the correlation coefficient r (0.644) reveals a moderately strong relationship between the observed variables, the connection between internal control and the application of creative accounting. f (18,546) indicates that the results are statistically significant, and based on this, the conclusion is reached that a well-established internal control affects the prevention of the application of creative accounting. the obtained data confirm hypothesis ph1, which assumes that there is a statistically significant relationship between internal control and preventing the application of creative accounting. conclusions accounting should be a "clean" job, given that it has principles that should be followed. however, as in any business, "creative" accountants appeared in accounting, and with them creative accounting. creative accounting does not have to be illegal, but the question arises as to whether it is ethical or not. financial reports should be true, fair and reliable, because only in that case they justify their role. financial statements are often subject to numerous manipulations. maneuvering space is found in accounting standards, which are often unclear and very complex, and assessments are subjective. with the introduction of internal and external control systems in the company, it is possible to reduce, but not eliminate, the percentage of fraud and manipulation by employees or company management. in order for the company's management to confront errors and frauds that may appear in the financial statements, it helps a lot: a reliable accounting system, appropriate control procedures, as well as a clear definition of the policy of accounting and financial statements. adequate human potential, an understandable code of ethics as well as the provision of continuous training for employees regarding accounting errors and manipulation of financial statements are also needed. in the end, it can be concluded that the application of creative accounting does not only endanger the company that applies it, but also the entire economic system of the country. in the fight against this growing problem, companies cannot rely only on existing controls to prevent and detect fraud, but must clearly define illegal activities and sanctions for those who commit fraud. discovering and researching the causes of fraudulent financial reporting, as well as a preventive approach and prevention of illegal and socially unacceptable behavior, aims to increase the level of security of users of financial information. bearing in mind the responsibility that the accounting profession has towards the social interest, as well as the scope of forensic accounting in discovering the causes and techniques of fraud, it is very important to point out future activities in the direction of developing unique educational and certified programs at the state level. given that criminal activities are represented in all spheres of society and are a burden to both developed and less developed countries, it is certain that this topic and the suppression of the application of creative accounting will be the subject of new considerations and further research. references 1. association of certified fraud examiners (2020). report to the nations: 2020 global study on occupational fraud and abuse. https://acfepublic.s3-us-west2.amazonaws.com/2020-report-to-the-nations.pdf 2. belak v.(2011).business forensics & forensic accounting. zagreb.belak excellens d.o.o. https://acfepublic.s3-us-west2.amazonaws.com/2020-report-to-the-nations.pdf azira osmanović, damir šarić 101 3. bedeković, m. (2013). the significance of accounting controls in the system of internal financial controls of budget users. practical management, 4 (1), 0-0. https://hrcak.srce.hr/118741 4. committee of sponsoring organizations of the treadway commission. (2022). about us. https://www.coso.org/sitepages/aboutus.aspx 5. deloitte. (2021). internal controls and risk assessment: what every private company should know. https://www2.deloitte.com/content/dam/deloitte/us/documents/audit/internalcontrolsand-risk-assessments-pov1.pdf 6. gulin, d. perčević, h. tušek, b. žager, l. (2012). business planning, control and analysis. zagreb: hzrif 7. halilčević, e. the impact of forensic accounting on corporate fraud in bosnia and herzegovina. journal of economics and politics of transition tuzla-zagreb-belgradebukurešt, 2020. vol. 23, no. 46. https://hrcak.srce.hr/file/397576 8. huzanić, b. (2015). creative accounting. accounting, auditing and finance. 5/15, 26-33. 9. mahaček, d. bolfek, b. šakota, b. (2015). the role of internal audit in preventing errors and fraud in the conditions of computer data processing. oeconomica jadertina, 5 (1), 48-64. https://hrcak.srce.hr/146892 10. mulford, c.w. comiskey, e.e. (2002). the financial numbers game. new york: john wiley & sons, inc. 11. negovanović, m. (2011). creative accounting and falsification of financial statements part three, accounting, auditing and finance, 3/11, 82-87 12. rajković s. (2021). the impact of creative accounting on the quality of financial reporting: empirical research in the republic of srpska. financing 03/21, 17-27. https://financingscience.org/wp-content/uploads/2021/10 /en_321.pdf 13. vujević, i. (2003). revision. split. faculty of economics in split 14. tušek, b. žager, l. barišić. i. (2014). internal audit. zagreb: hzrif https://hrcak.srce.hr/118741 https://www.coso.org/sitepages/aboutus.aspx https://www2.deloitte.com/content/dam/deloitte/us/documents/audit/internalcontrols-and-risk-assessments-pov1.pdf https://www2.deloitte.com/content/dam/deloitte/us/documents/audit/internalcontrols-and-risk-assessments-pov1.pdf https://hrcak.srce.hr/file/397576 https://hrcak.srce.hr/146892 https://financingscience.org/wp-content/uploads/2021/10%20/en_321.pdf agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 no. 1 (2023), pp. 126-134 126 the microcredit as a short-terms instrument for sustainable development the north-west region of albania: shkodra case m. zeneli, a. reci mimoza zeneli¹, armalda reci² ¹ business university collage of albania, e-mail: mzeneli2017@gmail.com ² credins bank of albania abstract. the sustainable development goals are a global call to action to end poverty, protect the earth's environment and climate, and ensure that people, regardless of location, can enjoy peace and well-being. recently notice that albanians tend to move abroad. recent trend show that albanians tend to move abroad. this is characteristic especially for the north of albania. shkodra region is a northwest part of albania that is known for its wealth of natural recourses, culture and traditions. it is surrounded by a lake, a sea, and a river; also the people of shkoder are called “the creedal of arts and knowledge”. but the poverty indicators prove the opposite. the poverty in this region is nearly 15 %, and the unemployment level is very high. people tend to leave shkodra. they have land and professions but they don't have the property legality and cash to exploit these natural resources. to have a sustainable development region, the government needs to take measures to help people to work their lands and to create their company. interviewing a sample of 200 people in rural areas in shkodra (borrowers/not borrowers) we notice that microcredit has a short-term impact in increasing their incomes and consequently contributes to reduction of immigration. before and after is the method used for impact analysis in order to reach the above conclusion. keywords: sustainable development, shkodra region, poverty indicator, microcredit impact, immigration. introduction the sustainable development goals (sdg) are a global call to action to end poverty, protect the earth’s environment and climate, and ensure that people everywhere can enjoy peace and prosperity. 19 un agencies are working together to support albania’s achievement of the sdgs, united nations albania (una,2022). one of the important objectives of the sdgs is "no poverty" which means "the elimination of poverty in all its forms throughout the world". albania has prepared a number of strategies that address development policies in various fields of development, which focus on the socioeconomic improvement of albania in the years 2021-2030, but based on the current situation of albania, the urgent need is to reduce inequality between the regions regarding main areas of development, especially in the reduction of poverty. this is and the first objective of sdgs mailto:mzeneli2017@gmail.com mimoza zeneli, armalda reci 127 i. problem statement the aim of the article is to study the assessment of the impact of microcredit on socio economic indicator of shkoder region regarding the reduction of the level of poverty as a first objective of sdg. access to financial services is crucial for economic development. microcredit is a development model is a model that has been adopted in many countries of the world to provide loans to the poor who have no or little collateral. based on the results on our analyses it was noticed the microcredit has an impact on family incomes as well as in improving health. i.1. poverty in albania the comparison of the risk of being poor for 2021, between albania and other countries of the region and the european union show that: the highest value of relative poverty is recorded in latvia (23.4%), romania (22.6%) ), bulgaria (22.1%) followed by albania (22%). the lowest poverty rates are recorded in the czech republic (8.6%), finland (10.8%), slovenia (11.7%), slovakia (12.3%) and denmark (12.3%). the average of european union countries (27 countries) is 16.8%, institute of statistics (is, 2021) according to the world bank, from 2021 to 2023, poverty will decrease by only 1.5 % in total, even less than in the last seven years, which proves "the very slow trajectory that poverty reduction has in albania". what is important to emphasize is that the level of poverty, as well as other socioeconomic indicators, are different in different regions. the shkodra region is one of the regions with the highest poverty indicators, as it is shown in table 1 table 1.poverty indicators by prefecture, 2012. poverty measures district headcount depth severity berat 12.3 2.3 0.7 dibër 12.7 2.3 0.7 durrës 16.5 3.6 1.3 elbasan 11.3 2.3 0.7 fier 17.1 3.4 1.0 gjirokastër 10.6 2.4 1.0 korçë 12.4 2.5 0.7 kukës 22.5 3.8 0.9 lezhë 18.4 4.7 1.8 shkodër 15.5 3.7 1.6 tiranë 13.9 2.7 0.8 vlorë 11.1 2.4 0.8 total 14.3 3.0 1.0 source: living standart measurement survey, lsms 2012* instat * after publishing the revised data for population 2001-2014 in may 2014, the data from lsms 2005, 2008, 2012 are revised. the microcredit as a short-terms instrument for sustainable development the north-west region of albania: shkodra case 128 the district of shkodra does not have the highest level of poverty, but what makes us analyse this district is the fact that shkodra is one of the districts with many natural resources, with an admirable geographical position on the border, with a tradition in education and culture, but regardless of these assets, it is ranked in the high-level poverty districts. i.2. shkoder district and natural resources the district of shkodra lies in the northern part of albania, in a territory of 3,562 km2, with geographical limits with montenegro in the north and northwest, with the district of kukës in the east and with the district of lezha in the south, while it reaches the adriatic coast in the west and southwest. the favourable geographical position in terms of cross-border relations enables the economic and territorial connections of shkodra with montenegro and kosovo, turning the city into a strategic point of the district; the climate is mediterranean, with a mixture of continental and maritime. in the southeast of shkodra lies the rozafa castle, at a height of 130 m above sea level and with an area of 3.6 ha, shkodër district council (sdc, 2010). to the north and northeast lays the plain of mbishkodra, while to the north and northwest is bordered by the albanian alps. in the opposite direction, about 30 km southeast of the city, lies velipoja, a beach on the adriatic coast. thus, within 30 km of the city there are a number of natural attractions, ranging from the high mountains of northern albania to the mediterranean coast of the adriatic, from the shores of the largest lake in the balkans to rozafa castle, which stands majestically on a city, where a hundred years ago there was a navigable river that brought foreign ships and passengers to its heart. shkodra is also one of the cities with a university. thanks to the very good natural resources that the shkodra region possesses and the favourable geographical position, this region has a suitable environment for the development of mountain and sea tourism, the development of agriculture and other economic activities. i.3. socio-economic indicators of shkodra district the population of shkoder district has a decreasing trend. if we refer to the statistical data of the internal migration of the population, we will notice that the departures from the county are greater than the incoming flow. compared to the general data, shkodra is the fourth district in terms of population migration in the country. table 2.domestic movements by county by variable, year and county. shkoder district year 2014 2015 2016 2017 2018 2019 2020 2021 incoming flows 1172 1338 2239 1692 1099 1682 1559 1994 outcoming flows 1830 2277 3409 2980 1559 2230 2367 2666 difference 658 939 1170 1288 460 548 808 672 source: is referring to the data on gdp or dgp per capita, we note that the trend is in decline. the growth rate of shkodra gdp in real terms is increased by 4.6%, being ranked as the eighth district (out of 12 districts) for the contribution to the overall gdp growth. mimoza zeneli, armalda reci 129 table 3. dgp for shkodër region. indicators in region measuring units 2015 2016 2017 2018 2019 2020* gross domestic product, in current prices mill. euro 554 582 596 655 699 668 growth rate of regional gdp % 1.6 3.1 -1.0 3.5 2.3 -4.6 gdp per capita euro 2,616 2,784 2,888 3,214 3,471 3,363 *evaluation for the year 2020 are based on semi-final estimation of gdp also, the official statistics shows that starting from the 2011-2012 school year, there is a decrease in the number of students registered over the years in all the universities of the country, including the university of shkodra. specifically, in 2011 there are 158,963 registered students nationwide and 14,538 students registered at the university of shkodra, which account for about 9.1% of the total number of students registered in all universities of the country. while in 2018, we have 113,277 students’ registered nationwide and about 8,245 students at the university of shkodra, which make up 7% of the total number of students. so, there is a decrease of 28.7% in the total number of students in the country compared to 2011, this also explains the decrease in the number of students at the university of shkodra. ii. methodology theoretically, a number of econometric techniques are known for impact evaluation, but their use requires appropriateness of data and the fulfilment of certain conditions. we have considered the "log-linear model" with an independent variable dummy most appropriate model regarding to the type and volume of data collected for measuring the impact or effect of microcredit on the socio-economic indicators of families in rural areas, gillespie, m. w. (1977). the dummy variable consists of the state of the indicators "before and after" receiving the microcredit. dummy variable d (before-after) takes the value 1 for the state before access to microcredit and the value 0 for the state after access to microcredit in the borrower group. in this way, the coefficient next to the dummy variable shows the impact of microcredit on the variable of interest, alba, r. d. (1987). based on above, the log-linear model was estimated and the corresponding coefficients were analysed for the assessment of the microcredit effects on each of the socioeconomic indicators considered in this analysis. through the analysis of the log linear regression coefficients it will be shown: (i) the impact of microcredit on the level of income in the rural areas of the shkodër district; (ii) the impact of microcredit on the educational level of the inhabitants; (iii) the impact of microcredit on increasing the level of employment of the residents of the rural areas, mckernan sm (2002); (iv) the impact of microcredit on improving the living conditions of the residents in the rural areas, chliova, m., brinckmann, j., & rosenbusch, n. (2015). ii.1. population and sample based on the fact that the study refers to the shkoder region, then the population will be the borrowers (residents of the rural areas of the shkoder region). a sample has been chosen which consists of 200 families who are beneficiaries of a loan in one of the microfinance institutions operating in these rural areas. data were collected before and after receiving the loan through the questionnaire prepared for this purpose. the microcredit as a short-terms instrument for sustainable development the north-west region of albania: shkodra case 130 ii.2. statistical analysis as we mentioned above, the data were collected through questionnaires by interviewing 200 borrowers. the sample consists of 80% men and 20% women. from the data analysis, it appears that approximately 60% of the interviewed borrowers belong to the middle level of education, 35% to the low level, and 5% to the high level of education. 95% of the interviewees are self-employed and 5% are employed in the public sector. regarding the profession of the respondents, 75% are workers, 15% are veterinarians and 10% are agronomists. based on the fact that the impact of microcredit is to be evaluated, data has been collected for the indicators that will be analyzed in two main periods before and after obtaining the loan. the period of access to microcredit is marked with t. t-3, t-2, t-1 are the periods before access to the microcredit, and t+1, t+2, t+3 are periods after access to microcredit. if there is a difference between the two periods, we will conclude that access to microcredit has an impact on the indicator that is being analyzed. iii. results the following table summarizes the results of processing the data collected from the selection of some key socio-economic indicators in two main periods, before and after access to microcredit. table 4. key indicators “before and after” loan in the borrower group. indicators unit 1 2 3 4 5 6 7 before after t-3 t-2 t-1 t t+1 t+2 t+3 income / family / month (all) 69,550 70,012 69,813 72,020 72,593 72,901 expenses for education/family/month ( %) 1.37% 1.45% 1.50% 1.87% 1.92% 1.98% expenses for social activities / family / month ( % ) 2.75% 2.75% 2.75% 2.78% 2.78% 2.78% average number of hospital visits (average number of medical visits / family/month) 2.6 2.4 2.3 1.95 1.8 1.75 average number of employees (average number of employees /family/month) 2.527 2.53 2.53 2.55 2.554 2.555 expenses for residence reconstruction (%) 6.69% 6.03% 6.71% 11.13% 11.56% 11.58% referring to the above table, it can be seen that all the indicators have an increasing trend, mimoza zeneli, armalda reci 131 starting from the period t-3 to the period t+3, exception for the number of visits to the hospital, a variable which has a negative trend. referring to the data in table 4, it is observed that the main indicators such as: "income", "employment", "education", "social activities" and "living conditions" have a shift in the increasing direction after receiving the loan in comparison with the dynamics of the indicators in the period before receiving the loan. the opposite happens with the "number of hospital visits", which moves in a decreasing direction after receiving the loan compared to the period before receiving the loan, which is evident due to the improvement of living conditions, the number of health visits is expected to decrease. iii.1. the impact of microcredit on the level of income in the rural areas of the shkodra district the following table shows the results of the "log-linear model", where the independent variable is the dummy variable itself and the dependent variable is "income". table 5. income change after access to microcredit. dependent variable: log(tr1) method: least squares sample: 1 200 included observations: 200 variable coefficient std. error t-statistic prob. c 11.32933 0.042750 265.0116 0.0000 dparpas -0.195406 0.060458 -3.232085 0.0025 r-squared 0.215628 mean dependent var 11.23162 adjusted r-squared 0.194986 s.d. dependent var 0.213085 s.e. of regression 0.191185 akaike info criterion 0.422442 sum squared resid 1.388967 schwarz criterion 0.337998 log likelihood 10.44884 f-statistic 10.44637 durbin-watson stat 1.433585 prob(f-statistic) 0.002541 referring to the data, it is noted that the coefficient near d is negative. this shows that after access to microcredit there is an increase in income by 1.16 percent points. when d has the value 1 (i.e. before access to microcredit), then log (tr) = 11.33-0.195, while if d = 0, then log (tr) = 11.33, a fact which shows that the impact of access to microcredit is approximately 1.16 percentage from the table, it is also observed that the p-value is 0.0025 less than the significance level 0.05, which means that the coefficient is statistically significant. meanwhile, based on the fact that r2 is around 0.22, it can be said that the model is statistically significant. referring to the graph, there is a positive shift of the graph (change which is identified with a dashed line) through which the increase in income as a result of access to microcredit is shown. 1 tr = “incomes”. the microcredit as a short-terms instrument for sustainable development the north-west region of albania: shkodra case 132 figure 1. income’s change after access to microcredit. referring to the above analysis, at the 5% significance level, there is sufficient evidence to support the statement that microcredit has positive impact on incomes. iii.2. the impact of microcredit on improving the health care level of residents in the rural areas of shkodra district the same methodology as above is used to evaluate the impact of microcredit on improving the health care level. below we will present the conclusions reached from the analysis. the dummy variable will be the same access to microcredit and the dependent variable will be the average number of visits to the hospital. from the processing of data, it can be observed that the the positive coefficient next to dummy variable (+ 0.498) shows that access to microcredit reduces hospital expenses by 4.98 percent points. the p-value is 0.0060 less than the 0.05 significance level, which means that the coefficient next to the dummy variable is statistically significant. meanwhile, based on the fact that r2 is around 0.18, it can be said that the model is statistically relativly significant. in conclusion, we can say that microcredit affects the improvement of the health level. iii.3. the impact of microcredit on increasing the level of employment of residents of rural areas of shkodra district the dummy variable will be the same, access to microcredit and the dependent variable will be the average number of employees. from the data analysis, we notice that the coefficient next to the dummy variable is 0.189000. also from the data table it is observed that the p-value is 0.4267 greater than the 0.05 significance level, which means that the coefficient next to the dummy variable is not statistically significant. this indicates that with a significance level of 5%, there isn’t sufficient evidence to support the statement that microcredit has impact on the level of employment. in the same way, it has been shown that microcredit has a positive impact on the improvement of living conditions. -0.6 -0.4 -0.2 0.0 0.2 0.4 10.8 11.0 11.2 11.4 11.6 11.8 5 10 15 20 25 30 35 40 residual actual fitted mimoza zeneli, armalda reci 133 conclusions microcredit has an important role in reducing poverty and improving the standard of living of families that have had access to microcredit, and therefore it is an instrument that contributes in the short term to sustainable development, microcredit summit campaign (msc,2009). achieving the objectives of sustainable development requires comprehensive planning and a cross-cutting strategy to unite common policies and solve the problems that arise in the horizontal plane. regardless of the existence of strategies and investment by the government in different areas of the economy, it is necessary to support the vulnerable population at the same time, since the impact of the macro economic regulations reaches this segment of the population later, demoralizing them. hubka, ashley, zaidi, rida. (2005) indicate that ““scaling up” will require increasing the scope (number of individuals reached), impact (effect on the well-being of borrowers), and depth (ability to reach the poorest of the poor) of microfinance. the idea is to make microfinance available not just to the moderate poor at whom it has traditionally been targeted, but also to the extreme poor and the vulnerable non-poor, and to expand the set of microfinancial products offered (cgap, 2003b)” (p.6) refering to the above results, it is noticed that the access in microcredit increases the incomes approximately by 1.16 percent points, that is a good result for poor families. also reduction of the hospital expenses by 4.98 percent points is another important impact of microcredit. also armalda reci (2021) estimated that “access to microcredit increases spending on the consumption of essential food products by 2.6 percentage points” (p.98). but with regard to the problems that albania has faced recently, immigration, it is necessary for the government to identify financial and political instruments that have an immediate impact in order to prevent the immigration of citizens from albania. one of these instruments can be considered exactly "microcredit". the creation of microcredit financial institutions in the region of shkodra specifically for crediting or guaranteeing loans to farmers who invest in agriculture, livestock and the field of agro-processing in accordance with agricultural development policies. the creation of training and advisory institutions and their financial support from the state, which enable counseling, training and orientation of the residents of rural areas towards appropriate and effective investments within the framework of the use of the resources they have available. the creation of the necessary advisory and guarantee instruments by the shkodra local or central institutions, which enable residents to benefit from the eu grants applicable for making investments in the framework of the development of rural areas. these measures are very important because they create premises for poverty reduction, and economic development of the rural area and consequently limited the abandonment of the country. references 1. alba, r. d. (1987). interpreting the parameters of log-linear models. sociological methods & research, 16(1), 45-77. 2. armalda reci (2021). socio-economic impact of micro-credit in rural areas of microcredit in shkoder district. (doctoral thesis, tirana university albania). form the microcredit as a short-terms instrument for sustainable development the north-west region of albania: shkodra case 134 https://unitir.edu.al/impakti-socio-ekonomik-i-mikrokredive-ne-zonatr-rurale-rasti-imikrokredive-ne-qarkun-shkoder 3. chliova, m., brinckmann, j., & rosenbusch, n. (2015). is microcredit a blessing for the poor? a meta-analysis examining development outcomes and contextual considerations. journal of business venturing, 30(3), 467-487. https://doi.org/10.1016/j.jbusvent.2014.10.003. 4. gillespie, m. w. (1977). log-linear techniques and the regression analysis of dummy dependent variables: further bases for comparison. sociological methods & research, 6(1), 103-122. 5. hubka, ashley, zaidi, rida. (2005). impact of government regulation on microfinance. ©washington, dc: world bank. from http://hdl.handle.net/10986/9133. 6. institute of statistics (2021). measuring income and level of living in albania, 2021. https://www.instat.gov.al/media/11129/anketa-e-t%c3%ab-ardhurave-dhe-nivelitt%c3%ab jetes%c3%abs-n%c3%ab-shqip%c3%abri-2021_final_publikim.pdf 7. mckernan sm (2002). the impact of microcredit programs on self-employment profits: do non-credit program aspects matter? review of economics and statistics, 2002. 8. microcredit summit campaign (2009). the state of the microfinance institutions and their clients’ world-wide, from http://www.syminvest.com/market/news/microfinance/state-of-themicrocredit summit. 9. shkodër district council (2010) “the strategic concept of shkodra's development” from https://www.qarkushkoder.gov.al/dw/mk/koncepti%20strategjik%20i%20zhvillimit %20rajonal_kszhr.pdf. 10. united nations albania (2022). our work on the sustainable development goals in albania (2023). from https://albania.un.org/en/sdgs/1. https://unitir.edu.al/impakti-socio-ekonomik-i-mikrokredive-ne-zonatr-rurale-rasti-i-mikrokredive-ne-qarkun-shkoder https://unitir.edu.al/impakti-socio-ekonomik-i-mikrokredive-ne-zonatr-rurale-rasti-i-mikrokredive-ne-qarkun-shkoder https://doi.org/10.1016/j.jbusvent.2014.10.003 https://www.instat.gov.al/media/11129/anketa-e-t%c3%ab-ardhurave-dhe-nivelit-t%c3%ab%20%20%20jetes%c3%abs-n%c3%ab-shqip%c3%abri-2021_final_publikim.pdf https://www.instat.gov.al/media/11129/anketa-e-t%c3%ab-ardhurave-dhe-nivelit-t%c3%ab%20%20%20jetes%c3%abs-n%c3%ab-shqip%c3%abri-2021_final_publikim.pdf http://www.syminvest.com/market/news/microfinance/state-of-themicrocredithttp://www.syminvest.com/market/news/microfinance/state-of-themicrocredithttps://www.qarkushkoder.gov.al/dw/mk/koncepti%20strategjik%20i%20zhvillimit%20rajonal_kszhr.pdf https://www.qarkushkoder.gov.al/dw/mk/koncepti%20strategjik%20i%20zhvillimit%20rajonal_kszhr.pdf agora international journal of economical sciences, aijes, issn 2067-3310, e issn 2067 – 7669, vol. 13 (2019) the role and functions of public finances in perspective cristina ioana antik1 1agora university of oradea, tineretului square str., no. 8, oradea, romania e-mail antikcristina@yahoo.com abstract the emergence of public finances is due to objectively determined needs and causes, their main function being to procure the financial resources needed by the state to exercise its responsibilities and, in this way, to intervene in the economy and society in general. public finances are necessary, subjectively and objectively, because they contribute to the accomplishment of the tasks and functions of the state, which could not be accomplished without the financial leverage. public finances are indispensable related to the existence of the state, and to the role of the public sector in the economy. thus, they express social relations, of economic nature that arise in the process of establishing and using public financial resources between the state, on the one hand, and the members of society on the other hand, in order to meet the general interest needs of society. thus, the role of public finances is to meet needs of general interest, or collective needs. keywords: public, finances, role, function, state. 1 introduction as a generalized expression of a certain group of processes and economic relations, public finances have to fulfill a certain social mission, in the sense that through them certain economic and social processes are carried out and play an important role by contributing to the achievement of private or economic objectives. general development of society, including the performance of various economic and social activities. the concept of function assigned to public finances designates their ability to mediate (under optimal conditions) the direct realization of certain economic processes expressed in monetary form and the development of appropriate relations between participants, as well as influencing the way they are carried out. most often, the fulfillment of public finance functions is materialized in the formation, distribution and use of public funds (financial) resources in the context of economic and social activities in which public authorities are involved. 2 the functions of public finances the specialized literature retains, most often, as functions assigned to public finances the distribution function and the control function, to which is sometimes added a function of regulating the economy, each of them mediating economic processes of distribution of a part of gdp. , achieving financial control, respectively stimulating the development of positive phenomena or counteracting negative phenomena in the economy and society [1]. three functions are assigned to public finances, namely: the function of distribution (or distribution) of resources; control function; the function of stabilizing (regulating) the economy. the distribution function appears as a component of the distribution one, meaning the mediation by the public finances of some processes of redistribution of resources between the natural and legal persons, with the involvement of the public authorities. this function is manifested by mailto:antikcristina@yahoo.com 2 taking over from public funds some parts of the income or assets of various individuals or legal entities in the form of taxes, fees, etc., and then distributing them in the form of public expenditures made according to criteria of equity or social justice. by default, its fulfillment materializes in the redistribution of a part of the gdp between the members of the society [2]. public finances also manifest themselves as a mediator of exercising control over money over various aspects of economic and social life. their ability to mediate the monetary-financial control over the development and results of different economic and social activities defines their control function. thus, the management of resources, in general, and financial ones, in particular, requires as accurate records as possible, on their existence and movement, knowledge and monitoring of their formation and use, ensuring maximum positive results, including compliance with certain management principles. and the regulations regarding the financial activity at the level of each entity or functional structure. in this context, public finances are also meant to mediate the exercise of monetary control over certain areas of economic and social activity by fulfilling the function of control. the stabilization function expresses the mediation by public finances of stabilizing influences on the evolution of economic and social life, thus having the ability to contribute to ensuring price stability, a high degree of employment, maintaining balance in relations thus helping to maintain an acceptable pace of balanced economic growth. 2.1 the function of public finances for the distribution of gross domestic product the function of the public finances of gdp distribution expresses their capacity to mediate the distribution in monetary form of the product created in the material activities, as a premise of accomplishing this process and in material form, to satisfy the needs of public consumption. in this function, public finances ensure the distribution and redistribution in cash of a large part of this product, and first of all, the redistribution of primary revenues achieved in the first phase of distribution, by individuals and legal entities, in favor of public authorities or entities. the manifestation of finances in this function implies, implicitly, the realization of financial flows aiming at the establishment of public funds and their distribution at various levels of the organization and functioning of the company. in terms of the processes of distribution and redistribution in monetary form of the national product, materialized by the financial flows (corresponding), the fulfillment of this function of public finances involves two phases (sides), namely: setting up (public) funds at the disposal of public authorities and entities; distribution on adequate destinations of the respective funds for the achievement of public objectives and actions. the two phases of the distribution function represent two moments of the same process, between them there are close links, of interconditioning. thus, the first phase is manifested by the mobilization of financial resources at the disposal of the state, respectively of public entities and the formation of their financial funds, not as an end in itself, but in accordance with the needs to be met, materialized by the destinations to be be given to the mobilized resources. the second phase involves the distribution by destination of the public funds established, being inevitably conditioned by the previous development of the processes of mobilization of resources to these funds, in the amount and moments imposed by the needs to be met. logically, it is acceptable that the procurement of money resources to public financial funds, in the manifestation of this function, is justified only in terms of directing them to meet specific public needs, and the distribution and use of such funds can take place only if , previously, the respective funds were set up. within the interdependence relations between these two phases of the distribution function, each fulfills both the role of determining factor and that of determined factor. thus, the establishment of funds, in the first phase, is objectively determined by the existence and size of 3 the financial resources needs assumed to be satisfied at the level of the respective entities as an expression of the second phase. these needs concretize, moreover, the destinations that must be given to the funds set up, depending on the actions, respectively the activities for the realization of which the resources that are accumulated in the first phase are consumed. therefore, the size and types of public funds that are constituted, in the first phase, depend directly on the destinations that will be given by their distribution and spending, in the second phase, which implies the need to correlate the dimensions of the needs to be covered with possible resources to be procured. however, the proportions of these processes of constituting public funds have an objective basis given by the real dimensions of the realized national product, although sometimes parts of the national wealth are used in the same framework. in its turn, the way of setting up the public money funds conditions, objectively and directly, the accomplishment of the second phase, first of all through the dimensions at which the accomplishment of the processes corresponding to the latter is ensured. thus, the distribution processes can be carried out only to the extent that the funds were created in the first phase of the distribution function. at the same time, the destination given to the money resources is dependent on the evolution of the constitution process, as dynamics and sources of formation of public funds. at the same time, we find that the interdependence of the two phases is amplified by the fact that the resulting destinations, in this second phase, include the possibility of creating favorable premises for the establishment (or non-establishment) of financial funds in the first phase. in this sense, it is typical the financing from public funds of some economic objectives that put into operation a national product, as a new value subject to the distribution and mobilization of new financial resources. or, if the dimensions of the allocation of resources with such destinations are larger, the processes of constitution and distribution of public financial funds are intertwined and condition each other to a greater extent. viewed at the macroeconomic level (in terms of public finances) the processes characteristic of the financial flows of establishment, respectively distribution and use of funds within the distribution function are dependent on those in which gdp is created subject to distribution, including public finances. thus, the product created and distributed in monetary form becomes the source of financial resources that later reach consumers and become a solvent demand addressed to the market and thus to the sphere of production, generating new values. the value distribution of the created product takes specific forms of money distribution, firstly, by making income in money by the participants in the directly productive processes, and secondly by establishing and then distributing financial funds at the disposal of public entities, respectively the state. . it should be noted, however, that the distribution of the product created in both phases is achieved by other means than financial ones. the financial forms through which the establishment, distribution and use of public funds by different public entities, including by the state, materialize differ significantly in time and space, meaning allocations or withdrawals of resources from and to the respective funds. by allocating parts of these funds to meet various consumption needs, those entities meet their own consumption needs in the form of goods and services in a natural-material form. the aggregate consumption demand itself also includes the one formed on account of financial resources, addressing the sphere of production, in order to create goods and services of the appropriate size and structure. thus, the accomplishment of the distribution function that belongs to the public finances is intertwined with the processes of creation, distribution and use of the national product in natural-material form, highlighting the interaction between the cash-financial flows and the real ones. first, financial inflows into public funds can have various sources of money (including 4 financial markets), just as (financial) outflows include a multitude of destinations given to money resources. the participants in the relations and financial flows characteristic of this function of public finances are public entities, respectively the state and natural or legal persons, either as taxpayers in setting up various public financial funds, or as direct or indirect beneficiaries of financial resources distributed from these funds. in the phase of setting up the financial funds, the natural and legal persons or the economicsocial entities transfer parts of their resources or incomes, in order to set up funds at the disposal of the different public entities or authorities. in the distribution phase, the participants in the respective financial relations directly or indirectly benefit from sums of money or social utilities at the expense of the expenses financed from these public funds. the main forms under which it is made are: taxes, fees, mandatory contributions, penalties, fines, royalties, revenues made by public institutions, state loans, financial aid, donations to the state. in their turn, the forms under which the phase of distribution of public financial funds materializes, within the same function are, mainly, public expenditures, which are differentiated on specific fields and actions (education, health, social protection, national defense, public order, etc). . they take forms of the expenses related to the creation of the material base of the public entities or of those of their functioning, cash resources as well as on the one of the personnel expenses. they are assimilated to the allocations from public funds, representing amounts of money transferred in favor of natural or legal persons, also known as subsidies. as an expression of the distribution function, the processes of constitution and distribution of financial funds have an objective character, but the technical modalities under which these processes are carried out, including the mentioned forms, have a subjective character. they are established by decisions adopted by the management and administration bodies of the various entities under the impact of the policies promoted at one time or another [4]. 2.2 the function of public finances to control economic and social activities the recognition of the control function of public finances has objective support in the fact that the manifestation of financial phenomena creates the necessary framework for the execution of financial control. by comparison, the work of financial control performed by certain persons who fulfill, within the created legal framework, administrative functions that confer attributions of financial controller’s imprints on this control a subjective component. the objective side of control through public finances lies in the fact that it can be performed by persons appointed to perform such control work where, in the foreground, processes and financial relations take place in which public authorities or entities are directly or indirectly involved, respectively public resources. the exercise of control through public finances therefore presupposes in an objective plan the existence, as its support, of public financial relations, including the development of activities based on the use of money with impact on the formation and use of public money resources, implicitly assuming the distribution function. two of its phases. naturally, the financial control considered as an expression of the fulfillment of this control function, is grafted on the operations and the monetary relations regarding the constitution and distribution of the public financial funds. therefore, between the two functions of public finances there are certain relations of determination, highlighting in the foreground the fact that the financial activity that materializes the distribution function provides the ground for the execution of financial control. on the other hand, the fulfillment of the financial control function favors the manifestation of the distribution function, including in the sense of generating new processes of constitution or distribution of public funds. 5 at the same time, it should be noted that, necessarily, the sphere of manifestation of the control function, although based on the manifestation of the distribution function, has larger dimensions, extending to other economic and social processes in interconditioning relations with those financial. from this point of view, there are two main categories of material processes included in the scope of the control function compared to the distribution one, namely: those consuming financial resources; respectively those generating new value and implicitly new financial resources. from this perspective, the exercise of financial control through public finances includes not only the sphere of distribution but also those of production, circulation and consumption, as in each of them processes are consumed or generate financial resources. thus, for example, financial control is exercised over production, because in this phase the values are created, which are subject to exchange and consumption, as well as the added value, which is subject to financial distribution, targeting expenses, revenues and results recorded. similarly, in the consumption phase, financial control aims at the structure, proportions, opportunity and efficiency of expenditures materialized in the intermediate and final consumption of public entities. on a broader level, expressing the ability of finance to mediate the exercise of control through money, based on financial relations, it is also known as monetary control involving the manifestation of money in their functions. thus, for example, the level of costs, the volume of investments, the value of goods production, the amount of profit, etc. it is evaluated by using money in its function of measuring (standard) value, but by the function of controlling finances it analyzes the correlations that are established between different value indicators for choosing the advantageous options for achieving objectives or actions. concerned. particularly important is the fulfillment of the function of money as a means of preserving or reserving the value that intertwines with the control function of public finances (especially), by monitoring and analyzing the processes of accumulation of money resources in centralized and decentralized public funds, respectively control over the mode of administration and the efficiency of their use. the fulfillment of the control function of public finances presupposes the creation of the adequate organizational framework, including the structures and regulations regarding the functioning of the control bodies in relation to the content of the economic and social activities subject to control. in this sense, the financial control can be exercised both from inside the public entities and from outside, through specialized institutions, distinguishing, as forms, the internal control and the external control. internal financial control is integrated into the functional structures of public economic and social entities, most often in the form of current preventive and operational control, especially at the level of operational structures. in turn, the external financial control is based on the creation and operation of institutions or bodies specialized in its exercise usually located at the level of other administrative structures than that of the entities subject to control, and within it, the central place belongs to state financial control. through bodies of the ministry of finance (public), respectively of the court of accounts, etc. 2.3 the function of public finances to stabilize the economy the existence of such a function of public finances is part of the context of the assumption by the state or other public bodies of an active role in the economy, either by indirect involvement in economic actions, or indirectly by influencing private economic activities. in both cases, however, this function outlines the manifestation of public finances as a means of influencing economic and social life and especially the economy in accordance with the general policy objectives promoted by public authorities. 6 by fulfilling this function, public finances mediate the counteracting of destabilizing phenomena (recession, crisis, unemployment, etc.) that disrupt the economic and social processes on the one hand, respectively stimulating the positive evolution of these processes, on the other hand. it is noteworthy that the development of modern theory of public finance by recognizing their possible stabilizing impact on the market economy subject to specific factors, which disrupts its imperfect mechanisms, provides scientific support for the realization of this function through appropriate public financial policies [5]. on the other hand, the quantitative and qualitative dimensions of new value-creating material processes are interconditioned with those of the formation and use of public financial resources. the possible regulatory impact of public finances on economic and social activities can be summarized in the following main directions: countercyclical adjustment or stabilization; stimulating economic expansion (growth); modernization, restructuring and adaptation of the economy to the requirements of the internal and external market. under the first aspect, the manifestation of this function consists in the use of public financial techniques and instruments as means for counteracting the economic crisis as a real or possible phenomenon, and of the unemployment that accompanies it, seeking to ensure a certain stabilization of production and employment. respectively, the attenuation of the cyclical oscillations, determined by the alternation of the periods of prosperity with those of economic decline. it involves financial facilities or restrictions designed to help avoid major syncopes. the second aspect aims at using financial techniques and instruments as propelling factors of economic activities, by stimulating investments and boosting the growth rate of production ensuring not only the relaunch of the economy or combating the growth slowdown, but also its expansion. under the third mentioned aspect that considers the involvement of public finances through specific techniques and tools for the processes of modernization and restructuring of national economies, either supporting the efforts of private economic agents or developing directly within the public sector, certain segments, branches or sub-branches either by restricting another and by ensuring that it adapts to the evolution of demand in the internal and external markets. the regulatory impact of public finances, based on the interaction of material processes with financial ones, is reflected in economic and financial variables whose dimensions condition the achievement of objectives, and the main tools used for this purpose are taxes, public spending, public budget. thus, for example, as objective premises of the regulation of the economy through public finances must be considered the interrelationships dependent on total income, composed of disposable income and tax on the one hand, with the size of total consumption (expenditure), structured in personal consumption and investments, on the other part, according to the following relations: v t = v d + t (1) ct = c p + i (2) where: v t = total income; v d = disposable income; t = taxes, fees, contributions; ct= total consumption; cp= personal consumption; i = investments. from the equalization of the two relations, in the form vt = ct, derives the correlation of the structural variables, reaching the finding of specific interactions, both between the two relations 7 and between the variables included in them. among these, it is obvious the indirect conditioning between the variables such as tax and investments in the sense that the change of the size of the former favors the change in the opposite direction of the latter. in conclusion, the regulation of the economy through taxes involves the adaptation of the size of the tax to the total income with its impact on disposable income and thus on the volume of investments. thus, if there is a trend of stagnation or recession, the recovery of the economy is possible by reducing the proportion of taxes, which will lead to increased disposable income, much of which can become a source of financing for investment. this resizing of the size of taxes becomes a premise for increasing investment and production capacity, including the creation of a large number of jobs and a significant reduction in unemployment. such an intervention through financial means is specific to the situation when there is a decline in economic activities, accompanied by the restriction of private investment and the increase in the number of unemployed in the total active population. on the contrary, admitting that there is a too accelerated pace of production (which corresponds to a small number of unemployed), which threatens to overheat the economy and create the conditions for its decline, it becomes possible to regulate in the opposite direction by raising taxes, reducing income available, private investment and production and thus moderating the too high rate of economic growth. similarly, but adapted to the content of specific processes, there is also regulatory intervention through public spending, considered a financial variable with an impact on the size of total consumption, aggregate demand and thus on supply. it materializes through adaptations of their size and structure, depending on the requirements of ensuring an upward, continuous evolution of the economy. the regulatory impact lies in the fact that an increase in budget expenditures, both an increase in public final consumption demand and public investment, can lead to an increase in investment, production and therefore the economy in periods when there are decreases of greater proportions. its large. in contrast, the option to reduce public spending results slowing down the pace of economic activities and, implicitly, attenuating cyclical oscillations in the opposite direction. in the same context, the regulatory action promoted by public finances includes the use of the public budget, by accepting the budget deficit and its financing from extraordinary resources, in the phases of economic decline, this becoming a factor of economic recovery and growth. 3 conclusions public positions have appeared with the evolution of society and are part of the objective process of the evolution of human society and requires the existence of minimum conditions to be able to manifest the character of economic relations. the conditions that made necessary and possible the appearance of public positions were: − the emergence and development of commodity-money relations able to allow the formation and use of state resources in monetary form; − the emergence of the state, which for the exercise of functions and tasks internally and externally, needed significant financial resources, which could not be procured in the commodity-money relations. following the historical evolution of finances based on the two conditions, it was concluded that public finances appeared with the arrangement of the primitive commune. this period did not know the appearance of the state or the monetary relations, and the economy had a deeply natural character. in the absence of the state, public functions were performed by people elected from among the community. the public authorities did not have a special coercive apparatus. as the production process developed, which was marked by the social division of labor, there was an increase in labor 8 productivity, an increase in production, and the development of exchange. production, exceeding individual consumption needs, determined the emergence of private property, the emergence of wealth inequalities and the division of society into social classes. in this way arose the need for an institution to protect the private property and privileges of wealthy people. this institution is the state that has played several forms in society over time. thus, as a final conclusion, i consider that the state is as that form of organization, an institution through which political power is exercised within the limits of a certain territory by a group of organized people who impose their will and interests on society. references [1] beleanu pavel şi anghelache gabriela , finanţe publice, editura economică 2005; [2] inceu adrian, pop florin, lazar dan, elemente definanţe publice, c.f.c.i.d., presa universitara clujeana, cluj-napoca, 2000; [3] moşteanu tatiana , finanţe publice, editura universitară 2005, [4] talpoş ioan, finantele romaniei, ed. sedona, timisoara, 1996 ; [5] văcărel, iulian, finanţe publice, editura didactică şi pedagogică, bucureşti, 2007 agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 no. 1 (2023), pp. 39-47 39 decarbonization as one of the ways to solve the problems of globalization a. korohod alona korohod international economic relations program, state university of trade and economics, ukraine orcid.org/ 0000-0003-3566-8038, e-mail: a.korohod@knute.edu.ua abstract. half a century, globalization has been a driving force in the development of world economies. besides positive effects, globalization has also caused negative consequences: accelerated climate change, degradation of natural resources, and increased emissions. that is why, in the last decade, the importance of climate and decarbonization policies has increasingly appeared on the world agenda. in addition, recent geopolitical events, including covid-19, the russian invasion of ukraine, further emphasize the importance of green solutions for recovery and decarbonization of countries' economies. this article aims to highlight the importance of decarbonization policies and identify the possibility of solving environmental and energy problems caused by globalization. through an analysis of existing literature and different countries' policies, the article identifies the potential of decarbonization policies to mitigate the negative impacts of globalization on the environment and energy sector. the findings suggest that the adoption of decarbonization policies can lead to a reduction in greenhouse gas emissions, improved energy efficiency, the development of renewable energy sources, and green jobs, ultimately contributing to a more sustainable and resilient global economy. keywords: globalization, decarbonisation, renewable energy, climate change, green jobs, energy efficiency. i. introduction for the last fifty years, globalization has been a key driver of economic growth and development worldwide. however, the rapid expansion of economic activity has also caused significant negative impacts on the environment, including climate change, resource depletion, and increased greenhouse gas emissions. as a result, in recent years, the importance of decarbonization policies has increasingly come to the forefront of global discussions. moreover, the recent geopolitical events, such as the covid-19 pandemic and the russian invasion of ukraine, have highlighted the need for sustainable and resilient economies. in response, many countries have increased their focus on decarbonization policies, recognizing the importance of green solutions for recovery and the decarbonization of their economies. i.1. globalization impact the adverse impacts of globalization on the environment have been widely documented by various studies. a study by the united nations environmental programme (unep) estimates that global greenhouse gas emissions increased by over 70% between 1970 and 2004, with the majority of the increase being attributed to energy-related activities (zhang, 2007). the intergovernmental panel on climate change (ipcc) has also identified the increasing concentration of greenhouse gases mailto:a.korohod@knute.edu.ua decarbonization as one of the ways to solve the problems of globalization 40 in the atmosphere as a key driver of climate change, leading to a range of environmental impacts such as rising sea levels, more frequent natural disasters, and loss of biodiversity (ipcc, 2022). i.2. geopolitical effect the covid-19 pandemic has exposed the vulnerabilities of the global economy and highlighted the need for more sustainable and resilient systems. the pandemic has led to disruptions in global supply chains, decreased demand for certain goods and services, and significant economic losses. governments and businesses have recognized the need to invest in more sustainable and resilient systems that can withstand future shocks. at the same time, the russian invasion of ukraine has led to a renewed emphasis on energy security and the need to reduce dependence on fossil fuels. many countries in europe rely heavily on russian gas imports, and the conflict has highlighted the risks of such dependence. governments have recognized the need to invest in renewable energy sources and reduce their reliance on fossil fuels to ensure energy security and reduce geopolitical risks. ii. methodology the methodology is focusing on a comparative analysis of established regulatory practices regarding the decarbonization of countries' economies, as well as the systematization of research and forecasts of scientists regarding the importance of decarbonization. in the context of the energy sector and the development of renewable energy sources, the methodology will include an analysis of policy implementation practices that aim to promote the growth of renewable energy technologies and reduce the reliance on fossil fuels. this analysis will include a review of policies such as feed-in tariffs, renewable portfolio standards, tax incentives, and subsidies for renewable energy technologies. overall, the methodology of the article will involve a comprehensive analysis of policies and practices that aim to promote the growth of renewable energy technologies and reduce the impact of globalization on the environment. by focusing on the energy sector and the implementation of renewable energy policies, the article will provide insights into the ways that decarbonization can be used as a means of addressing the challenges posed by globalization. iii. results iii.1. scientific view against this backdrop, there has been a growing recognition of the need for decarbonization policies as a means of mitigating the negative environmental impacts of globalization. decarbonization is the process of reducing or eliminating carbon dioxide and other greenhouse gas emissions from energy systems and other sectors. a report by the international energy agency (iea) highlights the importance of decarbonization in limiting global warming to well below 2 degrees celsius above pre-industrial levels, as outlined in the paris agreement (iea, 2021). there are many scientific articles that emphasize the importance of decarbonization policies. a large number of such articles focus on mitigating climate risks and reduce emissions through decarbonization (rockström, 2017). the article “a review of the global climate change impacts, adaptation, and sustainable mitigation measures” (abbass et al., 2022) is a sectorial assessment of climate change mitigation and adaptation approaches worldwide in the aforementioned sectors and the associated economic costs. the authors argue that decarbonization policies are necessary to mitigate the worst impacts of climate change and propose measures for mitigating negative effects in different sectors. alona korohod 41 william nordhaus in his article "the importance of carbon pricing for meeting climate targets" (nordhaus, 2017) argues that carbon pricing is essential for achieving the necessary emissions reductions to address climate change. the author discusses the economic benefits of carbon pricing and how it can help drive innovation and investment in clean energy technologies. the article “emissions reduction policies and their effects on economy” examines the relationships between emissions-reducing policies and their effect on the country’s economic growth (gdp) using carbon tax and co2 emission as explanatory variables and population and r&d as control variables (gurtu et al., 2022). another analysed block of scientific articles focuses on the economic benefits of decarbonization policies, arguing that they can promote job creation and economic growth. the authors write about pro-environmental economic model that changes the labor market and creates a green jobs (sulich and sołoducho-pelc, 2022), analyses connection between the further reduction of emissions and the short-term and long-term growth of employment in the energy sector (koasidis et al., 2022 ). in addition, it was observed that when analyzing decarbonization policies, scientists put a lot of emphasis on the energy sector and related policies. scientific results show that renewable energy in context of globalization have a significant impact in reducing co2 emissions (ulucak & yucel, 2021). the scientists came to a conclusion that countries should invest in renewable energy and environmental innovation aligned with the growth (sahoo et al., 2022), enhance the quality of governance and democracy, attract clean foreign direct investments, promote renewable energy use, and adopt clean economic growth strategies to decarbonize their respective economy (hamid et al., 2022). iii.2. policy responses moreover, many countries have increased their focus on decarbonization policies. governments have recognized the importance of investing in green solutions for recovery, such as renewable energy sources, energy efficiency, and sustainable infrastructure. analyzing the policies of different countries regarding decarbonization and recovery, it is worth highlighting the most widespread policy solutions of the countries on the reduction of emissions and the negative consequences of globalization processes: 1) carbon pricing: a carbon price is a fee imposed on fossil fuels' carbon content to incentivize the transition to low-carbon alternatives. a carbon tax or cap-and-trade system reduces greenhouse gas emissions from industries that contribute to globalization, such as shipping, aviation, and manufacturing. 2) renewable energy incentives: policies that encourage the development and deployment of renewable energy sources, such as solar, wind, and hydroelectric power, and help reduce the carbon footprint of globalization. this can include feed-in tariffs, tax credits, and subsidies for renewable energy investments. 3) energy efficiency standards: regulations that require more efficient energy use in buildings, appliances, and vehicles and focus on reducing energy consumption and greenhouse gas emissions from globalization. this includes energy performance standards, fuel efficiency standards, and building codes. 4) sustainable transport policies: policies that encourage sustainable modes of transport, such as public transit, biking, and walking, reduce the environmental impacts of transportation associated with globalization. this includes public transport infrastructure investments, electric vehicle incentives, and congestion pricing. decarbonization as one of the ways to solve the problems of globalization 42 5) circular economy initiatives: a circular economy is an economic system in which waste is minimized, and materials are reused, repaired, or recycled. this is used to reduce globalization's environmental impacts by reducing resource consumption, waste generation, and greenhouse gas emissions. policies encouraging circular economy practices include extended producer responsibility, product labeling, and waste reduction targets. iii.3. renewable energy incentives renewable energy policies are measures designed to promote the development and deployment of renewable energy sources. renewable energy policies can play an important role in mitigating the negative environmental impacts of globalization, by reducing greenhouse gas emissions from economic activities associated with globalization. moreover the attack of the russian federation on ukraine acted as a powerful catalyst for decarbonization processes, forcing the countries of the world community to rethink their perception of the russian federation’s fossil fuels as a source of funding for its military aggression (kudirko et al., 2022). in recent years, countries around the world have actively implemented renewable energy policies to promote the development and deployment of renewable energy sources, as a means of mitigating the negative environmental impacts of globalization and become more energy independent. these policies include feed-in tariffs, tax incentives, renewable energy standards, and carbon pricing, among others. the european union proposed the european green deal a centerpiece of its recovery plan, investing in renewable energy, sustainable transport, and circular economy practices. the european union's green deal is a comprehensive plan aimed at achieving climate neutrality by 2050, with a target of reducing greenhouse gas emissions by at least 55% by 2030 compared to 1990 levels. the plan includes significant investments in renewable energy, sustainable transport, and circular economy practices, among other initiatives. the european union's investment in renewable energy is particularly noteworthy, as the bloc has set a target of sourcing 32% of its energy from renewable sources by 2030. one of the key components of the european union's green deal is the eu renewable energy directive, which aims to increase the share of renewable energy in the eu's final energy consumption to at least 32% by 2030. the directive sets binding targets for each eu member state, taking into account their starting points and national circumstances. this policy has already had a significant impact on the decarbonization process in europe, with renewable energy sources accounting for 34.6% of the eu's electricity generation in 2020, up from 31.6% in 2019. this progress is expected to continue in the coming years, as the eu continues to invest in renewable energy infrastructure and technologies. the united states has also committed to significant investments in renewable energy and infrastructure as part of its build back better plan. the plan includes a proposed 2 trillion usd investment in clean energy over the next decade, with a focus on achieving 100% clean electricity by 2035. this investment is expected to create millions of new jobs in the renewable energy sector, while also reducing greenhouse gas emissions and increasing energy security. the plan also includes significant investments in electric vehicles, energy efficiency, and sustainable buildings. the united states has implemented a range of federal and state-level policies to promote renewable energy, including tax credits, loan guarantees, and renewable energy standards. many states have also implemented net metering policies, which allow households and businesses to sell excess renewable energy back to the grid. alona korohod 43 other renewable energy policies in different countries around the world: 1. germany: germany is a world leader in renewable energy, with a goal to generate 65% of its electricity from renewable sources by 2030. the country has implemented a feed-in tariff system, which guarantees a fixed payment for renewable energy generated by households, businesses, and utilities. 2. china: china is the world's largest producer of solar and wind energy, and has set a target to achieve 20% of its energy mix from non-fossil fuel sources by 2030. the country has implemented a range of policies to support renewable energy, including subsidies, tax incentives, and feed-in tariffs. 3. japan: japan has set a goal to achieve a 22-24% renewable energy share by 2030, and has implemented a feed-in tariff system to support the development of renewable energy. the country has also implemented energy efficiency standards and a carbon pricing system. 4. india: india has set a target to achieve 40% of its electricity generation from non-fossil fuel sources by 2030, and has implemented a range of policies to support renewable energy, including feed-in tariffs, tax incentives, and renewable energy certificates. 5. brazil: brazil has implemented a range of policies to promote renewable energy, including tax incentives, feed-in tariffs, and a renewable energy auction system. the country has also implemented biofuels mandates, which require a certain percentage of transportation fuel to come from renewable sources. iv. statistical analysis the transition to renewable energy sources such as solar, wind, and hydropower has been identified as a critical step in achieving decarbonization goals. a study by the european union’s joint research centre (jrc) highlights the potential of renewable energy sources to contribute to decarbonization efforts, with the authors noting that renewable energy technologies have become increasingly competitive with fossil fuels in terms of cost (tsiropoulos et al., 2020). figure 1. renewable electricity capacity growth by region/country, main case 2015-2020 and 2021-2026 source: international energy agency (international energy agency [iea], 2021) decarbonization as one of the ways to solve the problems of globalization 44 scientists and experts have emphasized the importance of decarbonization policies in addressing the challenges of climate change and environmental degradation caused by globalization. a study by the national renewable energy laboratory (nrel) in the united states found that in all modeled scenarios that the health and climate benefits associated with fewer emissions exceed the power system costs to get to 100% clean electricity (denholm et al., 2022). in addition, the report notes that such a green transition is quite real and not only in united states. the international energy agency is forecasting the growth of renewable capacity to accelerate in the next five years, accounting for almost 95% of the increase in global power capacity through 2026 (international energy agency [iea], 2021). moreover, according to the iea, the forecast increase in renewables is now 30% higher than the growth volumes anticipated before the russian full-scale invasion into ukraine. global renewable energy capacity is set to almost double, increasing by 2,400 gigawatts to reach 5,650 gigawatts by 2027 (international energy agency [iea], 2022). such predictable growth contributes not only to the reduction of pollution and emissions, but also to the growth of other economic indicators, in particular the number of jobs, green jobs. clean energy employment is “rapidly growing” and now accounts for more than half of all energy sector jobs, according to a new report. the first world energy employment report from the iea finds that hiring in clean energy has pushed energy sector employment globally above pre-pandemic levels – despite the oil and gas sector still struggling to recover from big layoffs in the initial stages of covid-19 (international energy agency [iea], 2022). russia’s invasion of ukraine and the energy crisis that followed have seen countries looking to “accelerate the growth of homegrown clean energy industries,” said iea executive director fatih birol. figure 2. energy employment in fossil fuel and clean energy sectors, 2019-2022 source: international energy agency (international energy agency [iea], 2022) thus, russia's war against ukraine became a catalyst for the introduction of renewable energy technologies. and it is worth noting, not only in the world, but also in ukraine, even despite the constant shelling of the energy infrastructure. with the beginning of the full-scale invasion, especially during the difficult winter period, ukrainians began actively install home installations in order to provide themselves with energy and be energy independent. in 2022, the share of investments in household solar power accounted for more than 60% of total investments in green genetation capacities. alona korohod 45 figure 3. investments in “green” generation capacity in 2021-2022 source: energy map v. conclusions the article highlights the significance of decarbonization policies in promoting economic growth and job creation, while reducing the carbon footprint of economic activities. this is in line with previous research findings which have demonstrated that the transition to a low-carbon economy can lead to significant economic benefits, including job creation, increased energy security and reduced costs of energy production. for instance, a study by the international energy agency found that the renewable energy sector has the potential to create up to 42 million jobs by 2050 (international energy agency [iea], 2022). this underscores the economic potential of decarbonization policies in promoting sustainable economic growth and reducing the risks of future shocks. moreover, the article highlights the importance of sustainable and resilient systems in reducing the risks of future shocks and providing solutions for energy independence. this is in line with previous research which has emphasized the need for resilient infrastructure and systems to mitigate the impacts of climate change and other shocks. for instance, a study by the global commission on adaptation (gca) found that investing in climate adaptation measures can yield significant economic benefits, including $7.1 trillion in net benefits by 2030 (verkooijen, 2019). this highlights the importance of adopting a holistic approach to decarbonization, which not only focuses on reducing emissions, but also on building resilient systems that can withstand future shocks and provide longterm solutions for energy independence. in conclusion, the article provides a compelling argument for the importance of decarbonization policies in promoting sustainable economic growth and reducing the risks of future shocks. the research has demonstrated the economic potential of decarbonization policies, as well as the need for resilient systems to mitigate the impacts of climate change and other shocks. as such, policymakers should prioritize the development and implementation of ambitious decarbonization policies at the national and international levels, in order to promote sustainable economic growth, create new opportunities for job creation and reduce the risks of future shocks. references 1. abbass, k., qasim, m.z., song, h., murshed, m., mahmood, h., & younis, i. (2022). a review of the global climate change impacts, adaptation, and sustainable mitigation measures. environ sci pollut res 29, 42539–42559. https://doi.org/10.1007/s11356-022-19718-6. decarbonization as one of the ways to solve the problems of globalization 46 2. denholm, p., brown, p., cole, w., mai, t., & sergi, b. (2022). examining supply-side options to achieve 100% clean electricity by 2035. golden, co: national renewable energy laboratory. nrel/tp6a40-81644. https://www.nrel.gov/docs/fy22osti/81644.pdf. 3. energy map (2022). investments in "green" generation capacity. https://map.uaenergy.org/en/search/resources/?search_query=investment+in+green. 4. gurtu, a., vyas, v., & gurtu, a. (2022). emissions reduction policies and their effects on economy. journal of risk and financial management, 15(9), 404. mdpi ag. https://doi.org/10.3390/jrfm15090404. 5. hamid, i., alam, m.s., kanwal, a., jena, p.k., murshed, m., & alam, r. (2022). decarbonization pathways: the roles of foreign direct investments, governance, democracy, economic growth, and renewable energy transition. environ sci pollut res 29, 49816–49831. https://doi.org/10.1007/s11356-022-18935-3. 6. international energy agency. (2021). net zero by 2050. a roadmap for the global energy sector. https://iea.blob.core.windows.net/assets/deebef5d-0c34-4539-9d0c10b13d840027/netzeroby2050-aroadmapfortheglobalenergysector_corr.pdf. 7. international energy agency. (2021). renewables 2021. analysis and forecast to 2026. https://iea.blob.core.windows.net/assets/5ae32253-7409-4f9a-a91d1493ffb9777a/renewables2021-analysisandforecastto2026.pdf. 8. international energy agency. (2022). renewables 2022. analysis and forecast to 2027. https://iea.blob.core.windows.net/assets/ada7af90-e280-46c4-a577df2e4fb44254/renewables2022.pdf. 9. international energy agency. (2022). world energy employment. https://iea.blob.core.windows.net/assets/a0432c97-14af-4fc7-b3bfc409fb7e4ab8/worldenergyemployment.pdf. 10. intergovernmental panel on climate change. (2022). climate change 2022: impacts, adaptation and vulnerability. contribution of working group ii to the sixth assessment report of the intergovernmental panel on climate change. cambridge university press. cambridge university press, cambridge, uk and new york, ny, usa, 3056 pp., doi:10.1017/9781009325844. 11. koasidis, k., nikas, a., van de ven, d., xexakis, g., forouli, a., mittal, s. gambhir, a., koutsellis, t., & doukas, h. (2022). towards a green recovery in the eu: aligning further emissions reductions with shortand long-term energy-sector employment gains. energy policy, volume 171, 2022, 113301, issn 0301-4215. https://doi.org/10.1016/j.enpol.2022.113301. 12. kudyrko, l., korohod, a., & buonocore, m. n. (2022). renewable energy of the eu countries in the context of risks of import dependence. zovnishnja torgivlja: ekonomika, finansy, pravo. no 4. s. 17-28. serija. ekonomichni nauky. https://doi.org/10.31617/3.2022(123)02. 13. nordhaus, w. (2017). the importance of carbon pricing for meeting climate targets. https://www.nber.org/system/files/working_papers/w23392/w23392.pdf. 14. rockström, j., gaffney, o., rogelj, j., meinshausen, m., nakicenovic, n., & schellnhuber, h.j. (2017). a roadmap for rapid decarbonization. science, 355(6331), 1269-1271. https://doi.org/10.1126/science.aah3443. 15. sahoo, b., behera, d.k. & rahut. d. (2022). decarbonization: examining the role of environmental innovation versus renewable energy use. environ sci pollut res 29, 48704– alona korohod 47 48719. https://doi.org/10.1007/s11356-022-18686-1. 16. sulich, a., & sołoducho-pelc, l. (2022). the circular economy and the green jobs creation. environ sci pollut res 29, 14231–14247. https://doi.org/10.1007/s11356-021-16562-y. 17. tsiropoulos, i., nijs, w., tarvydas, d., & ruiz castello, p. (2020). towards net-zero emissions in the eu energy system by 2050 – insights from scenarios in line with the 2030 and 2050 ambitions of the european green deal, eur 29981 en, publications office of the european union, luxembourg, isbn 978-92-76-13096-3. https://doi.org/10.2760/081488, jrc118592. 18. ulucak, z.s., & yucel, a.g. (2021). can renewable energy be used as an effective tool in the decarbonization of the mediterranean region: fresh evidence under cross-sectional dependence. environ sci pollut res 28, 52082–52092. https://doi.org/10.1007/s11356-02114350-2. 19. verkooijen, p. (2019, september 10). adapting to climate change could add $7 trillion to the global economy by 2030. global center on adaptation. https://gca.org/adapting-to-climatechange-could-add-7-trillion-to-the-global-economy-by-2030/. 20. zhang, y. (2007). warming of the climate system is unequivocal: highlights of the fourth ipcc assessment report. https://www.un.org/en/chronicle/article/warming-climate-systemunequivocal-highlights-fourth-ipcc-assessment-report. agora international journal of economical sciences, aijes, issn 2067-3310, e issn 2067 – 7669, vol 10 (2016) 14 the information management of the projects creț vasile 1 abstract methodologically point of view, the management of a company is studied based on the systems, methods, methodologies and techniques (general and specific) that the managers apply to fulfill the managerial functions. the managerial tool consists of systems, methods and management techniques that appeal to managers for foresight exercise, organization, coordination, assessment and control. informal subsystem is perfect adapted to the profile of the organization. it is integrated in the informational system of the mother company, being advantaged, because of its physical distance between locations, the electronic communications in detriment of paper. this fact implies the existences of a very good communication infrastructure. the main characteristic of a project is its newness. a project is a walk in unknown, full of risks and uncertainness. there are no two identical projects and even a project which repeats will be every time different in one or more commercial, administrative, social, politics or physic aspects. key words: project management, market, subsystems 1. project management the management is considered, by almost all the authors, to be the most important factor that influences the behavior of a company on the market. the person that works in this activity, the manager, is the one who takes the decisions that have a large or low influence upon the company, depending on the position he is in. the study of the organization management consists in a management system (a set of methodological, decisional, informational, organizational, psychological, motivational elements and the relations between them, so as to enable the objectives outlined 2 ), formed out of a lot of subsystems:  the methodological subsystem  the decisional subsystem  the informational subsystem  the organizational subsystem the most important are the management systems, management methods, design methodologies, redesign and maintenance of operation management and its components. 3 through decision making system of an organization we refer to all the decisions adopted and applied in its frame, structured correspondingly to the system, its objectives and configuration of the management hierarchy. the decisions are choices of the managers – chosen from several possible – that influence the behavior of decision making and operational behavior of other people. the decision making process is influenced by several factors, including the type of decision maker, the decision objective, the number and complexity of variants, the criteria and the consequences of the decisions. the information system can be defined as a set of data, information, flows and circuits’ information, procedures and means of information designed to help establish and achieve the organization objectives. 4 these 1 agora university of oradea, tineretului square nr.8, 410526, oradea, romania, vasilecret@univagora.ro 2 i. verboncu, organizaţii orientate pe proiecte, note de curs, a.s.e., 2009 3 i. verboncu, organizaţii orientate pe proiecte, note de curs, a.s.e., 2009 4 niculescu, o., verboncu, i., management, economica publishing house, bucharest, 1999 15 information and data are offered by informational procedures and together with the informational means (manual and automated) used inside a company creates the informational system. every company has a formal organization, based on internal documentation, which determines the existence of some functions, and posts required for the objectives, and an informal organization, determined by informal groups, necessary to fulfill the personal interests of the company’s members. the management personalization, and the people that implement it, is necessary to assure the adaptation of the company to a fast rhythm of changes which happen every day. the personalization implies profound changes of the management subsystem, and the implementation of different classic management system ( as for example: management through profit centers, management through objectives, management through projects, management through exceptions, management on product). in the business affairs from romania, the principles of the professional management began after the revolution from 1989, in especially because of the appearance of foreign managers. these principles where first applied at the multinational companies, and this thing forced the local companies to adapt, being threatened with bankruptcy. with all of these, in many romanian companies, in especially the state ones, the professional management remained an unknown, despite the certain advantage which this management can bring to a company. 1.1.the organizational subsystem the leader is “the person which, because of its formal and/or informal status (power, prestige, influence), mobilizes, organizes and leads the members and the group activities through establishing and touch their purposes” 5 . the documents which regulates activity in a company are internal regulations (ir), collective work contract and job description. in the last one are specified: the position of the employee, the department from which the employee is apart, study requirements and the years of experience for occupying the job, hierarchical relations, functional and cooperation, the duties and responsibilities associated to the work. besides the formal leaders, there are team leaders (that might be considered informal leaders), which coordinates the activity of a 4-5 members. these are not signed as managers in the company documents, but they have a functional authority above other team members. in general, from this category are elected the future managers, putting a smaller accent on external recruitment at this level 6 . structural organization of the company it’s a way of trimming of some organizational subdivisions in a certain configuration, for achieving the objectives 7 . in most of the companies, the structural organization is adapted to certain needs. management functions are reduced as much as they can; the accent is moved on execution functions. the numbers of hierarchical levels are low, realizing a flattened structure, in which the information moves vertically very fast. informal organization, which is formed from informal groups and their connections 8 , varies from a project to another. the groups are formed especially in accordance with putting different teams in a commune physic space and their experience in the company, and less on friendship relations between employees. the authority relations are established in the company between managers and subordinates (the hierarchic authority), but even in different departments. cooperation relations are established between jobs and compartments placed on the same hierarchic level, especially in the case in which compartments are involved to realize a project (for example between developing and testing). methodological subsystem from methodological side of view, the company uses in a higher grade than most of the romanian companies a modern managerial instrument. so, in the moment in which the company leadership is changed, 5 s. chelcea; p. ilut; enciclopedie de psihosociologie, economica publishing house, bucharest,2003, pag.207 6 nicolescu, o., verboncu, i., management, economica publishing house, bucharest,1999, pag. 42 7 i. verboncu, organizatii orientate pe proiecte, note de curs, a.s.e. 2009 8 op.cit. 16 there takes place a total reorientation of society management, moving from the classical management to the management through project, to be more exact, project management with staff. management through project is a management system with a limited duration, which facilitates resolving some complex problems, with a innovational character, by specialists, which work side by side with the formal organization structure. 1.2.informal subsystem informal subsystem is perfect adapted to the profile of the organization. it is integrated in the informational system of the mother company, being advantaged, because of its physical distance between locations, the electronic communications in detriment of paper. this fact implies the existences of a very good communication infrastructure. the information that can be transmitted in the company, between different compartments, are:  technical documents, which contain information regarding realizing the company products (for example the design of different new capabilities integrated in products, the documentation of products, different trainings etc.);  administrative documents (announces, requests, reports);  information regarding the evolution of current activities, designated to management. beside these information, there are exogenous information (from the exterior of the company), which contain data about the perception of clients about company products, information regarding the progress of rivals products and the university researchers from the interested domain 9 . the way of treating the information should be, in a big way, automated. the internal network (intranet) of a company can include equipment’s and specialized programs for the majority of the administrative activities, but also of project management. where is not possible the automated way of information, it is preferred using the email than paper, and this is how we can obtain a “paperless desk”. the advantages of using electronic information’s are:  the fact that finding information’s take seconds, comparing with minutes or even hours in paper documentation;  reducing operating costs by avoiding large archives and replace them with electronic archives;  reducing the risk of spreading information to unauthorized persons, secure information, destroy information quite easy 10 . 1.3.decision subsystem from the decision way, in the majority of the companies we mostly find the participative style, in which all the decisions are discuss with the involved parts. the final decision is individual, being taken only by the manager. in the annual prevision plan there is a larger decisional circle, where are included even lower level managers (even employees with experience), especially from the productive compartments. the decisions adopted at all levels have to target the following conditions: to target one or more precise objectives so that their achievement to be quantified exactly; to have more options from which to choose the optimum solution for achieving the objective, as well as a back-up solution; to take notice of economic, financial, temporal and social limitations. control function of management assumes the evaluation of results, comparing them with the objectives, finding the cause of the main positive and negative source and taking decisional solutions with corrective or 9 g. johns, comportamentul organizational, economica publishing house, bucharest, 1998 10 i. verboncu, organizatii orientate pe proiecte, note de curs, a.s.e. 2009 17 prophylactic character 11 . in the studied company, this function is tied with the rewards given to employees, the control result being the base foundation for material rewards. in the studied company, the control is decentralized, being made for each team. the results obtained are compared with the initial objectives for each employee, for each project, and in the quarterly and annual evaluation. the procedures are changed every year, based on the experience from the last years. with all of these, there are some management components that could be better. from these we remind:  learning from positive and negative experiences  treating employees with respect as well as to suppliers and clients, realizing a overlapping of the personal objectives with the company objectives  better work conditions, to increase productivity  to make a relation between the wage and performance  to respect the principles of the management through projects: involvement of all team members; approval from all the members of the project, measuring the success ( in terms of quantity, quality, time, efficiency and costs), compromise, strategy, control, unique communication channel, culture 12  reviewing and improving the methods used to identify the proper person for a job, he can a leader or worker, using in this way the optimum available human potential, rewarding of those who are worthy, avoiding conflicts between employees because of promotions on vague criteria, the bosses possibility to give orders to its employees etc 2. the computerized management of projects project management appeared as a planning, coordination, realizing and controlling instrument of complex activities from industrial, commercial, social, cultural and modern politics projects. it uses software applications in computerized management of projects 13 . the main characteristic of a project is its newness. a project is a walk in unknown, full of risks and uncertainness. there are no two identical projects and even a project which repeats will be every time different in one or more commercial, administrative, social, politics or physic aspects. project management is the process of planning, organizing and control of phases and results of a project with the purpose of obtaining a well-defined objective which usually has time restrictions, resources and costs. project management imposes planning, organizing, monitoring and control of all aspects and motivating all who are involved to realize the project objectives safety, in time limit, costs and targeted performance criteria. before starting project management it must be very clear identified its purpose. there are no projects without measurable objectives. the way the objective is set is specification. this is defined as a measurable expression of characteristics at which the product/service meet, being known by specialists as quantitative and qualitative needs offered by user. strictly, specification is a document which, in technical terms, the requirements which the realized product has to fulfil. the specification shows an actual solicitation of the client or can be a prediction for potential clients gathering drawings, models, plans, instructions or a written documentation which describes the projects objective. 2.1.the concept of project 11 i. verboncu, organizatii orientate pe proiecte, note de curs, a.s.e. 2009 12 d. savescu, a. budala, metode si intrumente pentru managementul proiectelor, brasov,2007 13 n. popescu, managementul informatizat al proiectelor – course notes 18 project is defined as a no repetitive process which realizes a new quantity, well defined, in some specialized organizations. projects characterizes as a unique action, specify, composed from a logic succession of activities, component, coordinate and controlled, with an innovation character by different nature, realized in an organize manner methodical and progressive, having time constrains, resources and costs, for obtaining with success complex results, needed to fulfill the objectives that are clear defined. in some projects, objectives can be better, and, the characteristics of the project are defined and adapt progressively by project developing. an individual project can be part from a bigger project. the realizing of a project is made through decomposing it in activities after “work breakdown structure” (wbs) method. the activities (work elements) are grouped in logical crowds “subprograms/work packages” with its subdivision in” activities/phases”. the project is developing in an organization which creates only on the existence of project 14 . the new created organization is called “consortium”. the performance of consortium is measured by its adaptability at realizing the projects objectives. the speed with which the employees of consortium unite their abilities and knowledges for finding solutions at realizing objectives is important. once a project objective is realized, the members of consortium make new different structure for realizing a new objective. the members of consortium have to have professional competences in the objectives problematics. a finished project leads to dissolution of the named consortium and regrouping the members of consortium for new projects. the flexibility and adaptability which characterizes a consortium, permanently permits the regrouping and recombining of human, physics and informational resources for realizing objectives. 2.2. life cycle of a project life cycle of a project is defined as the time period in which the project take time, as follows: marketing, elaboration of project proposal, winning the funding contest, thematic research for project realization, design for thematic research, production with realizing the thematic of the project, evaluation of project result, selling the project result with obtaining benefits, reusing and recycling some project results. the project realization impose crossing it through all stages of life cycle. life cycle of a project has the following stages: 1. identify, analyze, formulation; 2. preparing, estimation ( according with the fixed criteria), assuming; 3. implementation, monitoring, reporting; 4. final evaluation. the integrated conception on project management takes in sight 4 basic elements of a project:  time  budget(resources) – people, technology, money  quality ( a certain technology, performance, some characteristics of a product)  participants expectations ( financiers, members of project team, project manager, the beneficiaries, stakeholders – those involved in realizing projects – employees, shareholders, suppliers, public interest organism etc.). 15 so the stages of a project are:  project conception;  project planning;  project implementation;  evaluation/control and project revision dividing the project into several activities/tasks is needed from certain reasons: 14 d. hodgson, disciplining the professional: the case of project management, journal of management studies, volume 39, issue 6, pages 803-821,2002 15 d. hodgson, disciplining the professional: the case of project management, journal of management studies, volume 39, issue 6, pages 803-821, 2002 19 1. the project looks like a logical line of activities which help determining the optimum time graphic; 2. the activities can be easily controlled and evaluated; 3. it can be easily determined the need of personal and their skills. in the project management, planning means the “8p”:  project – why are we doing it?  paradigm/politics/procedures – how we do it?  paradigm refers at companies vision, what wishes it to obtain in future;  politics take care to establish the purposes, as modalities to reach a strategy, and procedures represent the action modalities through which the targeted objectives will be realized.  personal – who works?  program – when we do it?  performance – what we do?  price – who much does it cost? project implementation includes activities like monitoring, management of risks at which the project is exposed, finishing the project. in the evaluation stage of the project, the evaluation strategy will be established. it is necessary to make the periodical control in a time process to identify the deviations from the plan and the corrections that must be made. the fundamental processes can be found in the periodical reporting’s regarding project execution (the stat of the project, the forecasts for the projects future) and global control of the changes. helpful processes are:  the control of purpose change  the control of schedule planning  the control of costs  the control of quality  the control of risk answers. the processes of closing are:  closing contracts;  administrative measures of closing – gathering and disseminating information to give a legal form to shut down the project. 16 the post analysis of the project is a structure which gains a bigger importance. this is due the fact that the experience gathered on the course of the project will lead to avoid some past mistakes for the new projects. there are situations when projects can end abnormally. the causes that are at the base of these failures are:  wrong initial planning  insufficient resources  changes that occurred in the companies strategies and interests  quitting some key people from the project  exceeding the given time. bibliography 1. c. grey, management as a technical practice: professionalization or responsibilization, systemic practice and action research, volume 10, issue 6, pages 703-725, 1997 16 n. popescu, managementul informatizat al proiectelor – course support 20 2. d. hodgson, disciplining the professional: the case of project management, journal of management studies, volume 39, issue 6, pages 803-821, 2002 3. d. schweryler, professionalizing family business management, understanding family business, april 2008 4. g. benveniste, professionalizing the organization: reducing bureaucracy to enhance effectiveness, jossey bass, san francisco 1987 5. g. johns, comportamentul organizational, economica publishing house, bucharest, 1998 6. m. reed, p. anthony, professionalization management and managing professionalization: british management in the 1980s, journal of management studies, volume 29, issue 5, pages 591-613, 1992 7. n. popescu, managementul informatizat al proiectelor – course notes, 2009 8. o. nicolescu, i. verboncu, fundamentele managementuui organizatiei, tribuna economica publishing house, bucharest 2002 9. o. nicolescu, i. verboncu, i. cochina, c. nicolescu, d. popescu, abordari moderne in managementul si economía organizatiei : vol. 1 managementul general al organizatiei, economica publishing house, bucharest 2003 10. o. nicolescu,i. verboncu, management, economica publishing house, bucharest,1999 agora international journal of economical sciences, aijes, issn 2067-3310, e issn 2067 – 7669, vol. 13 (2019) implications of human trafficking on the romanian society camelia-elena nichita (vasile)1, miruna mutu2, gabriela bologa3 1, 2 ”valahia” university of târgoviște, doctoral school of economic and humanistic sciences, str. lt. stancu ion, nr. 35, târgoviște, romania 3agora university of oradea, str. p-ța tineretului, nr. 8, oradea, romania e-mails cam3vas3@yahoo.com, mutu.miruna@yahoo.com, gabi_fiat@yahoo.com abstract in order to raise awareness of the phenomenon of trafficking in human beings among different institutions (law enforcement, child protection, ngos) and to improve the measures they can take, the article aims to identify how severe is the phenomenon of human trafficking in romania. we also want to identify the repercussions of this phenomenon as well as to identify the solutions at political and legislative level in order to reduce or even combat this phenomenon. keywords: trafficking in human beings, victim (designates any natural person who is subjected to trafficking in human beings), sexual exploitation, forced labor or services, slavery, servicing or taking organs. 1. introduction motto: "ignorance is the mother of all crimes", honor de balzac international conventions ratified at national level define human trafficking in :, recruiting, transporting, transferring, accommodating or receiving a person, through threat, violence or other forms of coercion, kidnapping, fraud or deception, abuse of authority or profiting from the impossibility of that person to defend himself or to express his will either by offering, giving, accepting or receiving money or other benefits in order to obtain the consent of the person who has authority over another person, for the purpose of exploiting that person. exploitation consists of forced prostitution or other form of sexual exploitation, forced labor or forced services, slavery or similar practices, servitude, or organ removal. ” (law no. 300 of july 11, 2006 for the ratification of the convention of the european council on the fight against trafficking in human beings, adopted on march 3, 2005, signed by romania on may 16, 2005 in warsaw). also, the defense of human rights and fundamental freedoms is a permanent and common concern of all legal systems. according to the new penal code, art. 210, human trafficking is defined as follows: (1) recruitment, transportation, transfer, harboring or receipt of a person in order to exploit its committed: a) coercion, abduction, deception or abuse of authority; b) taking advantage of the impossibility to defend or to express their will or particularly vulnerable status of that person; c) offering, giving or receiving money or other benefits in exchange for the consent of a person having control over that person, shall be punished with imprisonment for 310 years, deprivation of certain rights. (2) human trafficking committed by a public official in the performance of their duties shall be punished with imprisonment for 512 years. (3) trafficking victim's consent is not relevant supporting. (3) human trafficking committed by a public official in the exercise of his duties is punished by imprisonment from 5 to 12 years. (4) the consent of the victim of trafficking is not a justifying cause. mailto:cam3vas3@yahoo.com mailto:mutu.miruna@yahoo.com mailto:gabi_fiat@yahoo.com 2 human trafficking by its forms of manifestation (sexual exploitation, forced labor, forced to beg or committing crimes) continues to be one of the social phenomena with a global coverage that brings significant moral, mental and physical harm to its victims and not only”. this phenomenon has become alarming, especially when children fall victim to the networks of traffickers. the most exposed to the recruitment /trafficking for the purpose of exploitation are the children, by the term "child" being named any person under the age of 18 years. under article 211 of the new penal code, child trafficking involves: (1) the recruitment, transportation, transfer, harboring or receipt of a child, in order to exploit it, shall be punished with imprisonment from 310 years deprivation of rights. (2) the punishment is imprisonment from 5 to 12 years and deprivation of certain rights when: a) the offense was committed under art. 210 par.(1); b) the offense was committed by a public official in the performance of duties; c) the offense endangered the life of a minor; d) the offense was committed by a family member of a minor; e) the offense was committed by a person in whose care, protection, education, protection or treatment is minor or a person having abused their recognized position of trust or authority over the minor. (3) trafficking victim's consent is not relevant supporting. there are few cases in which vulnerable people get into the hands of people for whom nothing is more important than the prospect of financial gains resulting from their exploitation. ” 2. recruitment of victims human trafficking, beyond the particular aspects registered at the individual level, is generally manifested through a succession of three stages: recruitment, transport and exploitation. recruitment arises from the romanian state, respectively one of the main countries of origin of the victims of trafficking exploited in the european countries. recruitment is materialized by the proposal made to the victim in the initial phase of the trafficking process, by the person trafficking. finally, this proposal is usually a false promise regarding the object or nature of the work, the destination of the victim's trip, the conditions in which he will be, will be kept or will work, or the place of the activity. recruitment can be done by a company, either directly or through a notice, through the media or the internet or by one or more persons, through different methods. recruitment, can be done by force or threat, or other coercive forms, by kidnapping, fraud, deception, abuse of power, exploitation of a vulnerability, by offering money or benefits, in order to obtain the consent of one person over another, all with the purpose of the exploatation”. in general, the article aims to contribute to the understanding of the trafficking phenomenon in romania, which, on the one hand, would allow the prevention and awareness campaigns to be targeted, effective anti-trafficking actions, and the specialists who contact the victims (prosecutors, judges, police officers, social workers, etc.) to establish the support measures in an effective way. in this regard, at present, experts in the field of anti-trafficking measures confirm the difficulties created by stereotypes (traditional opinions and perceptions of how trafficking works, who are the victims of this phenomenon and how to respond to this challenge), including the fact that trafficking is understood as sexual exploitation / prostitution, ignoring the complexity of the definition of trafficking which includes exploitation through work, begging, trafficking for the purpose of committing criminal activities. 2.1. main factors favoring at present, in romania, the main factors favoring human trafficking situations are: economic difficulties (poverty and unemployment), rural / urban disparities, migration, education and information level, deficiencies in the support provided by the community and in 3 infrastructure, ethnic differences, family (its disintegration and neglect of children), alcoholic parents, violence and abuse in the family or in institutions of protection, entourage. none of the above factors can explain or generate alone the phenomenon of human trafficking, they only work in concentrated. romania has been, in recent years, a country of origin for victims of human trafficking, in a condition of increased vulnerability of some segments of the population, in search of better living conditions. to the same extent, western countries have continued to maintain the status of exploitation countries for romanian people drawn into exploitation and trafficking situations, where there is the right context for tolerating begging, an increased demand for cheap labor. also, in the states where the legislation is permissive or where prostitution is tolerated or legalized, the demand coming from the consumers of sexual services, they are elements of encouragement for the vulnerable people, looking for more or less explicit sources of income, legal or illicit. 3. national / international legislative instruments romania's constitution, in the first article, guarantees as supreme values as human dignity, the rights and freedoms of citizens, the free development of human personality, justice and political pluralism. human trafficking is defined in art. 12 and art. 13 of law no. 678/2001 for the prevention and combating of human trafficking, with modifications and completions, the definition used at national level being in line with that of the protocol on the prevention, repression and punishment of human trafficking, especially of women and children. for the purpose of regulating the national networks of services and protection of victims of human trafficking, the services provided and their quality, measures regarding ensuring an optimal environment for the victims of human trafficking, ensuring the necessary qualified personal and its continuous improvement was adopted decision no. 1.238 of october 10, 2007 regarding the approval of specific national standards for specialized services of assistance and protection of victims of human trafficking. a legislative instrument with the purpose of protecting the victims of crime is law no. 211/2004 regarding some measures to ensure the protection of victims of crime by regulating measures to inform victims of crime about their rights, as well as psychological counseling, free legal assistance and financial compensation by the state. specific rules are provided for minors, in the sense that they are not obliged to set up an injured party or to make a criminal complaint, and the period of legal and psychological assistance is 3 months longer than for adults. in order to guarantee and protect the fundamental rights and freedoms of individuals, in particular the right to intimate, family and private life, regarding the processing of personal data, law no. 677/2001 for the protection of persons regarding the processing of personal data and the free movement of these data. thus, all victims of human trafficking, including the minor ones, benefit from these rights right from the moment they are identified. the un convention on combating organized and cross-border crime adopted in new york on november 15, 2000, as well as its additional protocol on preventing, combating and punishing trafficking in human beings, in particular women and children, highlights the role of cooperation in the prevention. and of combating the most operative of the organized crossborder crime being ratified at national level by law no. 565/2002. aspects regarding the protection of victims of human trafficking and especially of women and children, meticulously analyze preventive actions as well as cooperation which impose the achievement by adapting to the specific social policies in the field are regulated by this convention. also, romania, signed the convention of the council of europe on combating trafficking in 4 persons on may 16, 2005 in warsaw convention which was ratified at national level by law no. 300/2006. the actions of the anti-trafficking structures that target the punishment and the condemnation of the traffickers of persons, refer to the penal code, art. 182, art. 210, through which numerous organized criminal groups are destroyed and very high penalties are applied by the courts. 3.1. the visions of the national agency against trafficking in persons vs. the vision of the u.s. embassy in romania on anti-trafficking actions "the national agency against trafficking in persons evaluates and monitors, at national level, the activity carried out in the field of the fight against trafficking in human beings by public institutions and non-governmental organizations, fulfilling the role of national rapporteur". the national mechanism for identification and referral (mnir) is a formal framework for cooperation, based on which governmental institutions and intergovernmental organizations fulfill the tasks assigned to protect and promote the rights of victims of trafficking in persons, uniting their efforts in strategic partnership with civil society. mnir through the institution of the national rapporteur (national agency against trafficking in persons) records any victim or presumed victim referred to him by one of the institutions or organizations that have responsibilities in applying order no. 335 of october 29, 2007 for the approval of the national mechanism for identification and referral of victims of human trafficking. also, mnir records the data on persons, victims or suspected victims of human trafficking, which are referred by institutions and organizations outside the country. the goals of the mnir involve ensuring that the rights of victims of human trafficking are respected, as well as the implementation of effective victim referral procedures, institutions offering specialized protection and assistance services, as well as monitoring the quality of the services provided. the analysis carried out by anitp, both on the basis of their own statistical data, as well as by using the data and information made available by other law enforcement institutions, highlights an overview, doubled by a nuanced presentation, regarding vulnerabilities and the particularities of victims of human trafficking, registered in 2018, in the mnir. the analysis reflects the fact that, compared to past years, the characteristics that define the victims of human trafficking for 2018, remain unchanged from previous years. it is noted that the mechanisms for identifying victims exploited in the country are much more under the control of national institutions. it was found that significant difficulties arise in identifying victims, romanian citizens, but especially in the transnational referral, by authorities or organizations in the countries of exploitation. it was observed that the multiannual evolution of the size of the identified victim population retains the general trend registered during the last 11 years. the statistical data in the mnir indicate a decrease in the number of registered victims, in 2018, (from 662 victims, identified in 2017, to 497, in 2018). the data reflect a tendency recorded in the dynamics of the phenomenon of victimization through human trafficking, in a relevant period of time, over 10 years. it is appreciated that the decrease in the number of victims represents the multiplied result of the efforts of the authorities and civil society, over the last decade. it is appreciated that in order to be effective in the fight against trafficking in human beings, the correlated efforts of the authorities of the countries of origin with those of the countries where the exploitation takes place are crucial. it is important for romania to promote and implement demand reduction policies, in parallel with those aimed at reducing supply, in developing policies to reduce the phenomenon of human trafficking in the countries of exploitation. this aspect, well grounded in eu directive 36 of 2011, must be assumed by both the source countries of victims of trafficking in human beings and by the countries of 5 exploitation. romania mobilizes important human and financial resources necessary for the protection and assistance of victims of human trafficking, as well as for the prosecution and punishment of traffickers. the results of the actions taken by the state institutions are reflected on two levels, that of the action of the law enforcement authorities and that of the integrated interventions of the authorities, ong, as well as other institutions or organizations responsible for assisting victims. the actions of the anti-trafficking structures, from 2001 until now, are reflected in thousands of convictions, hundreds of organized criminal groups destroyed and very large penalties applied by the courts. in this regard, the us embassy in romania argues that "the split system of case reporting has affected the efficiency of the police and the coordination with the investigations and the criminal prosecution", "the authorities have accused the suspects of human trafficking for other crimes. , such as pimping ”,“ (29%) of the convicted traffickers received suspended sentences; the rest of the traffickers received penalties with imprisonment between 1 and 10 years ”,“ the lack of prioritization of human trafficking, widespread corruption and major legal and judicial reforms prevented the effective application of the law. observers reported corruption endemic and supposed complicity in human trafficking offenses of government officials, especially officials who exploited minors in state placement centers and acted in complicity with traffickers "," the small number of dedicated financial investigators prevented investigations financial and unavailability of assets, blocking the collection of evidence in cases of trafficking in human beings to corroborate the statements of witnesses, "a new law that reduces prison sentences for prisoners in improper conditions has led to the early release from prison of more than 500 convicted traffickers during the period covered by the report, "the judges did not treat prostitution and trafficking for sexual exploitation as different offenses, which had negative effects on the penalties imposed on the offenders and on the compensation granted to the victims", "although they mostly used funds in the donations for the training of police officers and prosecutors, the authorities organized, during the period covered by the report, a series of training programs on the topic of combating trafficking in human beings, for 25 members of the border police, ”the police especially from rural and rural areas. from small cities they are not aware of the potential for exploitation through prostitution, which has led to the identification of the signs of the use of force, fraud and coercion on persons who practice prostitution, including minors, “many police officers and judges lack the specialized training and sensitivity required in cases of trafficking in persons for the purpose of sexual exploitation and in matters relating to trafficking in persons, including a basic understanding of trafficking in human beings ” [11]. the priority recommendations for romania presented by the us embassy, on human trafficking (2019) are: according to the legislation in force, it is desired resolution in investigation as well as criminal prosecution in cases of trafficking in persons and punishment of traffickers with prison. it is necessary to extend the efforts of investigation, prosecution and conviction of the civil servants accomplices to acts of human trafficking as well as obtaining sufficiently severe sentences, corresponding to the gravity of the crime committed. increase the number of police officers investigating human trafficking offenses but also the number of financial investigators specialized in human trafficking cases. participation in professional development programs for police officers for working with victims, gathering evidence of human trafficking and understanding the phenomenon of psychological constraint. amend the legislation to allow the authorities to sanction the recruitment agencies for crimes related to trafficking in human beings. 6 in order to raise awareness of trafficking in human beings and to understand all forms of trafficking, it is necessary to increase the efforts of training of the officials involved in the judicial procedures especially of the judges, in order to professionally approach the cases of human trafficking and working with the victims. application of the national strategy and the national action plan 2018-2022 as well as the allocation of adequate financial resources. 3.2. the visions of the national agency against trafficking in persons vs. the vision of the u.s. embassy in romania on the indentification, protection and assistance on the victims. regarding the second register: identification, protection and assistance of victims, the first formal instrument was designed to identify victims of human trafficking and their referral (2007), with the purpose of adopting a common and integrated response, by all institutions and organizations involved in the identification, protection and assistance of victims, regardless of the institution or organization they came into contact, for the first time nmirv(national mechanism for the identification and referral of victims), a tool that has been refined and adapted throughout time through various tools, proposed by specialists who have encountered certain deficient situations. also, procedures were developed and introduced regarding the risk assessment and the special needs of assistance and protection of the victims, procedures regarding the assisted voluntary repatriation. at the same time, the procedure for granting the recovery and reflection period (90 days) was regulated, but there were also improved procedures or already existing aspects, which we mention the identification procedure or the indicators of identification of victims of human trafficking. tools were created to implement the processes described in the procedures, clarifications and standardization of some notions such as the potential victim, the presumed victim, the identified victim, the detection or identification of the victim of human trafficking, as well as establishing clear tasks in the responsiveness of the various institutions were required in the fight against trafficking. it is worth mentioning that no legal conditioning of the protection and assistance of the victims is established, which will be determined by the time or by the participation of the victims in the criminal process or by their collaboration with the judicial authorities. the protection services for recovery and reintegration are planned being provided on the basis of an individualized and integrated assistance plan made with the participation of the victim, periodically re-evaluated and permanently adapted according to the evolution of the victims situation and the way of meeting the set objectives. this plan is followed by a team of specialists involved, until the end of the case, with the participation and consent of the victim. it is also encouraged the participation of the victims in the judicial proceedings, by granting a period of recovery and reflection of up to 90 days, either by allowing them to recover, either to avoid the influence of the traffickers or to make a decision in knowledge of the case regarding the cooperation with the competent authorities.in this period of recovery and reflection the victims are counseled from the psychological point of view, from the point of view of social assistance, but also with regard to the applicable judicial and administrative procedures. according to the national agency against trafficking in persons, in 2018, the actions for the prevention of trafficking in human beings followed the national strategic documents (snitp 2018 2022, the national action plan 2018-2020 for the implementation of snitp 2018 2022, the national strategy for order and safety publishes 2015-2020 etc). most of the preventive actions of anitp were carried out in cooperation with institutions and organizations involved in the fight against trafficking in human beings. preventive campaigns were initiated and implemented together with institutional and non-governmental partners, all campaigns being adapted to the local and regional traffic specificity, but also to the different 7 types of exploitation and taking into account the particularities of the target groups of the antitrafficking message. regarding these issues, the us embassy in romania argues that: “the romanian government has reduced its efforts to protect victims of trafficking in human persons… civil servants and ong have identified 497 victims in 2018, the smallest number in 2018 the last 10 years, decreasing from 662 victims identified in 2017 "," as in previous years, less than half of the victims received assistance "," observers also reported that the authorities have penalited the persons involved in activities of prostitution, even if they were minors, without looking for indications of human trafficking ”,“ the permanent problems of the abuse and neglect of institutionalized children and the lack of early identification in the state institutions put the children in the placement centers in danger of becoming victims of trafficking "," the lack of government funds for ong assistance and protection services was still a problem "," the law provides for psychological and medical care for all victims ... the government did not offer more than one psychological counseling meeting and did not cover the cost of medical services. the ong paid the cost of all psychological services to the victims, as a result of the government's refusal to pay the psychologists who provided assistance to the victims and the cost of all emergency medical services, because the government did not provide financial assistance and the payment of medical services was made on the spot. … in order to have access to medical care, the victims in romania had to return to their home town in order to obtain identity documents” [11]. the priority recommendations of the us embassy for romania regarding human trafficking (2019) are [11]: a competent training of police officers and labor inspectors in order to recognize the indications of exploitation in such a way as to preventively identify potential victims, especially from the vulnerable population such as children from state placement centers, migrants and asylum seekers, persons involved in prostitution activities. according of psychological counseling to high professional standards and facilitating the access of victims to medical care. creating a formal mechanism for managing the funds and providing financial support to ong-s for victim services. in order to protect witnesses from reprisals and stigmatization and to encourage more victims to get involved in prosecution, it is requested that the names of all victims who testify at lawsuits for protection are not published. -the granting of protection in court and appropriate legal advice to the victims who attend the prosecution. in order to include a minimization of the judicial fees and an increase of the efforts to compensate victims, it is requested to review the retrocession mechanism. 4. conclusions conclusions of the us embassy for romania, on trafficking in human beings: "the romanian government does not fully meet the minimum standards for the elimination of trafficking in human beings, but it makes significant efforts in this regard" ... (priority recommendations of the us embassy for romania, regarding trafficking in human beings) (2019). the conclusions of the article refer to the improvement of the legislation, the extension of the monitoring system of the trafficked victims, also reiterating the need to increase the preventive measures and to increase the quality of the services offered. the less time the victims spend in human traffic, the more easily they are therapeutically approachable, the occurrence of mental disorders or very serious physical traumas is delayed and the easier the recovery and social reintegration becomes. 8 the romanian society of the present day places great emphasis on the material side, on the money. people, generally looking for resources, wealth, average survival, want to, with a minimum of effort, achieve the maximum result. i believe that this principle can also be applied in the above statement. thus, people want to gain legal or illegal financial benefits with minimal involvement. victims, most of the time, out of school, abused, vulnerable do not have the capacity to discern between reality and imagination. they fail to believe their own destiny in romania and choose to go abroad for the most part, not informing themselves in any way or putting their life in the hands of a person known for a short time or at all. also the traffickers have observed that they can obtain material advantages from the exploitation of other people, without manifesting any human feeling, the victims becoming objects (products) of consumption, with a view to the rapid enrichment of the traffickers. i think that today's society presents a moral crisis, which makes people no longer have any moral brake. this moral crisis manifests itself at the level of all stages of the romanian society. this can be explained by the fact that a state placement director from a city in the south of romania trafficked children in care, or officials who exploited minors in state placement centers and acted in complicity with traffickers. thus can be explained the endemic corruption and the alleged complicity in human trafficking offenses of government officials. in fact, people have forgotten that "work is an opportunity to give me something, to express myself and to achieve it"[13]. i also believe that education is needed for the development of a people, which is transforming children today, into tomorrow's adults. if today we have responsible, conscientious, persevering and correct children, tomorrow's adults will be the same. i believe that every citizen of this country can contribute in its own way to the creation of a prosperous and modern society, through involvement, proactivity, responsibility, professionalism and the promotion of values. references [1] https://lege5.ro/gratuit/gezdmnrzgi/art-182-exploatarea-unei-persoane-codul-penal; [2] constituția româniei, editura meteorrpress, 2019 [3] legea nr. 678/2001 pentru prevenirea și combaterea traficului de persoane, cu modificările și completările ulterioare; [4] hotărârea nr. 1.238 din 10 octombrie 2007 privind aprobarea standardelor naţionale specifice pentru serviciile specializate de asistenţă şi protecţie a victimelor traficului de persoane; [5] legea nr. 211/2004 privind unele măsuri pentru asigurarea protecţiei victimelor infracţiunilor; [6] legea nr. 677/2001 pentru protecţia persoanelor cu privire la prelucrarea datelor cu caracter personal şi libera circulaţie a acestor date; [7] legea nr 565/2002 pentru ratificarea convenției națiunilor unite împotriva criminalității transnaționale organizate, a protocolului privind prevenirea, reprimarea și pedepsirea traficului de persoane, în special al femeilor și copiilor, adițional la convenția națiunilor unite împotriva criminalității transnaționale organizate, precum și a protocolului împotriva traficului ilegal de migranți pe calea terestră, a aerului și pe mare, adițional la convenția națiunilor unite împotriva criminalității transnaționale organizate, adoptate la new york la 15 noiembrie 2000; [8] legea nr. 300 din 11 iulie 2006 pentru ratificarea conventiei consiliului europei privind lupta împotriva traficului de fiinte umane, adoptata la 3 mai 2005, deschisa spre semnare si semnata de românia la varsovia la 16 mai 2005; [9] ordinul nr. 335 din 29 octombrie 2007 pentru aprobarea mecanismului national de identificare și referire a victimelor traficului de persoane; [10] directiva 2011/36/ue a parlamentului european și a consiliului din 5 aprilie 2011 privind prevenirea și combaterea traficului de persoane și protejarea victimelor acestuia, precum și de înlocuire a deciziei-cadru 2002/629/jai a consiliului; [11] https://ro.usembassy.gov/ro/raportul-privind-traficul-de-persoane-2019 [12] http://anitp.mai.gov.ro//ro/docs/studii/raport%20national%202018.pdf [13] torrabadella p, inteligența emoțională la locul de muncă, editura allfa, 2009 https://lege5.ro/gratuit/gezdmnrzgi/art-182-exploatarea-unei-persoane-codul-penal?dp=gqytsojuguytq http://anitp.mai.gov.ro/ro/docs/studii/raport%20national%202018.pdf agora international journal of economical sciences, aijes, issn 2067-3310, e issn 2067 – 7669, vol 10 (2016) 35 the need to harmonize the laws of the european union regarding the succesion law laura-dumitrana rath – boşca 1 , loredana mirela barmoş 2 , ioana andreea (mihale) stănescu 3 abstract: the inheritance implies a balance between the will of the one who plans the anticipated transmission of his assets and the ones waiting for it. the creditors are equally put into equation in the transmission of the succession. the relations between these three categories of interest are regulated differently regarding the laws of succession of the states that favor either the interests of the interested in planning his succession or trying a "equilibrium" dampening discretion of the author of the inheritance, trying to protect his close family members (reserved to). 4 key words: inheritance, european union, harmonize, inheritance certificate, europe introduction in the past decades the technical scientific progress and continuous discovery of modern means of communication and the more refined information systems led to the rapprochement between people and people, states and countries, people and states. the european union law only regulates certain relations in civil law, family law, inheritance law, labor law, etc. the legal relations parties with foreign elements can be state, individuals or legal entities. the legal relations with one or more foreign elements are related to several legal systems. the science of law, the foreign element has been defined as "a circumstance in effect of which is legally tied to several countries, and consequently, several systems of law or laws belonging to different states." the objects, the content and the subject form the structure of the legal report and foreign element can be an attribute of each. for example, in a closed marriage between two people of different nationalities, the question, before the officer of civil status, will be on the law applied to the conditions of fund and form of the marriage in cause. in a legal report of the succession law which includes foreign elements we will encounter the same problem, the law applicability. 1 faculty of juridical and administration sciences, social sciences department, coordinating teacher agora university of oradea, oradea, romania, *correspondence: asis.univ.drd laura-dumitrana rath boşca, agora university of oradea, 8 piaţa tineretului st., oradea, romania e-mail: dumitra1970@yahoo.com 2 faculty of juridical and administration sciences, student, agora university of oradea, oradea, romania, 8 piaţa tineretului st., oradea, romania e-mail: loredanabarmos@gmail.com 3 faculty of juridical and administration sciences, student, agora university of oradea, oradea, romania, 8 piaţa tineretului st., oradea, romania e-mail: ionystanescu@gmail.com 4 dan andrei popescu, ghid de drept internațional privat în materia succesiunilor, magic print publishing house, onești, 2014, pag.6 mailto:loredanabarmos@gmail.com 36 although some skeptic people see the "new europe" as an experiment of transnational governing, those who believe that we are heading towards an impending globalization and believe in the european dream, which is characterized by a definite diversity in all aspects of social, cultural, economic, legal, etc., give hope to the generation´s growing interest for global and locally connection. the european union in the harmonization of national laws the european union was created by several sovereign states that have decided to choose a common destiny and in order to achieve agreements and joint actions in specific areas. these specific areas are areas where it is preferable for the member states to work and decide together not individual for their interest and common good. if when the european community began to be build namely the 1950 the harmonization of civil law was not among the objectives, the continuous development of relations and rapports between states and between nationals of the member states, free movement of people, goods, capital and services show increasingly clear need for harmonization of civil law in general, and especially in what concerns the inheritance law. today the european union is not technically a uniform system regarding inheritance law. this is a very difficult thing taking into account the specifics and peculiarities of the historical traditions evolution of each member state and their own moral, family and religious rules. the law of succession is regulated differently in each member state, from the classes of heirs, surviving spouse share, reserve succession and other major issues. this is one of the oldest and most conservative parts of civil law, reflecting the nation's way of being itself. but we will certainly always remember death and its effects, but it also marks the new beginning for us. the inheritance law is not confined only to an amount of technical rules, "accounting", aimed to distribute a heritage that risks of remains without an owner, but its principles designed to establish rules on transfer, transmission and share of the heritage, coming to legitimize posterity of the dead. this is concerned with maintaining and enhancing the harmony of this poster, which must mean dropping reasonableness and family ethics. the inheritance law is therefore closely linked to the idea of fairness and morality. but they are reported both in the author of the heritage and, equally, to those who make up the family. in addition, both equity and morality of an attitude are concepts that evolve over time and cannot be dissociated from the spirit of the age in which the succession is opened. 5 the laws of succession in the member states are characterized by their diversity. the unification efforts in this area are as sensitive as it seems insurmountable. the succession law is an important branch because it reflects the profound traditions of a country and mark the end of the author´s heritage and a new beginning for those who will inherit. it is an inexhaustible source of study because the national solutions of the member states present a great variety. until recently, the european union considered that the succession law is a branch of law that must be left to member states for separate regulations, but the events and diversity, multiplicity of legal relations of inheritance law, and taking into account the free movement of persons, goods, capital and services and all the problems that arise from this, it is clear the need for cooperation and the development of cross-border relations between the member states, to build both bridges between legal systems and possible regulation uniform. it may be noted that in the current european context, on different levels, efforts are made to modernize the law of succession. however, an only juxtaposition between the laws of england and germany is sufficient to see that the structures based on other traditions associated with different social, cultural or economic determinants are so far apart that it is difficult to reach a common and uniform settlement for the succession law within the european union. despite this, and the position that for a short period of time was believed that the problems of succession law is outside the competence of the european union, the vision of a uniform european law in matters of succession law always seemed tempting. therefore, legislators irrespective of the possibilities of eu 5 dan andrei popescu, ghid de drept internațional privat în materia succesiunilor, magic print publishing house, onești, 2014, pag. 5 37 legislative and theoretical arguments of recent years have changed the laws concerning the pro-european spirit of succession law. the european integration has been one of the most important factors shaping the new regulation. although so far there have been no serious efforts to harmonize european succession law, the concept of europeanization of this law is still alive. 6 one question that is impossible to predict today would be whether other amendments to the law of succession should move towards integration, or whether they should be limited to a simple implementation of national needs. in any case, it should be noted that the possible drafting of a new law in matters of succession should be based on a deep discussion about the state law. the influence of tradition stopped the circulation of national models beyond the state and the implicitly succession law harmonization at eu level. it is premature to talk about a unified european law of succession, common in all member states of the european union. although one of the most important objectives of the european community was, and still is, to promote a common market, and not to promote the unification laws of succession. 7 it is worth mentioning that there is still no international convention to standardize the law of succession. even in europe, in an era where a lot of discussion about the europeanization of the private law, there is no concrete project regarding succession. 8 but it was explicitly mentioned that the initiative does not refer to family law and succession law. 9 some harmonization attempts have been made at eu level since 1989, but this request was left aside considering that there are other more important areas of civil and criminal law to be harmonized. in 1994 it was raised the issue of harmonization by designing a european civil code, but unfortunately neither this date has been successful. it was not until july 11, 2001 when a first concrete step in the harmonization of certain civil matters and contracts is realized. the second practical step has been made in the action plan of the european commission "a coherent european contract law" on 12 february 2003, when the commission presented the findings at the earlier positions taken. 10 as can be assumed, the idea of a european civil code at least on a philosophical level seems fair and acceptable. while adjusting the succession law principles and concepts in a model is a very difficult process, such regulation is why the european union should adopt measures to harmonize legislation in this area. so in the absence of uniform rules and national disparities persist, they are a source of significant problems in legal relations with foreign elements, both for people who want to regulate in advance the situation of succession and potential beneficiaries, as for third parties holders or purchasers of the succession property. 11 the european council meeting in brussels adopted the "hague program" in 2004 12 , which show the necessity to adopt of a unification instrument of the law relating to succession law in the european union, and the creation of a european certificate of succession. this program does not regulate matters of succession law but the free movement of people within the eu and the opportunity to demonstrate, through the european certificate of succession, which is the heritage status of the deceased. august 17, 2015, is the date when the european regulation no 650/2010 regarding jurisdiction, applicable law, recognition and enforcement of decisions and authentic instruments of acceptance and not least the creation of a european certificate of succession governing this area of eu law came into force. this regulation introduces some significant changes in harmonizing the rules on succession law in all eu countries. it sets a new tool for documenting the succession rights of europeans. 13 6 b. ancel, le droit européen des successions. commentaire du règlement no 650/2012 du 4 juillet 2012, eds. a. bonomi, p. wautelet, brussels 2013, pp. 8 7 walter pintens, familia și succesiunea de drept în uniunea europeană. enciclopedia internațională de legi. vol. 1., 1997, p. 11 8 http://legeaz.net/dictionar-juridic/drept-succesoral-comparat 9 idem 10 idem 11 idem 12 dan andrei popescu, ghid de drept internațional privat în materia succesiunilor, magic print publishing house, onești, 2014, pag. 8 13 eleanor c. ritaine, national succession laws in comparative perspective, 14 era forum publishing house, 2013, pag.131-154. 38 the purpose of such regulation should be a fair, but above all effective regulation of succession cases that affect various countries of the european union. it replaces the existing national regulations under international law of succession, which is a major achievement of eu legislation in this area. this act has caused a lot of controversy even before it entered into force. it questioned the competence of the european union to harmonize legislation in this area. another controversy is the application field of the regulation and its legal implications. as a result of increasing migration within the eu and, more growth by acquisition of european assets outside their country of origin, were the starting points in the standardization of rules that apply to cross-border successions. therefore, regulation no 650/2012 is a response to the idea of unifying the succession law in europe. the divergences in national laws of countries belonging to the eu accounted for a long time a significant problem. to determine the law (the law of the countries) applicable to a succession or body should resolve the dispute but it is not always an easy task. this issue has become an increasing challenge for both law enforcement authorities and for doctrine. in the european union there are increasing cross-border succession cases. for this reason, it has been recognized that the rules of succession law could be the subject of many questions. the unification of succession law rules took place so far primarily to the international conventions (international treaties), but this was not enough. as the eu has set itself the objective to ensure the free movement of people (art. 3 par. 2 teu), it was necessary to adopt some actions in the private law area, with cross-border implications. 14 the regulation is therefore a comprehensive legal instrument governing international succession law of the european union. the european certificate of succession is the uniform document which may be issued by notaries or other competent authorities in successions with foreign elements and is governed by article 62, art. 63 and (67) of regulation (eu) no. 650/2012. if the heirs apply for a legacy with foreign elements, so the clerk may issue a certificate of inheritance under law no. 36/1995 and a european certificate of succession under regulation (eu) no. 650/2012. 15 the european legislature adopted an extensive conception notion of succession, which should include in its scope "all aspects of civil law relating to assets of a deceased person", that means "all forms of transfer of assets, rights and obligations of the concerned death, be it a voluntary transfer under a disposition of property upon death or a transfer form intestate succession.” so the scope of the regulation is expanded to include all matters that traditionally the law of the states circumscribes the scope of succession. 16 the recital (67) of regulation (eu) no. 650/2012 shows that: "for a succession of foreign elements into the union to be resolved in a quick, simple and effective way, the heirs, legatees, executors or administrators of the estate should be able to prove easily the status and / or rights and powers in another member state, for instance in a member state where the property of the succession is located. to enable this, this regulation should introduce a uniform certificate, the european certificate of succession (hereinafter referred to as "the certificate") to be issued for use in another member state. to respect the principle of subsidiarity, the certificate should not substitute internal documents which may exist for similar purposes in the member states. " article 62 of regulation (eu) no. 650/2012 provides: "the creation of a european certificate of succession (1) this regulation creates a european certificate of succession (hereinafter referred to as "certificate"), which is issued for use in another member state and shall produce the effects listed in article 69. (2) use the certificate is not mandatory. 14 jonathan harris, «the proposed eu regulation on succession and wills: prospects and challenges», 22 trust law international (2008), pp. 181-188 15 laura dumitrana rath-boşca, certificat european de moştenitor – vol. studii şi cercetări juridice europene, universul juridic publishing house, bucharest, 2016, pg.35 16 op.cit. dan andrei popescu pag. 9 39 (3) the certificate does not replace the internal documents used for similar purposes in the member states. however, a certificate issued for use in another member state produces effects listed in article 69 in the member state whose authorities have issued it in accordance with this chapter. article 63 of regulation (eu) no. 650/2012 states that: the purpose of the certificate (1) certificate is for use by heirs, the legatees having direct rights to the inheritance and the executors or administrators of the estate who must prove in another member state status or to exercise that right of inheritance or legatee and / or duties of an executor or administrator of the estate. (2) the certificate can be used, in particular, to demonstrate one or more of the following: (a) status and / or rights of each heir or, where applicable, each legatee mentioned in the certificate and respective shares of the estate; (b) the attribution of a specific asset or specific assets forming part of the estate heir / heirs, as appropriate, legatee mentioned (legatees mentioned) in the certificate; (c) the power of the person mentioned in the certificate to execute the will or administer the estate. " from the foregoing it appears that "the certificate of inheritance is issued in inheritance proceedings in which the heirs, legatees having direct rights for the succession, executors and administrators of the estate must prove their status or to exercise their corresponding rights in another state member.” 17 when the last habitual residence of the inheritance author or some goods that make up the estate are located in another state a european certificate of succession is issued. we can also encounter a situation where the element of foreignness to appear after the opening of succession proceedings, unless it has not been known that the deceased has assets in another european state, it leads to the issuing of a european certificate of death after initially it had been issued a national certificate of death. the general rule in this jurisdiction is written in art. 4 of the regulation. according to the article, the courts "in the member state in which the deceased was habitually resident at the time of death shall have jurisdiction to rule on the succession as a whole." 18 conclusion "the succession institution is an important component in the economic development and strengthens family relationships, society as a whole. beginning with the object, passing over the incipient and empirical rules and regulations, continuing with a developed and refined european or national law system, the "heritage" or "succession" has undergone various approaches both in terminology, and in philosophy, determined elements of economic development, legislative or policy that company ” 19 currently, it is possible to identify some general areas in which practical solutions in many european countries do not differ from each other because they are based on the guiding ideas that any potential legislative divergence is not a reason to consider uniform law impossible in the future. given that the core values and principles divergent legislative concepts are the same, finding common principles (denominators) should allow, in the future, making a detailed discussion on specific solutions and unified law of successions in the european union. bibliography 17 ioana olaru dreptul european al succesiunilor internaționale, uniunea națională a notarilor publici din românia, bucharest, notarom, 2014 18 dan andrei popescu, ghid de drept internațional privat în materia succesiunilor, magic print publishing house, onești, 2014, pag.29 19 liviu-bogdan ciucă, legal developments on inharitance, from rules under the primitive community to the european rules on inharitance, publicat în volumul „sgem conference on political scients, law, finance, economics and tourism” conference proceedings, vol. i, în cadrul international multidisciplinary scientific conferences on social scients and arts, albena, bulgaria, 2014 40 a. sources 1. anderson, miriam , arroyo i amayuelas, esther , the law of succesion: testamentary freedom, european perspective, european law publishing, amsterdam, 2012 2. b. ancel, le droit européen des successions. commentaire du règlement no 650/2012 du 4 juillet 2012, eds. a. bonomi, p. wautelet, brussels 2013, pp. 8 3. christian hertel, „european certificate of succession – content, issue and effects”, 15 era forum publishing house (2014), pp. 393-407 4. dan andrei popescu, ghid de drept internațional privat în materia succesiunilor, magic print publishing house, onești, 2014 5. eleanor c. ritaine, national succession laws in comparative perspective, 14 era forum publishing house, 2013 6. garb, louis, wood, john, international succesion, third edition, oxford university press, 2010, great britain 7. hayton, d, the significance of the hague conventions on trusts and on succession: a common law perspective; e pluribus unum. liber amicorum georges a.l. droz, nijhoff publishers, the hague/boston/london 1996. 8. ioana olaru dreptul european al succesiunilor internaționale, uniunea națională a notarilor publici din românia, bucurești, notarom, 2014 9. jeremy rifkin: visul european, bucharest, polirom publishing house, p. 294, 2006 10. laura dumitrana rath-boşca, certificat european de moştenitor – vol. studii şi cercetări juridice europene, universul juridic publishing house, bucharest, 2016, pg.35 11. liviu-bogdan ciucă, legal developments on inharitance, from rules under the primitive community to the european rules on inharitance, publicat în volumul „sgem conference on political scients, law, finance, economics and tourism” conference proceedings, vol. i, în cadrul international multidisciplinary scientific conferences on social scients and arts, albena, bulgaria, 2014 12. paul terner, «perspectives of a european succession law», 14 maastricht journal of european and comparative law, 2007, p. 151 13. sarah geber, die internationale zuständigkeit nach der vo nr. 650/2012, saarbrücken 2014, p. 19. 14. v.d zlătescu., drept privat comparat, oscar prinţ publishing house, bucharest, 1997, p. 249 15. walter pintens, familia și succesiunea de drept în uniunea europeană. enciclopedia internațională de legi. vol. 1., 1997 b. electronic sources 1. http://legeaz.net/dictionar-juridic/drept-succesoral-comparat http://legeaz.net/dictionar-juridic/drept-succesoral-comparat agora international journal of economical sciences, aijes, issn 2067-3310, e issn 2067 – 7669, vol 10 (2016) 9 a parallel between the general conditions of applicability of posdru – pocu bulzan ramona rebeca 1 roxana herdelău 2 abstract when we hear "pocu / posdru" we know that there are two funding programs carried out with the support of the european union and the state budget; pocu proposed for implementation in 2014-2020, and posdru implemented in 2007-2013. keywords: pocu, competitiveness, grant, structural funds introduction thus the two funding programs, strictly observe hrd human resources development programme 2007-2013 and pocu human capital development programme 2014-2020 presents the following fundamental successively sustainable development strategy of the eu economy as a whole taken. pocu continues in 2014-2020 in human resources development funding being allocated 5 billion euros 3 in the period mentioned above. 1. posdru objectives and scope of pos activities were established based on the analysis of human resource development. they have been defined in accordance with the following documents: 4 the joint assessment of employment policy employment (jap); national plan for employment 2004 2005; joint inclusion memorandum (jim); national strategy for employment 2005-2010; integrated guidelines for growth and jobs; accession economic programme 2005; short and medium-term strategy on continuous vocational training 2005-2010; the national strategy on social inclusion of young people over 18 who leave the child protection 20062008; government strategy for rromi people 2001; the national strategy for protection, integration and social inclusion of disabled persons in 2006-2013 "equal opportunities for people with disabilities towards a society without discrimination"; the national strategy of equality between women and men. strategy for decentralization of education (draft under discussion); strategic guidelines on education 2005-2008. 1 agora university of oradea, romania, e-mail: rebeca.bulzan2002@univagora.ro 2 agora university of oradea, romania, e-mail: herdelauroxana@yahoo.com 3 according to statistics data on fonduri structurale.ro 4 http://graduo.ro/economie/programul-operational-dezvoltarea-resurselor-umane-143961 accessed in 1st of november 2016 10 the main objective of pos dru was represented by human capital and increasing competitiveness on the labour market, by providing equal opportunities for lifelong learning and the development of a modern labour market. the specific objectives can be summarized as follows: 5  enhancing education and training of human capital;  human resources development in education;  promoting entrepreneurial culture;  facilitating the young people on the labour market. 2. pocu human capital operational programme sets out investment priorities, specific objectives and actions taken in the field of human resources, thus continuing investment through the european social fund in 2007-2013 and also contributing to the overall objective of the partnership (2014-2020 ap) european structural funds default and investment in romania, namely, to reduce economic and social development disparities between romania and eu member states. 6 parallel posdru – pocu posdru 7 pocu 8 priority axis 1. education and training in support of growth and development of knowledge based society priority axis 1. the initiative jobs for young people priority axis 2. connecting lifelong learning and labour market priority axis 2. improving the situation of young people neets priority axis 3. increasing adaptability of workers and enterprises priority axis 3. jobs for all priority axis 4. modernising public employment service priority axis 4. social inclusion and combating poverty priority axis 5. promoting active employment measures priority axis 5. community-led local development (dlrc) priority axis 6. promoting social inclusion priority axis 6. education and competencies priority axis 7. technical support priority axis 7. technical support priority axis 1. "education and training in support of growth and development of knowledge based society" has the general objective: developing routes flexible lifelong learning and increasing access to education and training by providing education initial and modern and quality, including higher education and research. ap 1 " the initiative jobs for young people " overall objective: sustainable integration on the labour market of young people, especially those who are unemployed, who are not in education or training, including young 5 idem, accessed in 2nd of november 2016 6 http://www.fonduri-ue.ro/pocu-2014 accessed in 1st of november 2016 7 www.fonfuri-ue.ro applicant's guide 2015 8 www.fonduri-ue.ro/pocu-2014 pocu synthesis http://www.fonfuri-ue.ro/ http://www.fonduri-ue.ro/pocu-2014 11 people facing risk of social exclusion and youth from marginalized communities, including the implementation of the guarantee for young people. priority axis 2. "connecting lifelong learning and labour market" overall objective: access to education, increasing employability and level of education and training of human resources through an approach of "lifelong" in context of the knowledge society. ap 2 " improving the situation of young people neets " sustainable integration on the labour market of young people, especially those who are unemployed, who are not in education or training, including young people who are at risk of exclusion social and youth from marginalized communities, including the implementation of the guarantee for young people. priority axis 3. "increasing adaptability of workers and enterprises' general objective is to promote entrepreneurial culture, flexibility and adaptability by supporting employment and enterprises competent, trained and adaptable. pa3 "jobs for all" access to employment for people looking for a job and inactive people, including long-term unemployed and people with little prospect of employment, including to the local initiatives of employment and support for labour mobility; self-employment, entrepreneurship and business creation, including some of microenterprises and small and medium innovative enterprises; adaptation to change of workers, enterprises and entrepreneurs; institutional modernization market forces work such as public services and private employment of the workforce and improving satisfaction market forces work by encouraging the mobility of workers and mobility program and through better cooperation between institutions and parties relevant stakeholders; increasing equal access to lifelong learning for all age groups in formal settings, formal and informal, updating knowledge, skills and competences of the workforce and promoting learning pathways flexible, inclusive by targeting and validation of competences acquired. priority axis 4 "modernisation of public employment service" overall objective: improve the quality, efficiency and transparency of employment services provided by the public employment service (anofm). pa 4 "social inclusion and combating poverty" socio-economic integration of marginalized communities such as the rromi people; promotion of social entrepreneurship and vocational integration in social enterprises and promoting social economy and solidarity to facilitate access to employment; increasing access to affordable, sustainable and high quality, including health care and social services of general interest. axis 5 "promoting active employment measures" has the overall objective to facilitate labour market integration of young unemployed and the long-term unemployed, attracting and retaining more people in employment, including in rural areas and supporting formal employment. ap 5 „community-led local development (dlrc)" local development. priority axis 6. "promoting social inclusion" overall objective: facilitating access to employment of vulnerable groups and promoting a cohesive and inclusive society to ensure the welfare of all citizens. ap 6 "education and skills" reducing and preventing early school leaving and promoting equal access to preschool, primary and secondary quality learning pathways including formal, non-formal and informal education and vocational reintegration; sustainable integration in the labour market of young people especially those who are unemployed, who are not in education or training, including young people who are at risk of social exclusion and youth from marginalized communities, including the implementation of security for the young; improving the quality and efficiency of tertiary and equivalent and access to them in order to increase participation and attainment levels, especially for disadvantaged groups; increasing equal access to lifelong learning for all age groups in formal settings, formal and informal, updating knowledge, skills and competences of the workforce and promoting flexible learning pathways including through career guidance and validation of competences acquired; increasing relevance labour market education and training systems, facilitating the transition from education to market forces work and 12 enhancing training and training systems, and their quality, including through mechanisms for anticipation skills, adaptation educational programs and the establishment and development of systems for learning at work, including dual learning systems and apprenticeship programs. priority axis 7 "technical assistance" aims general support for the implementation of pos dru and efficient use of the community financial support and national co-financing. pa 7 "technical assistance" improving the capacity of am and oi and pocu to manage and implement efficient and effective operational program; pocu improving beneficiaries' capacity to effectively and efficiently implement fse projects; raising awareness of beneficiaries and potential beneficiaries pocu regarding activities that may be subject fse, promotion and implementation of best practices and initiatives in the fse. posdru implemented while creating a human resource interdependencies between education and labour market development pocu implements this interdependence focuses on workforce quality through the development of human resources and skills of the labour market. the parallel between the two funding programs show changes regarding the applicability of their implementation so we emphasize: pocu financial and operational capacity 9 as a general rule, a legal entity cannot participate in more than 5 projects for each call for proposals, regardless of the applicant or as a partner. where is identified as participating in more than 5 projects on a request for proposals, all projects identified by the participating legal entity will be rejected. depending on the type of request for proposals, the applicant's guide specific conditions or amendments may contain exceptions to this rule. posdru financial and operational capacity: this condition does not exist. following a survey of the business environment and institutional framework, both by the funding authorities and their representatives directly, we found that a significant number of beneficiaries who have implemented projects posdru have difficulties in settlement of project expenditure, as effect of late payment applications for reimbursement and / or payment by the competent authority. the new financing program, pocu attempts by the ministry by funding authorities to regulate matters of a financial nature unwanted (unable to pay or the insolvency or bankruptcy) by capping the deposit up to 5 projects. pocu financial capacity of the partnership 1. public institutions 2. non-governmental organizations (ngos) older than 1 year 3. companies (sc) older than 1 year 4. non-governmental organizations (ngos) are older than 1 year 5. companies (sc) are older than 1 year posdru financial capacity of the partnership 1. public institutions 2. ong older than 1 year 3. srl older than 1 year 4. ong for less than 1 year 5. srl are older than 1 year the importance and relevance of this change is bringing added value to the principle of equal opportunities for posdru started and continued through this change, enabling the diversification of the types of companies to support the objectives well defined pocu. 9 guidelines on accessing funding under pocu 2014-2020, april 2016 13 pocu general rules on eligibility cash payments will only be used in duly justified circumstances (e.g. subsidies for the target group), only in situations where payments through the banking system or through postal order cannot be carried out. in these particular cases, the beneficiary shall require the prior consent of the am/oi pocu responsible. any cash payment made by the beneficiary / partner without prior am/oi pocu will be deemed ineligible. posdru general rules on eligibility: this condition does not exist. given the accounting policies romania's alignment with european and they are aimed at eliminating possible cash transactions so that pocu help achieve them by adding the above mentioned amendment. pocu expenses related to outsourced activities pocu funded projects are not mandatory auditing services and auditing. where, for implementing the project, the applicant decides to use the services, expenses will be classified as indirect costs. posdru auditing services and financial auditing quality assurance refund applications submitted during the implementation of the project and the expenditure incurred, are necessary services provided by a chartered accountant/chartered accountant and an independent auditor. analyzing goal this change, we can say that has both positive points and less favourable. we consider favourable financial terms that without mandatory outsourcing accounting expertise and financial audit intervenes in budget savings applicant also is in the process of gaining time applications for payment or reimbursement; the fact that an unfavourable accounting expertise and financial audit on the expenditure ensure their authenticity and accuracy, so if that occurred some errors, they could be checked and corrected. conclusion need for european funding for organizations in romania focused on human capital development have been, are and will be required to develop both horizontally and vertically to these organizations in this context based on the comparison between the two guides we conclude that the new guide pocu comes with a number of additions and clarifications but not enough detail on the small entrepreneur from romania. bibliography 1. according to statistics data on fonduri structurale.ro 2. guidelines on accessing funding under pocu 2014-2020, april 2016 3. http://graduo.ro/economie/programul-operational-dezvoltarea-resurselor-umane-143961 accessed in 1st of november 2016 4. http://www.fonduri-ue.ro/pocu-2014 accessed in 1st of november 2016 5. www.fonfuri-ue.ro applicant's guide 2015 6. www.fonduri-ue.ro/pocu-2014 pocu synthesis http://www.fonfuri-ue.ro/ http://www.fonduri-ue.ro/pocu-2014 agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 17, no. 2 (2023), pp. 110-120 110 implications of artificial intelligence in healthcare in developing countries: perspectives and challenges n. mikava, t. mamulaidze nino mikava1, tamta mamulaidze2 business and technology university, georgia 1 orcid id https://orcid.org/0000-0002-9567-3958, e-mail: nino.mikava@btu.edu.ge 2 orcid id https://orcid.org/0009-0006-3457-2842 abstract: the integration of artificial intelligence (ai) and machine learning (ml) technologies into the healthcare sector has catalyzed transformative changes across the globe. this comprehensive article delves into the multifaceted impact of ai and ml on healthcare quality, data management, and clinical practices. moreover, it examines these trends within both a global context and the specific framework of the republic of georgia. the purpose of this study was to specify the most important implications of ai in healthcare for developing countries and to assess perspectives and challenges of implementation. at the first stage, desk research was performed. fifty relevant scientific articles and reports were identified, by key words, with utilization of various scientific bases and analyzed. moreover, the major findings of the desk research, regarding implications of ai in healthcare in developing countries and challenges were used for the qualitative research. more specifically, in-depth interviews (overall 10) were conducted with various stakeholders of georgia’s healthcare system and two focus-group discussions (fgd) were moderated with medical professionals and specialists. the purpose of in-depth interviews and fgds was assessment of attitudes and perceptions of major stakeholders about ai implementation and utilization. according to the reviewed literature, perceptions and attitudes of stakeholders are very important for the successful implementation. however, this issue is not evaluated sufficiently, especially in developing countries. according to the results of the study ai can have substantial economic benefit for the developing countries, with consideration of the monetary savings, improved level of healthcare quality and increased patient safety. as the findings of the qualitative research demonstrate attitudes and perceptions of the doctors and important stakeholders represent a challenge for the successful implementation of ai. consequently, it is strongly recommended to centralize and prioritize this issue on a system’s level in the process of policy and strategy design. keywords: ai in healthcare, implications of ai in healthcare, ai for healthcare management, ai implications in developing countries. introduction the convergence of ai and healthcare has ushered in a new era of medical innovation. aipowered clinics and intelligent medical systems are revolutionizing healthcare practices, ranging from diagnosis and treatment to data analysis and administrative efficiency. these advancements hold great promise in enhancing healthcare quality and accessibility while optimizing resource utilization. https://orcid.org/0000-0002-9567-3958 mailto:nino.mikava@btu.edu.ge https://orcid.org/0009-0006-3457-2842 nino mikava, tamta mamulaidze 111 transforming healthcare landscape ai clinics represent a paradigm shift in healthcare service delivery. through machine learning algorithms, patient data can be analyzed rapidly and accurately, aiding in early diagnosis and predictive treatment strategies. global initiatives in ai clinics are addressing the shortage of medical professionals, particularly in remote areas, by providing virtual consultations and intelligent diagnostic tools. another area where ai's impact is far-reaching is healthcare quality. it not only assists medical professionals in making accurate diagnoses but also supports personalized treatment plans based on individual patient profiles. machine learning algorithms, when trained on vast datasets, can identify hidden patterns in patient data, leading to optimized treatment strategies and reduced adverse effects. one of the areas of healthcare quality where ai is showing promising results is hospital-acquired infection rate reduction. recent study conducted in mayo clinic found that risk prediction for hospital-acquired-infections (hai) with utilization of ai model can estimate risk of infection per individual patient, based on patient’s clinical features and characteristics of similar patients. this model was trained on 38,327 unique hospitalizations and a distinct model for surgical site infection prediction was trained on 18,609 hospitalizations. accordingly, researchers conclude that this model could enable hospitals to prevent early detection of hais, which in turn can result in decreased length of stay, mortality, and costs (wolff et al., 2020). it is well acknowledged that costs of medical care and national expenditures in this regard are dramatically increasing in all countries of the world. among several causal factors, increasing life longevity and increased number of chronic patients carry substantial part. even though there is a lack of compelling scientific evidence justifying cost-efficiency of utilization of ai in healthcare (khanna et al., 2022), it still can be forecasted to cause substantial savings, according to the effectiveness and process optimization it demonstrates (mathias, 2023). regarding costefficiency of ai in healthcare, special attention should be paid towards the internet of medical technology (iomt). iomt represents the fastest growing sectors of iot market, predicted to reach 176 billion us dollars by 2026 (shah&chircu, 2018). the most popular area of iomt utilization is remote patient monitoring and such directions, as glucose monitoring, heart rate monitoring, depression and mood monitoring, parkinson’s disease monitoring, iot connected inhalers, ingestible sensors, connected contact lenses and robotic surgery (rizwan et al., 2017). to return to the topic of healthcare quality mentioned above, according to the report delivered at the conference for the association of professionals in infection control epidemiology utilization of iot for hand hygiene “showed a 61.4% decrease in hais (hospital-acquiredinfection) across 10 hospitals that use technology” (www.cleanhands-safehands.com). hand hygiene is one of the most important areas in infection control in hospitals and one of the most challenging, as well, about compliance from medical personnel. to illustrate this technology, in the badges of clinicians there is bluetooth technology, which communicates with iot sensors affixed to soap and sanitizer dispensers in patient care areas. once a clinician walks into or out of a patient’s room, iot sensors detect this, and doctors have a certain number of seconds to dispense sanitizer or soap. if they don’t dispense, real-time voice reminder sound reminds saying “please sanitize”. in case of rooms where patient has clostridioides difficile the voice changes to “soap http://www.clean/ implications of artificial intelligence in healthcare in developing countries: perspectives and challenges 112 and water only” upon exit, as sanitizer does not kill c. difficile spores. furthermore, according to the data from ten hospitals, from the same study it has shown prevention of 372 total infections per year, translating into 9.5 million us dollar direct cost savings and 39 lives saved each year (fitzpatrick, 2020). literature review in the realm of healthcare, the integration of artificial intelligence has been a subject of profound investigation by healthcare experts. an array of seminal works and scholarly articles underscores the paramount significance of amalgamating technologies to propel the advancement of healthcare. these scholarly works provide a comprehensive view of the contemporary landscape of artificial intelligence within the healthcare domain, underscoring its capacity to revolutionize industry. specifically, it demonstrates its potential to enhance diagnostic capabilities, individualize treatment strategies, and elevate the quality of patient care. additionally, these scholarly contributions conscientiously recognize the multifaceted challenges of ethical, regulatory, and technical nature that necessitate meticulous consideration to facilitate the broad and conscientious adoption of artificial intelligence in healthcare. to be specific, one of these foundational papers by topol provides an overview of the potential of ai in healthcare, from diagnostics to treatment recommendations (topol, 2019). it emphasizes ai's ability to augment and improve human clinical decision-making. "artificial intelligence for healthcare: on a par with human clinical decision making?" in the research process, manu agarwal senior manager – growth, as a knowledgeable and cooperative contributor, has facilitated the acquisition of valuable insights and information. furthermore, the report featured on the markets and markets (markets and markets, 2023)) presents a notable projection for the artificial intelligence in healthcare market. according to this report, the market is poised for substantial growth, with an expected transition from usd 14.6 billion in 2023 to a noteworthy usd 102.7 billion by 2023. this growth trajectory is underpinned by a projected compound annual growth rate (cagr) of 47.6% during the stipulated forecast period. justus wolff et al’s article “the economic impact of artificial intelligence in health care” presents a systematic review of cost-effectiveness studies related to the economic impact of artificial intelligence (ai) in the healthcare industry (wolff et al., 2020). the central objectives of the study are to assess the quality of these studies and to highlight areas for potential improvement. this article offers a valuable review of the state of economic impact assessments in the context of ai in healthcare. it highlights the need for more robust and comprehensive studies to better inform decision-making in this rapidly evolving field. judy mathias article “use of ai to predict risk of hais” reports on a study conducted by researchers at the mayo clinic arizona, which focuses on the development and evaluation of an artificial intelligence (ai) model for predicting the risk of healthcare-associated infections (hais) (mathias, 2023). the study aimed to create an ai model capable of estimating individualized risk for hais by considering a patient's clinical characteristics and those of similar patients. this article presents nino mikava, tamta mamulaidze 113 promising results from the application of ai in healthcare, particularly in the context of hais. the ai model's ability to outperform traditional models and reduce costs is a significant advancement in the field. the findings highlight the potential of ai to enhance patient care and reduce the burden of hais on healthcare systems, underscoring the importance of continued research and development in this area. additionally, "challenges and opportunities for machine learning in healthcare" obermeyer and emanuel (2016) discuss the potential of machine learning in healthcare while also highlighting challenges, such as bias in algorithms and data privacy concerns (ghassemi et al., 2020). literature review effectively captures a range of perspectives on ai and machine learning in healthcare. it emphasizes the potential benefits of ai in improving patient care, reducing costs, and enhancing clinical decision-making. however, it also acknowledges the challenges related to bias, data privacy, and the need for more comprehensive economic impact assessments. enhancing healthcare quality through ai is an ongoing process that holds immense promise for improving patient outcomes, reducing healthcare costs, and enhancing the overall healthcare experience. it is essential for healthcare providers to continue to research, develop, and implement ai technologies while ensuring they meet the highest standards of accuracy, privacy, and ethical considerations. the exponential growth of healthcare data necessitates advanced management strategies. ai and ml play a pivotal role in processing and analyzing these massive datasets to extract meaningful insights. predictive modeling, data-driven decision-making, and patient risk stratification are some of the areas were ai shines in healthcare data management. machine learning algorithms are redefining clinical practices by enabling early disease detection, prognosis prediction, and treatment response monitoring. these algorithms continuously learn from new data, evolving their accuracy over time. ai's ability to analyze multimodal data, such as medical images and genomics, opens avenues for precise diagnostics and treatment personalization. in the georgian healthcare landscape, where certain diseases are more prevalent due to regional factors, ai-driven clinical practices can offer tailored interventions. this approach can significantly impact disease management, reduce treatment costs, and improve patient outcomes. the implementation of ai and ml in healthcare is not without challenges. ethical concerns, data privacy, algorithm bias, and the need for healthcare professional engagement require careful consideration. striking a balance between human expertise and ai's capabilities is essential. in the global context, including georgia, fostering interdisciplinary collaboration between technologists, medical professionals, and policymakers will be crucial in harnessing the full potential of ai in healthcare. methodology the purpose of this study was to specify the most important implications of ai in healthcare for developing countries and to assess perspectives and challenges of implementation. at the first stage, desk research was performed. fifty relevant scientific articles and reports were identified, by key words, with utilization of various scientific bases and analyzed. implications of artificial intelligence in healthcare in developing countries: perspectives and challenges 114 moreover, the major findings of the desk research, regarding implications of ai in healthcare in developing countries and challenges were used for the qualitative research. more specifically, in-depth interviews (overall 10) were conducted with various stakeholders of georgia’s healthcare system and two focus-group discussions (fgd) were moderated with medical professionals and specialists. the purpose of in-depth interviews and fdgs was assessment of attitudes and perceptions of major stakeholders regarding ai implementation and utilization. according to the reviewed literature perceptions and attitudes of stakeholders are very important for the successful implementation. nevertheless, this issue is not evaluated sufficiently, especially in developing countries. furthermore, the fgds were conducted online using zoom platform, led by an experienced moderator using appropriate „discussion guide“ and supported by a research assistant. the assistant was pre-trained in fgd method and specific aspects of transcript preparation. a total of ten in-depth interviews were conducted, six interviews were face-to-face and four by video calls. the average duration of an interview was 50 minutes. based upon informed consent all discussions and in-depth interviews were audio/video recorded and transcripts prepared based on them. transcript data were analyzed using ‘content-analysis’ methodology. analysis started immediately after the fgds were conducted and in-depth interviews ceased, respectively. consequently, ‘main ideas’ or ‘themes’ were summarized and highlighted using ‘concept map’ approach. results in the specific context of healthcare research in georgia, a burgeoning landscape is emerging as the country embarks on its initial forays into exploring the applications of artificial intelligence (ai). this research trajectory represents a pioneering effort, marking georgia's first exploration of the multifaceted possibilities of ai within the healthcare domain. it highlights the country's dedication to leveraging technological advancements to enhance its healthcare infrastructure and services. within this research landscape, georgia seeks to comprehensively evaluate the potential and implications of ai technologies in healthcare, a venture that is characterized by its novelty and forward-looking orientation. as the country takes these initial steps, the aim is to discern how ai can be effectively integrated to not only augment healthcare delivery but also to address the unique healthcare challenges that are intrinsic to developing nations. this pioneering research signifies a promising journey for georgia as it seeks to harness the transformative power of ai to optimize healthcare practices within its specific national context. this exploration is poised to lay the foundation for a deeper understanding of the applications, benefits, and potential limitations of ai in healthcare, fostering a rich research landscape within the country and contributing to the global discourse on ai in healthcare. the utilization of ai in developing nations carries substantial potential to enhance the quality of healthcare services and broaden healthcare access. nevertheless, this endeavor is currently grappling with fundamental challenges. these obstacles include a deficiency in public health infrastructure, a shortage of adequately trained healthcare professionals, and a prevalent nino mikava, tamta mamulaidze 115 apprehension of job displacement, as underscored in joshi et al.'s recent study (2022) (joshi et al., 2022). the fear of potential job loss among healthcare professionals engenders skepticism and mistrust towards ai and related technologies, thereby impeding their effective integration into healthcare practices, as noted in de abreu et al.'s research (2021), as cited by joshi et al. (2022). these challenges collectively constitute the primary impediments to the successful adoption of ai in developing countries. nevertheless, there is potential for a more harmonious alignment of expectations between healthcare professionals and ai technologies. moreover, fostering collaborative co-creation in the design and implementation of ai systems holds promise in mitigating these hurdles. this notion is consistent with findings in a systematic literature review by hogg et al. (2023) which addressed ai's role in healthcare (hogg, 2023). it is important to highlight that a notable gap exists in research pertaining to ai in healthcare within the context of developing countries, as indicated by hogg et al.'s review. further exploration of this subject may yield valuable insights to overcome these challenges and enhance the integration of ai in healthcare within developing nations. also, healthcare systems in developing nations frequently grapple with a chronic shortage of medical personnel. ai applications hold promise in addressing this persistent workforce deficit. the world health organization (who) acknowledges that the rapid integration of ai technology in healthcare comes with a set of notable challenges. one significant concern lies in the potential lack of comprehension regarding the intricate workings of ai technologies, often referred to as the 'black box' problem. this lack of understanding can lead to the risk of patient harm. additionally, ai technologies, especially those reliant on machine learning processes, are susceptible to biases inherent in the model itself and the data used for training. furthermore, ai applications in healthcare frequently involve access to sensitive personal information. consequently, there is a pressing need to establish effective measures for safeguarding and responsibly managing this data, as well as overseeing the purposes for which ai is deployed in the healthcare sector. the primary highlights revolve around three substantial challenges in the integration of ai in healthcare: a deficiency in transparency, regulatory and governance complexities, and a fundamental lack of comprehension among healthcare practitioners and patients. developing countries, including georgia, often encounter challenges related to the geographical distribution of healthcare professionals and the adoption of modern technologies and ai in healthcare. according to the opinions of the respondents, in the georgian context, ai empowered digital health platforms have the potential to bridge healthcare disparities between urban and rural regions. like many other developing countries, georgia’s healthcare system faces a challenge of medical professional asymmetry. more specifically, 70% of healthcare professionals work in the capital city and only 30% of the medical personnel serve the rest 70% of the country’s population in the regions. telemedicine empowered by ai can connect patients (even in the most distant areas of the country) with medical experts, overcoming geographical barriers and improving access to specialized care. moreover, interdisciplinary approach and value-based healthcare are the most accentuated aspects of the healthcare systems, that should be met for implications of artificial intelligence in healthcare in developing countries: perspectives and challenges 116 patient-centered care, better outcomes, and higher quality of treatment. in georgia, as in most developing countries, many regions and rural areas do not have specialists such as endocrinologists, ophthalmologists etc. this results in fragmented care and lack of care continuity. however, telemedicine provides a platform to offer multidisciplinary team approach to the patients living in rural areas. even more, shortage of specialists in certain areas represents significant challenge in georgia’s healthcare system, as well as in other developing countries. “brain drain”, migration of talents to developed countries leaves developing countries scarce of highly qualified specialists. with the application of ai optimization of resources becomes available. for instance, in telemedicine settings with ai involvement preliminary diagnosis can be made with analysis of various images, scans and recordings of lung and heart sounds. and human intelligence should be used only for special cases. this frees time for specialists for more significant cases and decreases time for diagnosis for the patients. rather interesting topic emerged in the focus group discussions. according to the opinions of some respondents, there can be a trend observed in the displaced population – forced to leave their places of residence after the wars in august of 2008 and in 1990s. healthcare specialists from the samegrelo region (where large number of displaced citizens is concentrated) shared findings of several charity check-ups conducted in this population. according to their observations, there is a trend of increased oncological disease prevalence among these individuals compared to other citizens in the same region. one of the suggestions is that increased levels of stress these individuals underwent through, could contribute to greater exposure to oncological conditions. nevertheless, this fact needs further in-depth research and implementation of ai can support trend identification, disease prediction and prevention. with a diverse population and a wide spectrum of health conditions, ai-driven analytics can aid in tailoring treatment approaches to the country's unique demographic and epidemiological landscape. another area for ai's potential is enhancement of healthcare quality in the provider sector. government of georgia envisions to position the country on the global medical tourism market, as a destination country. however, to realize this vision one of the central requirements is to offer adequate healthcare quality to medical tourists. currently, georgia’s provider sector faces many challenges regarding healthcare quality, like many other developing country contexts. therefore, respondents accentuated the role of ai as a solution to the number of problems in this regard. to illustrate, utilization of ai for the early prognosis of infections in hospitalized patients could significantly decrease costs of the treatment of complications and save more lives. even though electronic medical records are not fully implemented in all clinics, this process will be completed soon. georgia's nascent electronic health records system can benefit immensely from ai-driven data management solutions. by effectively organizing and analyzing health data, the country can identify emerging health trends, improve clinical research, and facilitate evidence-based policy formulation. the greater problem, in this scope, is a lack of data analytics. respondents extended this topic further on the national level. according to the representatives of non-governmental organizations, working with the ministry of healthcare and involved in various projects, data from different registries (birth, oncological etc.) and digital platforms in the country are not processed nino mikava, tamta mamulaidze 117 and analyzed adequately, thus living serious potential for evidence-based decisions unrealized. consequently, implementation of ai is sought as a solution to this problem on a provider, as well as on a state level. another area of concern in georgia’s healthcare system is polypharmacy and excessive instrumental or laboratory investigation – “overmedicalization over-investigation”. according to the respondents this problem also could be solved, and patients could benefit from ai utilization. to cite one of the respondents – “currently, the ministry of healthcare cannot control this problem as more than 90% of clinics are private, for-profit. the only way to correct this problem is to leverage control and regulatory capacity. and this can be achieved only by creation of evidence pool and data analytics. to identify trends in medicine prescription and “treatment behavior””. moreover, through the identification of mentioned trends and data analytics with ai total healthcare expenditures can be decreased and quality of treatment enhanced. still another direction in healthcare quality for the prevention of infections and complications is hand hygiene. respondents weren’t familiar with ai empowered solutions for hand hygiene compliance (mentioned above, in the literature review findings). during interviews and fgds this information was shared with them by researchers. most of the respondents found this technology very useful for georgia’s context. one of the significant challenges in georgia’s healthcare system is a lack of therapeutic education and self-management among chronic patients and parents of the children with chronic diseases. among the respondents were two experts with several years’ experience in diabetes research. to illustrate their opinion regarding ai’s role in patient education – “we conducted several studies to assess the needs and problems of the patients with diabetes, adults, and children. one of the biggest problems in this regard is lack of education among parents of children having diabetes and adult diabetic patients. diabetes is a disease which heavily depends on selfmanagement and behavior change. lack of knowledge hinders serious behavior change and outcomes are much worse. if we could use ai, to increase access to the newest information for them results could be much better”. according to the discussion, with utilization of generative ai tools access to up-to-date information can be increased and digital libraries (video library as well) can be created. this concerns other chronic conditions as well, where modification of risks is possible with self-management and behavior change. once personalized health content generation becomes possible patients can easily get information tailored to their specific condition. to continue the topic of chronic diseases, which represents a significant burden for the country’s budget, introduction of ai empowered chronic disease assistance platforms can also improve health condition of patients and quality of life. to illustrate, one of such digital applications, on a global market, is dario, where ai can assess/recognize mental and physical state of the patient based on voice recognition and text comprehension technologies, directs patient accordingly to the relevant specialist and offers additional assistance. this kind of applications customized to georgian patients can decrease healthcare expenditures on top of the benefits mentioned above. among the participants of fgds were two professionals working on mental wellness issues (one psychiatrist and anotherrepresentative of ngo working on mental health). during discussions, implications of artificial intelligence in healthcare in developing countries: perspectives and challenges 118 the significance of deteriorating mental health of the population was discussed and alarming rate of emerging problems such as anxiety disorders and panic attacks were mentioned. it should be noted that prevalence of mental problems dramatically increased after covid-19 and after the war in ukraine. as georgian population underwent two wars in 1990s and in 2008, war in ukraine caused significant re-traumatization among citizens. official statistics do not illustrate the real situation in this regard, as due to stigma and cultural issues the number of individuals suffering mental problems is much greater. according to the respondents, implementation of solutions, such as ai coupled with virtual reality goggles and biofeedback devices can bring substantial results for the treatment of patients with different phobias, post-traumatic-stress disorders (ptsd) and anxieties. it should be noted that neurofeedback devices empowered with ai diagnostics is newly introduced on georgia’s market and has attracted attention of patients and specialists in very short period of time. it should be outlined that none of the respondents of interviews and fgds mentioned robotic surgeries among listed significant ai implications in healthcare. in developing countries, the adoption of ai in healthcare is often driven by the need to address resource constraints, access issues, and the delivery of cost-effective care. the specific technologies used may vary, but the common goal is to leverage ai to improve healthcare access, quality, and efficiency. ai can help these countries maximize their limited healthcare resources and enhance the overall health outcomes of their populations. it's worth noting that while these technologies offer significant promise, their successful implementation in developing countries may also face challenges related to infrastructure, affordability, and regulatory frameworks. nevertheless, the potential benefits in terms of improving healthcare access and quality make ai an important focus for healthcare development in these regions. however, despite all the benefits and potential implications of ai in healthcare that were discussed during the study, challenges and skepticism among the respondents should also be mentioned. during the fgds, healthcare specialists expressed concerns regarding replacement of doctors with ai and machine learning. moreover, skepticism and fear of change were evident in the discussion process and in the concerns that were expressed. it is well known and researched how this kind of attitudes and resistance to change, as well as fears hinder innovations, especially in regard with implementation of new technologies. another challenge named by the respondents was lack of flexibility and coordination of efforts on a system’s level in the country. more specifically, many processes in scope of digitalization of healthcare are hindered by a lack of collaboration among different ministries and state units. still another challenge named in fgds and interviews is deficiency of specific and clear vision of government concerning digitalization of healthcare and ai. moreover, absence of the relevant technological infrastructure, weak regulatory system and loose monitoring from the government’s side were named as substantial hindering barriers for effective implementation and utilization of ai in healthcare. to summarize, despite these challenges, there is growing recognition of the potential benefits of ai in healthcare for developing countries, including improving healthcare access, quality, and efficiency. efforts are underway to overcome these obstacles through international partnerships, capacity-building initiatives, and the development of ai solutions tailored to the nino mikava, tamta mamulaidze 119 specific needs and resources of these regions. for the effective realization of ai’s potential in healthcare the following requirements should be met – clear and specific vision and strategy should be developed by the government. furthermore, government in a flagmenship role should coordinate collaboration and integration of efforts among various ministries and institutions in order to develop technological infrastructure and framework in the country. provider sector and all the stakeholders should be involved from the very initial stage of ai implementation vision and strategy development etc. even more, encouragement and stimulation of the provider sector should be thought to enhance ai adoption by the private clinics and hospitals. as for the provider sector, management of clinics need to consider and utilize change management principles for the effective transformation. to illustrate, so called “champions” – specialists supporting and enthusiastic about ai implementation should be engaged actively in the groundwork processes to change attitudes and perceptions of the personnel in favor of technological progress. conclusions ai and machine learning have brought about transformative changes in healthcare quality, data management, and clinical practices on a global scale. in georgia, these advancements hold immense promise in overcoming healthcare disparities and optimizing healthcare delivery. as ai continues to evolve, a harmonious integration with human expertise will pave the way for a future where healthcare is not only technologically advanced but also empathetic and patient centric. references 1. wolff, j., pauling, j., keck, a., & baumbach, j. (2020). the economic impact of artificial intelligence in health care: systematic review. journal of medical internet research, 22(2), e16866. https://doi.org/10.2196/16866 2. khanna, n. n., maindarkar, m. a., viswanathan, v., fernandes, j. f. e., paul, s., bhagawati, m., ahluwalia, p., ruzsa, z., sharma, a., kolluri, r., singh, i. m., laird, j. r., fatemi, m., alizad, a., saba, l., agarwal, v., sharma, a., teji, j. s., al-maini, m., rathore, v. suri, j. s. (2022). economics of artificial intelligence in healthcare: diagnosis vs. treatment. healthcare (basel, switzerland), 10(12), 2493. https://doi.org/10.3390/healthcare10122493 3. mathias j. (2023). use of ai to predict risk of hais. https://www.ormanager.com/briefs/use-of-ai-to-predict-risk-ofhais/#:~:text=this%20study%20led%20by%20researchers,and%20features%20of%20si milar%20patients. 4. shah, rushabh, and alina chircu (2018). "iot and ai in healthcare: a systematic literature review." issues in information systems 19, no. 3 (2018). 5. rizwan, p., m., r. b., & k., s. (2017). design and development of low investment smart hospital using internet of things through innovative approaches. biomedical research (0970-938x), 28(11), 4979-4985. https://doi.org/10.2196/16866 https://doi.org/10.3390/healthcare10122493 https://www.ormanager.com/briefs/use-of-ai-to-predict-risk-of-hais/#:~:text=this%20study%20led%20by%20researchers,and%20features%20of%20similar%20patients https://www.ormanager.com/briefs/use-of-ai-to-predict-risk-of-hais/#:~:text=this%20study%20led%20by%20researchers,and%20features%20of%20similar%20patients https://www.ormanager.com/briefs/use-of-ai-to-predict-risk-of-hais/#:~:text=this%20study%20led%20by%20researchers,and%20features%20of%20similar%20patients implications of artificial intelligence in healthcare in developing countries: perspectives and challenges 120 6. how hospitals are reducing infections by over 60% (2019). the power of the voice to finally solve hand hygiene. http://cleanhands-safehands.com/wpcontent/uploads/2019/01/hai-reduction-white-paper.pdf 7. fitzpatrick, f., doherty, a., & lacey, g. (2020). using artificial intelligence in infection prevention. current treatment options in infectious diseases, 12(2), 135–144. https://doi.org/10.1007/s40506-020-00216-7 8. topol, e.j. (2019). high-performance medicine: the convergence of human and artificial intelligence. nat med 25, 44–56 (2019). https://doi.org/10.1038/s41591-018-0300-7 9. markets and markets, market research report (2023). artificial intelligence in healthcare market by offering (hardware, software services), technology (machine learning, nlp, context-aware computing, computer vision), application, end-user and regionglobal forcast to 2028. (https://www.marketsandmarkets.com/market-reports/artificialintelligence-healthcare-market-54679303.html 10. ghassemi, m., naumann, t., schulam, p., beam, a. l., chen, i. y., & ranganath, r. (2020). a review of challenges and opportunities in machine learning for health. amia joint summits on translational science proceedings. amia joint summits on translational science, 2020, 191–200. 11. joshi, geeta, aditi jain, sabina adhikari, harshit garg, and mukund bhandari (2022). "fda approved artificial intelligence and machine learning (ai/ml)-enabled medical devices: an updated 2022 landscape." medrxiv (2022): 2022-12. 12. hogg h. d. j et al. (2023). evaluating the translation of implementation science to clinical artificial intelligence: a bibliometric study of qualitative research. https://www.frontiersin.org/articles/10.3389/frhs.2023.1161822 http://cleanhands-safehands.com/wp-content/uploads/2019/01/hai-reduction-white-paper.pdf http://cleanhands-safehands.com/wp-content/uploads/2019/01/hai-reduction-white-paper.pdf https://doi.org/10.1007/s40506-020-00216-7 https://www.marketsandmarkets.com/market-reports/artificial-intelligence-healthcare-market-54679303.html https://www.marketsandmarkets.com/market-reports/artificial-intelligence-healthcare-market-54679303.html agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 no. 1 (2023), pp. 108-114 108 harmonization of environmental management accounting tool for managing economic reconfiguration s.-g. stanescu, m.-d. coman, c.-a. ionescu, d.-m. coman sorina-geanina stanescu¹, mihaela-denisa coman², constantin-aurelian ionescu³, dan-marius comanº institute of multidisciplinary research for science and technology, valahia university of targoviste, romania ¹ orcid.org/ 0000-0003-1219-3420, e-mail: geaninastanescu@yahoo.com ² orcid.org/ 0000-0002-5070-5303 ³ orcid.org/ 0000-0001-6063-2921 º orcid.org/ 0000-0003-4937-6327 abstract. the market economy implies the permanent optimization of an accounting system that ensures: modern methods, policies, and strategies compatible with the requirements of the current economy oriented towards the support of long-term sustainable economic activities. the increase in business relations' complexity has determined a profound revolution in management and implicitly in accounting as the main source of information and assistance in the decision-making process. also, the awareness of the effects of economic activity on the environment leads to the reconsideration of the financial accounting system, by integrating environmental aspects, thus environmental managerial accounting contributes to providing relevant solutions and reporting adequate information. in this sense, this research presents the importance of streamlining all stages of organizing environmental management accounting to identify relevant solutions for managing adequate information and all existing resources available to economic entities. keywords: environmental accounting, management, sustainability, information. introduction nowadays, environmental issues have become a common point of global concern. in today's economic context, one of the biggest challenges is to maximize economic benefits without harming the environment. therefore, accounting must support sustainable development by providing basic information about the social and environmental impact of the entity. the development of the economy at the national and international level requires increasing efforts to find the most rational means of improving management accounting regarding environmental management in order to manage the resources necessary to reconfigure a sustainable economy (kaya & yokobori, 1997). social economy takes into account the objectives of sustainable development, in the sense of responding to current needs without affecting future generations (sneddon, howarth, & norgaard, 2006). the emergence of sustainability concept brought new terms to the theoretical plane that had to be conceptualized to become operational, such as: viability, vitality, sustainability, and sustainable development of an entity, activities, branches or even countries (rogers, jalal & boyd, 2012). in 1987, the bruntland commission, in its final report "the common future", mailto:geaninastanescu@yahoo.com sorina-geanina stanescu, mihaela-denisa coman, constantin-aurelian ionescu, dan-marius coman 109 defines sustainable development as development that meets the needs of the present without compromising the ability of future generations to meet their own needs (bruntland, 1987). sustainability or sustainable development is a holistic approach that considers ecological, social and economic aspects, considering that these aspects must be considered together to achieve a level of long-term prosperity (rogers, jalal & boyd, 2012). sustainability in the business environment is not precisely defined, but rather resides in a series of recommendations and actions that do not only pursue immediate profits and leave a legacy for future generations of a sustainable economic environment and a cleaner planet. thus, sustainable development represents that sustainable development, which focuses on the balance between social, ecological and economic elements, development that satisfies current needs, without compromising the ability of future generations to satisfy their own needs, offering us a framework of doing so to generate economic growth, achieve social justice, practice green stewardship and weigh governance with the aim of achieving sustainable long-term progress. i. the role of environmental management accounting in the sustainable development of the business environment in terms of the sustainable development of entities, the starting point is environmental accounting a current theme, as it encompasses an in-depth study of environmental issues, both locally and globally, thus helping to improve the environment through highlighting the use of natural resources. the integration of the environment into the life of the entity requires taking it into account both at the technical, legal, economic, but also accounting and financial level (morelli, 2011). bartolomeo and collaborators analyze the notion of environmental management accounting, defined as the process of generating, analyzing and using financial and nonfinancial information intended to support decisions in an entity (bartolomeo et al., 2000). bennett considered environmental management accounting as "the link between environmental management and management accounting" (bennett, bouma & wolters, 2002). environmental management accounting is a combined approach that provides financial-accounting information, represented by costs and balances of material flows, to improve the efficiency of the use of these materials, reduce risk and impact on the environment, thus contributing to the reduction of environmental protection costs (jasch, 2003). according to the united nations, environmental management accounting represents the identification and evaluation of the entire spectrum of environmental costs resulting from pollution prevention, as well as the integration of these costs and benefits in the decisionmaking process (united nations division for sustainable development, 2001). therefore, environmental managerial accounting has as its main object the production of useful information in decision-making (stanescu et al., 2021). such accounting ensures the sustainable development of the entity's activity and analyzes the costs and benefits related to the environmental impact on the activity, the contributions to the recognition of the high level of environmental taxes, capital and operating expenses generated by the use of pollution harmonization of environmental management accounting tool for managing economic reconfiguration 110 control equipment. environmental management accounting is a control tool that provides management with basic information for the decision-making system, which concerns the entity's internal management, but is of particular importance and constitutes the basis for reporting external environmental information. the environmental accounting system implemented at the level of economic entities contributes to complying with the requirements of sustainable development, through the value estimation of financial and non-financial information. environmental accounting through the specific functions (figure 1) makes it possible to manage and analyze environmental costs, as well as to transmit the information obtained both internally and externally to the entity. figure no. 1. the functions and role of environmental accounting environmental managerial accounting has a decisive role in the processing of traditional financial information, however, it will also contribute to the evaluation and compliance with the accounting procedures approved by the management of the economic entity regarding the situation of environmental protection expenses by analyzing: i) the existence of supporting documents corresponding to the registered environmental operations; ii) the veracity of the operations and the analysis of their usefulness; iii) compliance with the legal provisions and the decisions of the entity's management regarding the way to complete the documents; iv) correction of errors according to legal provisions; v) the authenticity of the documents that were the basis of the registered operations; vi) compliance with the procedure regarding the flow of documents; vii) compliance with the accounting procedures approved by the management of the economic entity. sorina-geanina stanescu, mihaela-denisa coman, constantin-aurelian ionescu, dan-marius coman 111 ii. measuring and assessing the sustainability of a business entities through decision-makers can use the information provided by environmental management accounting to make decisions that can eliminate the negative effects that influence the financial performance of the entity and the environment. the identification of environmental costs and their recognition in the accounting of the entity related to a product, work, service or economic system is necessary to make relevant and successful managerial decisions. knowing and managing current, future and possible environmental costs is a starting point for achieving the objective of minimizing environmental costs, strengthening recovery activities and streamlining environmental performance. information on environmental costs is determined throughout the managerial process to substantiate reliable decisions regarding production cost modelling. the data obtained are particularly valuable for management initiatives aimed at specific environmental objectives. environmental management accounting / environmental management accounting provides not only the cost data needed to assess the financial impact of these initiatives, but also the physical consumption data (raw material use and renewal rate) that help characterize how these initiatives will had an impact on the environment. their role is to identify and properly collect physical data that can lead to the improvement of the decision-making process within the entity. environmental data is no exception. figure no. 2. environmental accounting essential factor in assessing the progress of a sustainable economy in the long term harmonization of environmental management accounting tool for managing economic reconfiguration 112 in order to measure and evaluate the degree of sustainable development of an entity, need a series of the most relevant indicators, in accordance with the activity carried out, which reflect reality in the pursuit of predetermined objectives (ionescu et al., 2020). by their nature, indicators are used to measure a variable appropriate to the achievement of the proposed goal, the desired resources, the effects to be achieved, the quality index or conjuncture variables. the objective of non-financial indicators is to establish a performance measurement system that allows the entity to determine the defining elements that make up long-term financial performance. the interest given to these indicators stems from the awareness of the fact that the financial indicators that measure performance are by their nature: simplistic measures of results; far from being familiar and intuitive for the people who generate the operations (diaconu & albu, 2003), instead the non-financial indicators complement the financial ones, better characterizing the company's performance, because they directly touch sensitive points of the organization (robu & sandu , 2006). iii. management tools needed to reflect environmental impact in accounting traditional accounting does not correspond to the new requirements to reflect the environmental impact in accounting, thus, the adoption of new methods and instruments specific to environmental accounting is essential. integrating environmental management tools into the day-to-day management process can, theoretically, be a problem, given the fact that leaders normally use financial data to coordinate their activity. in this context, the environmental management system, standards, environmental audit play a particularly important role: they provide a framework for the creation of several technical instruments for measuring, monitoring or evaluating environmental impact. for entities, environmental accounting has the role of increasing the efficiency and effects of the environmental protection measures taken within them and to keep records of environmental expenses and income, to report and reflect them in the financial statements. table 1. classification of environmental management tools according to purpose and the data they use information used or provided piloting tools monitoring tools control tools financial environmental budgets the green dashboard evaluation of environmental accounts environmental accounts environmental indicators environmental audit physical environmental budgets the green dashboard the eco-balance environmental indicators eco balance environmental audit qualitative iso 14001 standard the emas standard environmental audit surce: bennett et al. (2002) sorina-geanina stanescu, mihaela-denisa coman, constantin-aurelian ionescu, dan-marius coman 113 text non-financial indicators are an important part of the performance of an economic entity. the success of an entity is the team within it, but it must also be supported by a human resources policy aligned with the business strategy. the connection of strategic objectives with performance, performance monitoring through indicators and their concretization represented and represent the crucial challenge of any economic entity. performance indicators help quantify the realization of a result, providing visibility into the performance of individuals, teams, departments and organizations, allowing those who have decision-making power to take action towards the achievement of the intended goal. in financial management and operational accounting, there is a close connection between the level of customer satisfaction and the future performance of economic entities. conclusions the growing pressure on economic entities both to reduce costs and to minimize the impact exerted by economic activity on the environment has contributed to their social and environmental responsibility. the consideration of environmental issues by international and national corporations, as well as by their leaders, is the result of a gradual evolution of the attitude of the entities, starting in 1970. from an attitude of ignorance and denial regarding environmental issues, today, more and more entities consider environmental performance as an important element of their business strategy. in order to ensure the success of the harmonization of environmental managerial accounting, it is necessary that the three major objectives presented previously (economic, environmental and social) be fulfilled simultaneously. harmonization is the process by which the managerial accounting of the environment needs to be put on its normal course of fulfilling its objectives and functions, thus contributing to the better management of resources, to the practice of efficient management over long periods of time. at the microeconomic level, the management accountant is the one who will have to design, implement and correctly manage all the environmental managerial accounting activity, on which the practice of high-performance management depends to a great extent. currently, the realization of an integrated system of indicators encounters many difficulties, in the sense that the impact of the approach remains limited in areas such as measuring the scope of the potential to influence and monitoring progress on the researched topic. there are uncertainties especially in the methodological aspect, such as: the object of the measurement, the method of measurement, the spatial limits and time horizons, the influence of the different measurement of the variables on the use of the indicator frameworks. references journal papers bartolomeo, m., bennett, m., bouma, j. j., heydkamp, p., james, p., & wolters, t. (2000). environmental management accounting in europe: current practice and future potential. european accounting review, 9(1), 31-52. harmonization of environmental management accounting tool for managing economic reconfiguration 114 ionescu, c. a., coman, m. d., paschia, l., gudanescu nicolau, n. l., & stanescu, s. g. (2020). sustainable economic intelligence: a new dimension of information provided by non-financial indicators. improving business performance through innovation in the digital economy, 117-143. jasch, c. (2003). the use of environmental management accounting (ema) for identifying environmental costs. journal of cleaner production, 11(6), 667-676. morelli, j. (2011). environmental sustainability: a definition for environmental professionals. journal of environmental sustainability, 1(1), 2. robu, v., & sandu, r. (2006). problematica analizei performanţelor–o abordare critică în contextul teoriilor informaţiei şi guvernanţei corporative. revista economie teoreticǎ şi aplicatǎ, 8, 15-28. sneddon, c., howarth, r. b., & norgaard, r. b. (2006). sustainable development in a post-brundtland world. ecological economics, 57(2), 253-268. stanescu, s. g., cucui, i., ionescu, c. a., paschia, l., coman, m. d., nicolau, n. l. g., ... & lixandru, m. l. (2021). conceptual model for integrating environmental impact in managerial accounting information systems. international journal of environmental research and public health, 18(4), 1791. books diaconu, p., & albu, n. (2003). contabilitate managerială aprofundată. editura economică. kaya, y., & yokobori, k. (eds.). (1997). environment, energy, and economy: strategies for sustainability (pp. 16-26). tokyo: united nations university press. rogers, p. p., jalal, k. f., & boyd, j. a. (2012). an introduction to sustainable development. earthscan. edited books bennett, m. d., bouma, j. j., & wolters, t. j. (eds.). (2002). environmental management accounting: informational and institutional developments (vol. 9). springer science & business media. documents from conferences bruntland, g. h. (1987). our common future. the world commission on environment 1 and development, 45-65. united nations division for sustainable development (2001), environmental management accounting, procedures and principles. new york and geneva: united nations publications. medimond template 1 agora international journal of economical sciences, aijes, issn 2067-3310, e issn 2067 – 7669, vol. 15 (2021) the effects of foreign direct investment on the host country cristina ioana antik1, 1faculty of legal and administrative sciences, agora university of oradea, oradea, romania e-mail antikcristina@yahoo.com abstract a corresponds to any flow of foreign direct investment (including loans) granted to foreign companies, provided that residents investing country (in general enterprise) have an important part of this business property. it is distinguished from short baths capital movements. direct investment involves mobilization of capital transferred abroad. for this reason, the national statistical departments groups, often under the term direct investment, purchases of shares and long-term loans to the same group of companies that contribute to the industrial capital of the lending company, ie its production capacity. keywords: foreign direct investment, balance of payments, monetary fund 1 introduction the concept of direct investment aims to deliver a technically defined strictly understood as an acquisition of securities. according to the definition given by the international monetary fund in 1977, the balance of payments manual, foreign direct investment "means an investment that aims to acquire a lasting interest in an enterprise operated in a country other than the investor, for the latter influence the actual management of the undertaking concerned"1. is considered to be a direct foreign investment, foreign investors should have 10% or more of the common shares or voting rights in an enterprise. thus, once the firm invests at least 10% holding company foreign direct investment includes any investment, be it a new purchase or a simple loan. i think romania should, where possible, to ensure domestic needs without resorting to imports, the efficiency of resource investments taking into account the correction of these resources to productive romanian companies to develop local potential, so that accumulation of capital to produce the country's borders, be kept and used by it. also "establish an appropriate ratio between the share of resource allocation to the investment objectives that will contribute to the country's economic revival term generating long-effect in terms of future investment and resource allocation share for targets that do not generate propagated effects in the investment plan, but which are socially necessary"2. in one of his books, french economist p. joffre says that foreign direct investment by international capital flows is an enterprise in one country creates or develops a subsidiary in another country. such an increase direct foreign investment in production capacity abroad, through its subsidiary. the distinguishing feature of direct foreign investment is that it involves not only 1 phlindert-international economics, economic publishing house, paris, 1997. 2 vesea ic, resource efficiency investment, annals of university "eftimie murgu" in resita section regional economic development, ed eftimie murgu, 2008 mailto:antikcristina@yahoo.com 2 a transfer of resources, but is accompanied by another decisive element: control and power purchase decision on the company investing assets of value added by virtue of a long interest shown by this term. this branch is not just financial obligations in relation to the parent, but it belongs to one and the same organizational structure. subsidiary company controlled by the parent receives from it, frequently and directly inputs such as different techniques, trade secrets and various instructions, the use of intellectual property rights, management rules and intangible assets other type. consequently, direct investment is not only a movement of capital, direct investment flows, regardless of their destination, is the sum of: • net capital contributions provided by investors in the form of acquisition of shares, capital increase or creation of new enterprises; • net loans, including loans or advances on short term of the parent to its subsidiary; • undistributed profits and reinvested. the need for capital investment amounting to a level far beyond the current economic condition requires resorting to capital objective of attracting foreign direct investment as capital, a common characteristic of all former communist states. thus, in this respect is already an interest of both parties, both from investor and foreign capital and domestic investors from. the imminent integration of countries in eastern and central europe with the western european union, driven by strategic interests of both parties, requires the expansion of international cooperation with other countries, especially those developed and accelerating the transition to market economy, open horizons to real international cooperation. in fact, immediately after the collapse of the socialist system, the countries of central and eastern europe such as hungary, poland and former czechoslovakia, and bulgaria and romania have initiated various steps for certain actions such as regional cooperation between countries bordering the black sea, creating border economic zones, etc. they also passed at the request of understanding with the european community, with which signed association agreements or ftas. the force required to accelerate this process of transition to market economy and accession to the european union lies only in the availability of capital. aware, in turn, that the main obstacle they have to face is the lack of transition states and capital, respectively, private investment, production and services, western european countries show great interest in financial aid economies in transition. the transition to a market economy is characterized in all the eastern and central european economies to national instability, economic decline, the real crisis of capital and dangerously low rate of investments, especially those productive. virtually all national economies in transition are marked by deep imbalances due to the decrease in labor productivity and time actually worked, and union pressure on wages and declining management capacity of the new leadership team. the high rate of interest, which in recent years romania was among the first countries in transition, was a leading cause of reducing propensity to invest. in these circumstances each national economy is evident inability to cope with the former communist alone equity absolute need to ensure a minimal growth. the need for foreign capital lies, then, precisely in their inability to ex-communist national economy to meet the need, even minimal capital investment recovery, which, if continuing rebound in the years immediately after 1990, likely 3 to throw these economies in total dependence on the developed world, with serious consequences in the medium and long term. on the other hand, this need for foreign capital is enhanced and more lagging behind the technological level of industrial production facilities and countries in transition. 2 effects of foreign investments on host country governments must decide by their actions at the national investment policy, which is why their national territory, governments may limit or prohibit direct investments in certain sectors and also different ways to regulate the operations of foreign companies, the to require local participation in new activity, the training of personnel, procurement of components of national origin, common research, access to markets, etc. currently, we are witnessing a "yard" hard that many governments do multinational companies, offering various forms of subsidies to encourage them to locate their operations in the country. basically, now the competition has shifted from firms to the government, which compete in granting substantial incentives to influence foreign investors to choose their countries as multinational location. effects on the host country are not necessarily symmetrical with those exerted on the country of origin, in addition, they will not have the same impact as the host country. effects on economic activity can be considered, a priori, as good as foreign investment stimulates production, employment and development. by adding new activities or by increasing production companies taken over, and increase national production, thus, the overall pace of economic growth can accelerate. direct contribution of foreign saving increases domestic investment opportunities, encouraging growth in the medium-term, often contributing and improving labor productivity due to new knowledge and techniques available to the receiving nation, without additional expenses on its part. resource allocation is improved, to the extent that foreign firms invest, normally in areas where the nation has a comparative advantage that it could not exploit enough, usually because of low domestic saving potential. consequently, the overall economic efficiency should increase, in turn, competition could be stimulated by the entry of new producers in the sector, which could lead to a regrouping c ear of local firms. however, in comparison with local competitors, "the foreign subsidiary is in a privileged position: it benefits from a lower cost and direct access to technical knowledge of the parent company, in part to its resources, better conditions credit local and international financial markets (the parent company guarantee) usually, it may have managerial skills, marketing or organizational multinational company. but all these are more difficult to adapt national local companies " on the other hand, multinational companies, seeking to plant a new production unit in a country accepts more easily than national firms to locate in regions in difficulty or whose development is a priority because they can more easily avoid various trade barriers, seeks to take maximum advantage of available public aid and rely primarily on an economic calculation that advantage-costin their bargaining power allows them to increase benefits (subsidies) and reduce costs. then, implantation of a new company that allows the host country, while, to increase tax revenues, at least insofar as the tax relief granted is not systematic. at the same time reducing the risk of receiving the nation's independence and autonomy cannot be ignored, since the policy of increasing production and subsidiary is defined as 4 mother company interests, interests that may not converge with those of the nation. the codes and investment agreements, the un and oecd do tend to define and to respect the rules accepted by the company and the nation, although apparently no reasons why a company would sabotage an installation cost on economic grounds. effects on balance of payments, the positive effects (entry of foreign currency) are primarily due to capital inflows through acquisition or construction of facilities, hiring staff initially paid by the parent company (as long as nua branch developed its production activities and sufficient sales to self-financing his expenses) as a result, the trade balance will record exports branch (even at cost of transfer to the parent company) and possibly reduce imports manufactured good from now, locally. the negative effects are related to the repatriation of dividends, purchase of machinery, parts, intermediate goods imported to ensure its production subsidiary, to pay dividends, royalties paid for the right technology. in general, it is difficult to make overall judgments allowing to say a priori that the host country always benefit or lose in a systematic way with the implementation of a branch of foreign companies, to establish such a court should be able to compare the situation nine with the presence of foreign subsidiary, the situation would have known that a country without direct investment, which is considered to be impossible. criticism of foreign direct investment start from the fact that direct investment has negative effects on the balance of payments on short-term investor friendly country in the long term. from the viewpoint of the host countries, direct investment is considered to be "expensive". a small investment that has weak effects on balance of payments in the early years, is transformed by "game" reinvestment in a company whose returned income (dividends, salaries) can become substantial3. as a fundamental principle, the direct investment that brings high profits is a sign of very weak balance between supply and demand, therefore, the market would be that new "players", so that offer profits to rise until reaching a normal level. these positive and negative effects on economic activity and balance of payments of the host country will be found, the more nuanced way, the economy, developing countries in which the situation and romania. their economic instability may prevent you from benefiting from the favorable effects of implantation of a subsidiary in their territory, and instead to strengthen the unfavorable. developing countries generally have a dual economy and disjointed, which makes the development of the subsidiary may not be passed only on the overall economy and weak, some of the effects of domestic product growth of the branch to be transferred to foreign suppliers not for national activities in the upstream production process, there is not such a juxtaposition and interdependency between the "modern" and the branch to which it belongs "traditional" of developing countries moreover, the choice of technology and is based on factors of constraints weighing on the economy of the country of origin and, of course, inadequate to the host country factor endowment: appropriate technology would allow a lower employment use of a capital insufficient but the cost of adapting their research or multinational company is excessive. due to the relative size ratio of developing countries and multinationals, the host country may lose some of its sovereignty, its economic effectiveness and monetary policy, its development policy. it comes therefore to a situation where a limitation is desired for a multinational company to benefit from its implantation without excessive costs. 3 h. henner international commerce, economic publishing house, paris, 1992. 5 at present, however, host countries, developed or developing, are interested in attracting companies, that it was an auction in the system of subsidies and tax relief, the bargaining power of multinational companies back. 3 conclusions direct investment is a factor of economic development in countries succeeded in entering a surplus capital can be consciously directed benefit effects on macro-economic indicators of a country. the role of direct investment is just so crucial for developing countries by some government facilities may need to raise capital development, development that benefits both in terms of human resources and in financial terms. references [1] henner international commerce, economic publishing house, paris, 1992 [2] phlindert-international economics, economic publishing house, paris, 1997. [3] vesea ic, resource efficiency investment, annals of university "eftimie murgu" in resita section regional economic development, murgu eftimie publishing, 2008 agora international journal of economical sciences, aijes, issn 2067-3310, e issn 2067 – 7669, vol. 12 (2018) the use of relative statistical indicators, of central trend indicators and their interpretation cristina ioana antik1 1agora university of oradea, tineretului square str., no. 8, oradea, romania e-mail antikcristina@yahoo.com abstract statistics is one of the economic evidence form in charge with the study of socioeconomic staple phenomenons, quantitatively speaking, in close connection with their qualitative side, in concrete conditions of space and time. the present article uses the importance of statistical indicators in the economic analysis of an economic entity, showing the calculation of theoretical and practical relative indicators, and the central trend indicators. keywords: statistical indicators, relative indicators, relative sizes, interpretation of statistical data, arithmetic mean, harmonic mean, geometric mean, mean square value, statistical interpretation, economic analysis. 1 introduction relative indicators are expressed in relative quantities and are used to analyze the evolution of economic phenomena over time. it is calculated as the ratio between the size it compares and the size taken as a basis for comparison. this ratio is a coefficient, which can be multiplied by: a. 100 and the result is called a percentage; b. 1000 and the result is called a promil. the types of relative sizes are [2]: structure of the dynamics coordination intensity of the plan (provisions) 2 types of relative sizes 2.1 structure related sizes it is calculated as the ratio between the size (in absolute amount) of a group and the size of the whole community [1]. calculation formula: o the size of a group o the size of the community they are also called specific weights or weights, ie how much a group represents in the community. obs: the sum of the group weights = 100% example: mailto:antikcristina@yahoo.com 2 table 1. the structure of clients at a company with tourist activity in 2018 (conventional data) categories of clients number of clients weight % internal clients 1.200 30 external clients 2.800 70 total 4.000 100 calculation of shares: internal clients no. 1.200 a.internal clients = ---------------------x 100 = ------x 100 = 30% total clients no. 4.000 external clients no. 2.800 b.external clients = ---------------------x 100 = -----x 100 = 70% total clients no. 4.000 interpretation: the number of external customers represents over 2/3 of the total number of customers (70%). 2.2 dynamics related sizes it is calculated as the ratio between the size of the indicator in the current period (1) and the size of the indicator in the base period [3]. calculation formula: the size of the indicator in the current period (1) the size of the indicator in the base period (0) they can be expressed in percentages (%) and promils. the relative quantities of the dynamics express the evolution in time of the economic phenomena (increase or decrease) [4]. example: table 2. the dynamics of the customer structure in 2018 compared to 2017 at a company with tourist activity categories of clients no. of clients year 2017 base period (0) no. of clients year 2018 current period (1) weight (%) 2017 2018 internal clients 1.200 1.760 30 40 external clients 2.800 2.640 70 60 total 4.000 4.400 100 100 calculation of customer shares in 2018: 1.760 a.internal clients = -----x 100 = 40% 4.400 2.640 b.external clients = -----x 100 = 60% 4.400 dynamics indicator: 1.760 c.internal clients = ----x 100 = 146,66% 1.200 2.640 d.external clients = -----x 100 = 94,28% 2.800 4.400 e.total clients = ------x 100 = 110% 4.000 3 interpretation: the total number of tourists at the analyzed travel agency increased in 2018 compared to 2017 by 10% or 110% or 1.1 times. the situation by categories of customers is as follows: in the case of domestic tourists, the number of domestic customers increased in 2018 compared to 2018 by 46.66%; in the case of foreign tourists, the number of foreign customers decreased in 2018 compared to 2017 by 5.72%. 2.3 coordination related sizes they are calculated as the ratio between the values of two groups, phenomena (communities), different territorial units [5]. calculation formula: the size of a group (communities), territorial unit to be compared (xa) ------------------------------------------------------------------------------------------- the size of a group (communities), territorial unit base of comparison (xb) or xb xa example: comparison of wheat production at two farms (data are conventional for 2018): farm a (1) the production was 30,000,000 lei farm b (2) the production was 24,000,000 lei wheat production at farm 1 30.000.000 lei a. variant 1 = ---------------------------------x 100 = -------x 100 wheat production at farm 2 12 mil result = 125% interpretation: wheat production on farm 1 was 25% higher than wheat production on farm 2 in 2018. wheat production at farm 2 24.000.000 lei b. variant 2 = ---------------------------------x 100 = -------x 100 wheat production at farm 1 15 mil result = 80% interpretation: wheat production on farm 2 was 20% lower than wheat production on farm 1 in 2018. 2.4 intensity related sizes they are calculated as the ratio between the value of two related primary characteristics and express how much of the value of the compared characteristic returns per characteristic unit basis of comparison. example: table 3. average production per worker (w) at two companies in 2018 with the same object of activity (textile garments) commercial company production value no. of workers average production per worker a 200.000 1.000 100 b 240.000 1.000 120 wb 120 size related to intensiy = ----x 100 = ---x 100 = 1,2 wa 100 4 interpretation: the average productivity per worker is 1.2 times higher in company b compared to company a, in 2018 2.5 provisions related sizes it is calculated as relative quantities of: planned volume in the current period a.plan tasks = -----------------------------------------------x100 achieved volume in the base period this index can be: sub-unitary, when a reduction is planned compared to the achievements of the previous period (expenses, costs); supra-unitary, when an increase is planned compared to the plan load (production, sales) achieved volume in the current period b.other plan achievements = -------------------------------------------- planned volume in the current period this index can be: sub-unitary, when the achievements of the current period are lower than the provisions (reduction); supra-unitary, when the achievements of the current period are higher than the provisions (increase). example: table 4. the volume of goods sales at the sc fresh fruct srl store in 2018 commercial company sales volume actual sales 2017 provisions 2018 actual sales 2018 sc fresh fruct srl 2.000.000 2.400.000 2.640.000 → the relative sizes of the plan task for 2018 provisions 2018 2.400.000 --------------------x 100 = -----------x 100 = 120% achievements 2018 2.000.000 interpretation: the company has forecast (scheduled) for 2018 an increase in sales volume by 20% (growth rate). → the relative sizes of the 2018 plan implementation achievements 2018 2.640.000 -----------------------x 100 = ----------x 100 = 110% provisions 2018 2.400.000 interpretation: the company registered an increase in sales compared to the annual provisions by 10% in 2018. the central trend indicators used in the statistical analysis of mass socioeconomic phenomena are studied using: average indices position indices 3 average sizes (indices) these average sizes are grouped by the nature of the characteristic into the following categories: -arithmetic mean harmonic average square mean geometric average chronological average 5 each average is calculated as: • simple average: when the number of characteristic variants is equal to the number of observed units; • weighted average: when the same variant is found in several observation units. 3.1 the arithmetic mean it can only be calculated for quantitative variables. the arithmetic mean can be simple and weighted. 3.1.1 simple arithmetic mean it is calculated as the ratio between the sum of the values (levels) of the characteristics and their number. where: n = number of variants xi = variants of the characteristics x = statistical characteristic example: a student obtained the following grades in the discipline "statistics" in the school year 2017/2018: 4,5,6,7,8,9 the average student at the end of the school year is: 4 + 5 + 6 + 7 + 8 + 9 ms = ------------------------= 39 / 6 = 6,50 6 3.1.2 weighted arithmetic mean where: n = frequencies i= number of characteristic variants example: the situation of students in a class according to their average in mathematics for a semester is as follows: table 5. the situation of students in a class according to their average math average (x) no. of students (n) xn 5 7 35 6 7 42 7 5 35 8 6 48 9 5 45 total 30 205 the general average of the students in this class in mathematics is calculated as follows: 205 mp = ----= 6,83 30 example: calculate the weighted arithmetic averages for a series of intervals: the distribution of students in a class of students at the end of a school year, according to the number of absences. n x x i =   = i ii n nx x 6 table 6. distribution of students in a class by number of absences groups of students by number of absences no. of students (f) the center (middle) of the range (x) xf 0-10 18 5 90 11-20 4 15 60 21-30 3 25 75 31-40 3 35 105 41-50 2 45 90 total 30 420 ma = σxf / σf = 420 / 30 = 14 interpretation: the average number of absences per student is 14, it is between the first interval (with the highest number of students) and the second interval. example: application for calculating the average for the alternative characteristic with answer variants: yes no. at the end of a school year, in a class, the situation of students' promotion is as follows: out of 30 students, 24 are promoted and 6 are not promoted. no. of promoted students no. of promoted students (%) = --------------------------= 24/30 = 80% total no. of students no. of failed students no. of failed students (%) = ----------------------= 6/30 = 20% total no. of students 3.2 the harmonic mean it is calculated as the inverse size of the arithmetic mean from the inverse values of the terms. a) simple: 𝑋h= 𝑛 ∑ 1 𝑥 ∙𝑓 , where n= number of series terms; x= characteristic variants. b) weighted: 𝑋h= ∑ 𝑓 ∑ 1 𝑥 ∙𝑓 , where f= frequencies (weights) x= characteristic variants. this average is used in different situations: calculation of the average harvest per "hectare" on a farm; calculating the average salary of a company, when the salary fund for different departments and the average salaries of employees are known. application: table 7. calculation of the average salary at s.c. fresh fruct s.r.l. compartments average salary / employee (𝑺) salary fund / lei (fs) sales administrative 2.200 2.500 110.000 80.000 total s.c. fresh fruct srl 190.000 (𝚺𝑭𝑺) the number of employees is at the sales department 50, and at administrative 32. the average salary on the company in 2018 was 2,317.06 lei. average salary per company is calculated: 𝑆= σ𝐹𝑆 σ𝑁 = σ𝐹𝑆 σ 1 𝑆1 ∙𝐹𝑆 = 190.000 50+32 = 190.000 82 =2.317,06 lei the number of employees is calculated taking into account the average salary by compartments: 𝑁𝑠= 𝐹𝑆 𝑆 = 1 𝑆 ·fs 7 in the "sales" section: 𝑁𝑎𝑛𝑔= 1 2.200 ·110.000 = 1.100 11 = 100 in the "administrative" section: 𝑁𝑎𝑛𝑔= 1 2.500 ·80.000 = 8000 125 = 64 3.3 the square mean it is calculated by extracting the square root from the arithmetic mean of the squared terms of the series. it is used to calculate the variation of the characteristic (mean square deviation) or when it is indicated to give importance to higher levels in a series of statistics [6]. calculation mode: a) for simple series: 𝑋p= √ ∑ 𝑋2 𝑛 b) for the frequency series: 𝑋p= √ ∑ 𝑋2𝑓 ∑ 𝑓 application: calculation of the average number of products made by a worker, who works according to a company with production activity. table 8. average number of products made by a worker workers no. of products (x) 1 2 3 4 12 18 10 20 total 60 (∑ 𝑿) if simple arithmetic mean is used, 𝑋a= ∑ 𝑋 ∑ 𝑛 = 60 4 =15, where: n = no. of variants workers x = characteristic variants if simple quadratic arithmetic mean is used, 𝑋p= √ ∑ 𝑋2 ∑ 𝑛 = √ 122+182+102+202 4 =√ 968 4 =√242~ 15,56 so, the average number of products made by a worker calculated according to the arithmetic average is 15, and according to the square average is 15.56. 3.4 the geometric mean it is based on the product relationship between the series terms and is used when the lower terms are given importance in the absolute value [7]. it is mainly used for the calculation of averages in the case of relative quantities of dynamics, respectively for establishing the average growth rate. the geometric mean is the value, which by replacing the terms of the series and the effect of their product, the resulting value is equal to the product of the terms, meaning: 𝑥1 ∙ 𝑥2·𝑥3 ∙ … ·𝑥𝑛 = π𝑥, where: 𝛱𝑥 = the product of the series terms. geometric mean: 𝑋𝑔= √π𝑥 𝑛 this average is used if there is a negative or zero term in the statistical series. 8 3.5 the chronologic mean it is used in the case of the statistical series of dynamics (chronological) for the calculation of the average level. 𝑋𝑐𝑟= 𝑥1 2 +𝑥2+𝑥3+ …+ 𝑥𝑛 2 𝑛−1 where: x = characteristic variants; n = number of terms. calculation mode: make the sum between half the value of the first term and the last term, with the full value of the other terms of the series; divide the total amount obtained by the number of series terms minus 1. a) simple: it is used in the case of the dynamic series of moments with equal intervals, usually for the statistical calculation of the average stock (goods, materials) application: table 9. the situation of the stock of goods at a store for the second quarter of 2018 period goods stock (lei) average stock april may june july 10.000 10.400 11.600 10.800 the average stock of goods in each month of the second quarter was 7,133.33 lei. average level of stock of goods = 10.000 2 +1 10.400 2 + 11.600 2 + 10.800 2 3 = 5.000+5.200+5.800+5.400 3 = = 21.400 3 =7.133,33 lei b) weighted in the case of dynamic series with unequal intervals. 𝑋𝑐𝑟= 𝑥1+𝑥2 2 ·𝑓1+ 𝑥2+𝑥3 2 ·𝑓2+⋯+ 𝑥𝑛−1+𝑥𝑛 2 ·𝑓𝑛 𝑓1+𝑓2+⋯+𝑓𝑛 applicațion: table 10. the situation of raw material stocks at a company with production activity in 2018 period good stock (lei) (x) january march july september december 16.000 (x1) 13.000 (x2) 10.000 (x3) 15.000 (x4) 12.000 (x5) time intervals (in months) are: 𝑓1 = 2 𝑓2 = 4 𝑓3 = 2 𝑓4 = 3 average annual stock = = 16.000+13.000 2 ∙2+ 13.000+10.000 2 ∙4+ 10.000+15.000 2 ∙2+ 15.000+12.000 2 ∙3 2+4+2+3 = 29.500+46.000+25.000+40.500 11 = 141.000 11 = 12.818,18 lei the average annual stock of raw materials for 2018 was 12,818.18 lei. 4 position sizes (indicators) they are used for distribution series. 9 4.1 the median represents the central value of a statistical series ordered ascending or descending, which divides the terms of the series into equal parts: half of the terms are smaller than the median and half are larger than the median. if the series has an odd number of terms, the median represents the value of the central term, which is calculated by the relation 𝑛+1 2 , 𝑛 = serial term number. example: statistical series 3,7,8,9,4,2,5, n = 7 place of the median = (7 + 1) / 2 = 8/2 = 4 the median is 9, ie the fourth term. if the series has an even number of terms, the value of the median is calculated as the arithmetic mean of the two central terms. example: statistical series in ascending order: 6,8,9,12,15,16 the median = 9+12 2 = 21 2 =10,5 the series has an odd number of terms, the series is ordered ascending: 5,5,6,7,7; the series has 5 terms, therefore the formula is used: (n+1) / 2 the place of the median is 5+1 2 =3 the median is 6, occupying the 3rd place (middle). application: the series has an even number of terms (4). the series is ordered in ascending order: 10,12,18,20. place of median between term 2 and 3: the median = 12+18 2 = 30 2 =15 4.2 the module represents the characteristic level that has the highest frequency. calculated only for frequency distribution statistical series. in table no. 1, the maximum frequency is 7, so the modulus, ie the corresponding value is 5 and 6 (averages of 5 and 6). in table no. 4, the highest frequency is 20, so the module corresponds to worker no. 4, which made this number of products (20). 5 conclusions the importance of the statistical calculation lies not only in the calculation of the arithmetic ratio of these indicators, but in the examples and their interpretation, from which the top-level management (managers) can come out to conclusions and arguments in order to correct the business evolution. the theoretical and practical presentation of these statistical indicators is addressed to practicing accountants, economists, students enrolled in an economic profile, departments of economic analysis within companies, as well as those interested in the introduction of the calculation methods and the interpretation of statistical indicators. references [1] anghelache, c., statistică teoretică și economică – teorie și aplicații, editura economică, 2004 [2] dorin, v., stan, f., statistică și analiză economică,editura cd press, bucurești, 2007; [3] ișfănescu, a, colectiv, analiza economico-financiară, editura ase, bucurești, 2002; 10 [4] isaic, m.a., colectiv, statistică – teorie și aplicații, editura cison, bucurești, 2006; [5] meșter, i. simuț, r., statistică economică – aplicații practice, editura universității din oradea, 2009; [6] meșter, i., silaghi, s., statistică economică – aplicații practice, editura universității din oradea, 2008; [7] wagner, p., colectiv, statistică, editura didactică și pedagogică, bucurești, 1995. agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 no. 1 (2023), pp. 70-82 70 principles of water infrastructure management in ensuring sustainable water use in ukraine n. mahats nataliia mahats state organization «institute of market and economic & ecological research of the national academy of sciences of ukraine», ukraine https://orcid.org/0000-0003-0799-9462 e-mail: mahatsnataliia@gmail.com abstract. the military actions in ukraine significantly aggravate the problems of sustainable water resources management. even in the pre-war period, the main funds of the drinking water supply and sanitation systems were characterized by an unsatisfactory technical condition, an extremely high percentage of wear and tear and required large capital investments. during the wartime, the water management infrastructure of ukraine became the object of massive attacks by the russian federation, which led to catastrophic consequences, such as the destruction of critical infrastructure facilities, lack of population access to drinking water supply, contamination of drinking water sources, complications of the sanitary and epidemiological situation, which poses a significant threat to the health of the nation. the purpose of the article is to determine the current state, trends in the restoration and development of the water management infrastructure in ukraine and the formation of the basic principles of its management to ensure sustainable water use in ukraine. the methodological tools of the study were such approaches and methods as a systematic approach, methods of system-structural analysis and synthesis, comparison and generalization, economic and statistical methods. keywords: ukraine’s water infrastructure, іmpact of the full-scale russian invasion, sustainable water use principles, blue economy, circular economy, social responsibility introduction water industry is an important component of any modern economy. water facilities are crucial for the socio-economic development of ukraine, as they provide centralized water supply and sanitation for the population, industrial and agricultural enterprises, as well as protect from negative consequences associated with water use. however, unfortunately, they can be subject to wear and tear and malfunction, which can lead to serious water quality problems, which in turn may affect public health and the state of the environment. this problem arises for a number of reasons, in particular, inadequate funding, inefficient management, lack of due attention to the protection and conservation of water resources. modern management tools, such as smart water management, aimed at water infrastrustructure operation based on sustainability and self-sufficiency. it can be carried out through the use of innovative technologies, such as information and control technologies and monitoring. thus, water management contributes to leakage reduction, water quality https://orcid.org/0000-0003-0799-9462 mailto:mahatsnataliia@gmail.com nataliia mahats 71 assurance, improved customer engagement and operational optimization (ramos et al., 2020). the state of the water infrastructure has a significant impact on sustainable water use in the country. the european union (eu) has implemented a series of directives aimed at ensuring the effective management of water resources and the preservation of water quality. these directives set out specific environmental requirements that water management facilities must adhere to in order to promote the sustainable use and protection of water bodies across eu member states. in the article (bolognesi, 2014) it is examined main laws and regulations concerning water standards enacted at european level. one of the main challenges for water infrastructure has always been the great quantity of electricity needed to extract, treat, convey and reuse water thus it becomes increasingly important to integrate renewable energy sources into water infrastructure systems. by harnessing renewable energy, it can be achieved a more sustainable and resilient water sector while mitigating the impacts of climate change. bieber et al. (2018), using a scenario based approach, propose innovative water supply and energy deployment policies, which address the provision of clean energy for population and demonstrate the potential effects of climate change. as long as water infrastructure systems in the developed countries evolved as products of the industrial revolution, design principles of that time were different. however, the existing water infrastructure design is incompatible with the present environmental, economic, and social principles of sustainability (apul, 2010). thus, it is necessary to implement modern principles of water infrastructure management, which will contribute to ensuring sustainable and efficient water resources use, meeting the population needs and preserving the environment. i. methodology the methodology of this study was based on a combination of statistical analysis of the results of water infrastructure management in ukraine in the pre-war 2020-2021 years, statistical and expert data on the impact of the of the russian federation on critical water infrastructure facilities in ukraine, with an analytical study of modern principles of sustainable development that will affect the main directions of the post-war restoration of ukrainian water infrastructure. the study was conducted from november 2022 to april 2023 in the following stages: 1) collection of statistical information on the main indicators of the state of the centralized water supply and sanitation systems in the regions of ukraine in 2020-2021; 2) analysis of recent reports and studies on the impact of the russian full-scale military aggression in ukraine in terms of determining the damage caused to ukraine's water resources and water infrastructure; 3) determination of the main principles of sustainable development in the context of the conceptual foundations of the circular economy, social responsibility, blue growth and the possible vectors of its application for the post-war restoration of ukraine's water infrastructure. the study was based on such information resources as the statistical-analytical report of the world bank, statistical data report of unicef, statistical data of the ministry for communities and territories development of ukraine, publications of ukrainian and foreign principles of water infrastructure management in ensuring sustainable water use in ukraine 72 scientists on the research topic according to the list of references (22). the following approaches and methods served as the methodological tools of the study: a systematic approach, methods of system-structural analysis and synthesis, comparison and generalization of a systematic search, economic-statistical methods. i.1. the analysis of the pre-war problems in the field of water management and the current state of the water infrastructure in ukraine the water infrastructure of ukraine consists of a large number of structures and objects, such as water intake facilities, water pressure towers, water supply and sanitation networks, treatment and hydrotechnical facilities, reservoirs, etc. before the war, the main funds of water industry of ukraine were mostly characterized by an unsatisfactory technical condition, since they were built in the 60s of the last century, they needed serious capital repair and in some cases complete reconstruction. according to the ministry for communities and territories development of ukraine (minregion, 2021), in 2020 the total length of water supply networks was 121921 km, including dilapidated and emergency networks – 46602 (38%); during the year, 991 km (2,1%) of the need were renewed. the total length of centralized sanitation networks was 46602 km, including dilapidated and emergency – 16618 km (35,6%); during the year, 186 km (1,1%) of the need were renewed. as can be seen from fig. 1 the rate of renewal of the water supply and sewerage network in ukraine is quite low and does not meet the needs of the population and the economy. fig. 1. the length and condition of centralized water supply and sanitation networks in ukraine in 2020. source: compiled by the author based on (ministry for communities and territories development of ukraine [minregion], 2021) another indicator of the state of the water infrastructure in ukraine is the accident rate of centralized water supply and sanitation networks, which can be caused by various factors, in particular, such as aging networks, insufficient funding, negligence in operation, etc. accidents on water supply and sanitation networks can lead to interruptions in the supply of drinking water, its pollution, flooding of territories, environmental pollution and pose a threat to human health. 0 20000 40000 60000 80000 100000 120000 140000 renewed, km renewal required, km total length, km 991 46.602 121.921 186 16.618 39.708 centralized sanitation networks centralized water supply networks nataliia mahats 73 so, in 2020, the average accident rate of the centralized water supply network in the regions of ukraine amounted to 1,83 accidents per 1 km of the network, in particular, the largest number of accidents was in the kiev region – 6,38 accidents and in odessa – 4,92 accidents per 1 km of centralized water supply network; the lowest – in the cherkasy region – 0,04. the average accident rate of the centralized sanitation network in the regions of ukraine amounted to 1,54 accidents per 1 km of the network, the largest number of accidents was in the kyiv region – 6,0 accidents and kharkiv – 4,3 accidents per 1 km of the centralized sanitation network; the lowest – in the kirovohrad region – 0,09 (fig. 2). fig. 2. accident rate of centralized water supply and sanitation networks in ukraine in 2020 * the statistical information was not available in the temporarily occupied territories source: developed by the author based on data (minregion, 2021) in rural areas of ukraine, in particular in the east and west of the country, the water infrastructure was less developed and had a low level of technical equipment. according to (minregion, 2022), in 2020-2021, more than 75% of rural areas in ukraine did not have access to centralized water supply and sanitation systems (table 1). 0,70 0,24 1,20 3,10 0,04 2,50 2,40 0,40 0,90 2,35 4,92 1,10 0,44 1,96 1,03 6,38 1,00 1,81 1,38 2,10 1,90 1,65 2,60 0,20 0,29 0,42 2,60 0,12 4,30 1,30 0,18 1,43 1,33 2,81 1,20 0,04 2,36 0,09 6,00 0,80 0,23 2,82 1,70 1,40 1,90 1,80 0 1 2 3 4 5 6 7 chernihiv chernivtsi cherkassy khmelnytsk kherson kharkiv ternopil sumy rivne poltava odesa mykolaiv city of kyiv lviv luhansk* kirovohrad kyiv ivano-frankivsk zaporizhzhia transcarpathian zhytomyr donetsk* dnipropetrovsk volyn vinnytsia ar crimea* accident rate per 1 km of the sanitation network accident rate per 1 km of the water supply network principles of water infrastructure management in ensuring sustainable water use in ukraine 74 table.1. provision of settlements in ukraine with centralized water supply and sanitation systems in 2020-2021 year cities urban type settlements rural settlements total provided with % total provided with % total provided with % centralized water supply 2020 314 310 98,7% 473 432 91,3% 22 204 5 382 24,2% 2021 314 310 98,7% 473 427 90,3% 22 204 5 215 23,5% centralized sanitation 2020 314 301 95,8% 473 319 67,4% 22 204 323 1,45% 2021 314 301 95,8% 473 319 67,4% 22 204 330 1,48% source: grouped by the author based on data (minregion, 2022) according to the tasks specified in the national report “sustainable development goals: ukraine”(2017), the share of the rural population with access to centralized water supply should increase from 17,2% in 2015 to 80% in 2030; the share of the rural population with access to improved sanitation should increase from 1,9% in 2015 to 80% in 2030, which is quite an ambitious target even in peacetime. thus, in 2021, only 23,5% of rural settlements in ukraine had access to centralized water supply and 1,45% to centralized sanitation. these circumstances can lead to the use of low-quality water from open sources such as rivers and ponds, which can subsequently cause the spread of diseases and threaten the health of the local population. in addition, the lack of sanitation systems can lead to environmental pollution, in particular water resources and soil. to solve the problems of providing rural settlements of ukraine with centralized water supply and sanitation systems, it is necessary to apply an integrated approach. in particular, according to professors m. khvesik and v. golyan (2014), the priority areas for the modernization of the water infrastructure in rural areas should be: increasing the volume of work on the construction of new and reconstruction of existing centralized water supply and sanitation systems in rural settlements; technical and technological restructuring of inter-farm and intra-farm networks of hydraulic structures; construction of those water infrastructure facilities that will contribute to the implementation of the european union directives. in a study by n. kovshun (2015) it is noted that a perspective economic mechanism for financing the water infrastructure of ukraine is a public-private partnership, when the state, to solve a specific problem for a water facility, involves private initiatives. solving the problematic issues of the water infrastructure functioning can improve the living conditions of the rural population and provide a more sustainable future for rural development in ukraine. nataliia mahats 75 i.2. the impact of the full-scale military aggression of the russian federation on critical water infrastructure facilities in ukraine the full-scale military aggression of the russian federation has a serious impact on water resources and water security both at the national and global levels. although, according to the geneva conventions (1949), countries involved in armed conflicts are obliged to observe and ensure compliance with international humanitarian law under any circumstances. however, there is a global trend towards increasing the use of water resources and infrastructure as a target or means of warfare in armed conflicts. the full-scale russian invasion and intense hostilities in ukraine led to the destruction of critical infrastructure, including water industry facilities. in the study (shumilova et al., 2023), the authors examined how military operations affected water resources and water management infrastructure during the first three months of the war. a total of 64 reported impacts on the water sector were investigated, in particular, such as interruption of water supply; disruption of sanitation networks and treatment facilities; pollution of surface waters due to the release of chemicals as a result of shelling and bacteriological contamination due to mass death of poultry; damage to dams; mine flooding; disruption of a hydroelectric power plant. the article (gopchak et al., 2022) provides methodological recommendations for calculating the damage from the destruction to fixed assets of the water sector for industrial and non-industrial purposes, and calculating the costs of restoring the infrastructure. in particular, it was noted that the volume of damage to active war zones will increase linearly over time at a rate of 0.274% per day. if the region is under occupation, the growth rate of damage is 0.137% per day. in the world bank report (2022), it is noted that the most affected water infrastructure facilities were water supply and sanitation networks, water treatment facilities, drinking water treatment plants. table 2 shows the water infrastructure facilities, their damage and estimated needs for reconstruction. the information provided is not exhaustive given the difficulty of obtaining data from temporarily non-government controlled areas. table.2. water infrastructure damage inventory and estimated recovery and reconstruction needs as of june 2022 object type type of damage reconstruction needs, usd million partially damaged completely destroyed total urgent / short-term mediumto long-term total water treatment facilities (units) 8 2 10 39,0 156,0 195,0 wastewater treatment facilities (units) 10 4 14 72,0 288,0 360,0 water pumping stations (units) 20 18 38 13,7 54,6 68,3 sewage pumping stations (units) 32 19 41 28,6 114,5 143,1 principles of water infrastructure management in ensuring sustainable water use in ukraine 76 water supply networks (km) 0 816,314 816,314 122,4 489,8 612,2 sanitation networks (km) 0 241,665 241,665 108,7 435,0 543,7 wells (units) 11 13 24 0,6 2,4 3,0 laboratories (units) 3 2 5 0,3 1,2 1,4 clean water tanks (units) 4 12 16 4,1 16,3 20,4 water towers (units) 8 24 32 1,6 6,5 8,2 total, usd million 391,0 1564,3 1955,3 source: compiled by the author based on data (world bank, 2022) water infrastructure recovery and reconstruction needs are based on damage and losses as of june 2022. at that time, they were estimated at about usd 1,955 million. partially damaged and destroyed infrastructure requires restoration on a priority basis. the necessary investments are divided into urgent short-term (usd 391,0 million) and medium-long-term (usd 1564,3 million). the needs assessment considers a “build back better” approach to recovering damaged/destroyed water infrastructure objects. the bulletin of the observatory of conflicts and the environment (2022) analyzes the impact of the war on the state of the water supply sector and on the water resources of ukraine, in particular, it is studied the most devastating incidents for the period februaryaugust 2022, such as the explosion of the dam of the kakhovskaya hydroelectric power station, damage to the mykolaiv pipeline, numerous accidents with damage to the pumping stations of the water supply system in the city of popasna and the seversky donets canal, the destruction of the irpen dam, which led to flooding. however, the greatest destruction ukraine’s critical infrastructure has experienced since october 2022, when the russian federation launched massive and methodical missile strikes throughout ukraine approximately every 10 days, in particular, water supply networks, sewerage systems and other water infrastructure facilities were damaged. in general, for the period october 2022 march 2023, the russian federation launched 908 missiles and 95 kamikaze drones in order to destroy critical infrastructure. as a result, according to unicef (2022), as of december 2022, 16 million ukrainians had limited access to water, sanitation and hygiene. the situation is especially critical in the east and south of ukraine, where people are forced to fight for access to water supply and sanitation services in order to meet their vital needs. the energy crisis in december 2022 – february 2023 further aggravated the problems: power outages affected the condition of water pumping stations and led to interruptions in water supply throughout ukraine. internally displaced persons in collective centers and host communities faced significant restrictions in access to water, hygiene and sanitation. restoration of water infrastructure facilities during the active phase of hostilities is an extremely difficult, but also the most important task for ensuring the safety and health of the nataliia mahats 77 population under martial law. the main obstacles to the timely resumption of the water infrastructure facilities functioning are: location of damaged objects in the occupied territory; location of damaged objects in the zone of active hostilities and shelling. however, in other territories of ukraine, updating water infrastructure facilities to an adequate technical condition is not a priority task for local authorities in wartime. ii. results – principles of post-war reconstruction and management of ukrainian water infrastructure on the basis of sustainable development the destruction of ukraine's water infrastructure leads to serious consequences for public health, in particular, to a decrease in the quality of drinking water and an increase in the risk of epidemics and other diseases that are transmitted through water. in addition, as a result of missile attacks, mining, especially in the zone of active hostilities, there is a lot of toxic explosive material that can pollute water sources and lead to the destruction of aquatic and semi-aquatic ecosystems. in the post-war period, ukraine will face many challenges in the field of water management. therefore, today, when forming a strategy for the post-war development of ukraine, it is necessary to take into account modern principles of water infrastructure management, which should be based on the main provisions of the circular economy, social responsibility, blue growth (fig. 3) and promote sustainable water use and conservation of water resources for future generations. management of water infrastructure according to the principles of the circular economy implies an increase in the efficiency of the use of water resources and a reduction in waste from the water sector. the 10r principles, developed by j. cramer (2017), are the basis for the introduction of a circular economy and can be applied in the water management sector to ensure the sustainable water use. refuse and reduce: reducing water consumption by eliminating inefficient water use, applying water-saving technologies and changing consumer behavior. redesign, repair, refurbish and remanufacture – these are important circular economy principles that can be applied to water supply and sanitation management to promote the sustainable and efficient use of water resources. for example, designing water systems that collect and use rainwater while reducing the amount of water needed from other sources; repairing leaking pipes and refurbishing wastewater treatment plants with more advanced treatment technologies; reconstruction of the existing water management infrastructure to extend its service life. reuse, re-purpose, recycle, recover – include recycle of treated wastewater for nonpotable needs such as irrigation, industrial processes, domestic needs, etc.; reuse of storm water for non-potable purposes such as industrial cooling or landscaping; recover of valuable resources from wastewater for use in agriculture or bioenergy production. the application of wastewater reclaiming and recycling practices is discussed in more details by the author in the preliminary study (khumarova & mahats, 2022). principles of water infrastructure management in ensuring sustainable water use in ukraine 78 fig. 3. interrelation of circular economy, blue growth and social responsibility principles in ensuring sustainable water use source: developed by the author having considered the main 10r principles of the circular economy, it is proposed to pay attention to such important principles of water infrastructure management as: regenerate – means restoring natural ecosystems and water resources to a healthy and productive state. regenerative practices can help reduce pollution, improve water quality, and promote biodiversity conservation. renew energy. the use of renewable energy sources can be a valuable tool for managing water infrastructure. using renewable energy sources to power water infrastructure can reduce energy consumption, reduce carbon emissions and promote sustainable development. thus, the use of renewable energy sources can include solar-powered water treatment, the use of wind energy to power pumps for transporting water through pipelines, the production of biogas from the treatment of wastewater sludge, etc. by applying these principles to the water sector, businesses and societies can improve water use efficiency, reduce waste, and promote sustainable water infrastructure management practices. blue growth as part of the sustainable development concept involves using the potential of marine and coastal regions for balanced development in economic, social and environmental aspects. this approach recognizes the importance of water as a critical resource for economic development and takes into account the needs of rational use to ensure the availability of water for future generations. based on the main provisions of the book by g. pauli (2010), it is identified the following principles and tools for blue growth in water blue growth principles: integration, nature-based solutions, science-based decisions, resilience, innovation, cooperation circular economy principles: 10r's: refuse, reduce, redesign, repair, refurbish, remanufacture, reuse, repurpose, recycle, recover; regenerate, renew energy social responsibility principles: inclusiveness, responsibility, safety, ethics, transparency sustainable water use nataliia mahats 79 management (table 3). the application of blue growth principles will contribute to the sustainable use of water resources, the conservation and restoration of aquatic ecosystems and the reduction of the human activity impact on the environment. table 3. blue growth principles and instruments in water infrastructure management principle meaning implementation tool integration ensuring interconnection between various sectors, such as water supply, sanitation, environmental protection, energy and transport, in order to achieve a common goal – the efficient and sustainable use of water resources.  integrated water management plan;  integrated environmental permit. nature-based solutions taking into account natural processes and environmental factors in the planning and construction of water management infrastructure, in particular, in the construction of reservoirs, sewage networks, dams, etc.  environmental impact assessment;  the concept of "green infrastructure";  ecosystem approach. science-based decisions use of scientific research and expert assessments for decision-making regarding the use of water resources and the management of water infrastructure.  data analysis and forecasting;  monitoring and control;  modeling; • expert systems. resilience the ability of water infrastructure management to maintain its performance and adapt to changes in the ecological, economic and social environment.  risk and vulnerability assessment of water management systems;  development a contingency plan;  development of strategies for rapid reaction to changes. innovation application of the latest technologies and innovative solutions to improve the efficiency and sustainability of the water infrastructure.  digital technologies;  renewable energy sources;  modern construction materials and technologies. cooperation provides for interconnection between various parties, including governmental and non-governmental organizations, public organizations, scientists, business and society to achieve the sustainable use of water resources.  public consultations;  involvement of stakeholders in the planning and decisionmaking process;  creation of platforms for information exchange and actions coordination. source: developed by the author principles of water infrastructure management in ensuring sustainable water use in ukraine 80 water infrastructure management based on the provisions of social responsibility implies an understanding of the water industry enterprises impact on society and the natural environment and a responsible attitude towards the consequences of this impact. this means that water management must respond to the needs of the public, ensure that services are accessible to all groups of the population, contribute to positive changes in society and prioritize environmental practices. sharing the vision of о. grishnova (2011) on understanding the essence of social responsibility, it is formed some of the most important principles, including: inclusiveness: ensuring equity in access to water resources for everyone, regardless of social status and other characteristics. this can be achieved by introducing programs and projects that help improve access to water and sanitation for all people, especially those who are in a vulnerable state. responsibility: management of the water infrastructure in accordance with the laws, rules and regulations relating to the water sector, and responsibility for the consequences of the use of water resources and water infrastructure. safety: provides for high-quality drinking water supply to the population, the proper technical condition of the infrastructure, as well as safe working conditions for employees of water industry organizations. ethics: upholding high standards of virtue and morality in the decision-making process of water infrastructure management. this means that decision-making should be based on objective facts and analysis, and not on personal interests or corruption. transparency: providing access to information on the state of water resources and water infrastructure, the decision-making process and the activities of management bodies through open data and reports. in previous studies of the author (khumarova & mahats, 2023), it was substantiated that the organization of water management on the basis of social responsibility will help ensure the harmonious development of the economy and the social sphere and will improve the quality of life of the population. conclusions after the end of the war, the restoration and development of water management infrastructure is one of the most important tasks for the economic recovery and the socioeconomic development of territories that have been destroyed as a result of military operations. after analyzing the general pre-war problems in the field of water management and the current state of the water infrastructure in ukraine, it was determined that in order to ensure sustainable water use in ukraine, the management of water infrastructure should be based on the basic principles of the circular economy, blue growth and social responsibility. at the same time, achieving sustainable water use in ukraine requires cooperation and coordination of actions of all stakeholders, including state authorities, public organizations, scientific and research institutions, the private sector and society (carius et al., 2004). until the end of hostilities and the complete de-occupation of the entire territory of ukraine, it is very difficult to assess the scale of the water infrastructure destruction and make suggestions on further trends in their restoration. however, based on today's global nataliia mahats 81 initiatives, the basic principles of sustainable development and the “build back better”, it is possible to propose the main vectors for the subsequent post-war recovery and development of ukraine's water infrastructure (kitowski et al., 2023): restoration and modernization of water management facilities, considering the environmental requirements of the european union directives; expansion of the centralized water supply and sanitation network, especially in rural areas; reducing the share of traditional energy sources in the supply of water infrastructure and increasing the use of renewable energy sources; equipping water infrastructure facilities with innovative technologies and introducing "smart" water management systems; designing new water supply and sanitation systems, considering the introduction of water recycling practices. thus, introducing these main vectors of water infrastructure development should ensure the efficient use of water resources, social justice, environmental conservation and sustainable economic growth. references 1. apul, d. (2010). ecological design principles and their implications on water infrastructure engineering. journal of green building, 5 (3), 147–164. https://doi.org/10.3992/jgb.5.3.147 2. bieber, n., ho ker, j., wang, x. et al. (2018). sustainable planning of the energy-waterfood nexus using decision making tools. energy policy, 113, 584-607. https://doi.org/10.1016/j.enpol.2017.11.037 3. bolognesi, t. (2014). the paradox of the modernisation of urban water systems ineurope: intrinsic institutional limits for sustainability. natural resources forum, 38(4), 270-281. https://doi.org/10.1111/1477-8947.12052 4. bulletin of the observatory of conflicts and the environment. (2022). ukraine conflict environmental briefing. https://ceobs.org/ukraine-conflict-environmental-briefing-water/ 5. carius, a., dabelko, g.d., & wolf, a.t. (2004). water, conflict, and cooperation. environmental change and security project report, 10, 60-66. 6. cramer, j. (2017). the raw materials transition in the amsterdam metropolitan area: added value for the economy. well-being and the environment, 59, 3, 14-21. https://doi.org/10.1080/00139157.2017.1301167 7. gopchak, i., kovalov, i., zhuk v. et al. (2022). determination of damage caused to hydro-economic infrastructure facilities as a result of the armed aggression of the russian federation against ukraine. scientific bulletin of civil engineering, 108, 2. https://doi.org/10.29295/2311-7257-2022-108-2-60-67 8. grishnova, o. (2011). social responsibility in the context of overcoming the systemic crisis in ukraine. demography and social economy, 1(15), 39-46. https://doi.org/10.15407/dse2011.01.039 9. international committee of the red cross. (1949). geneva convention relative to the protection of civilian persons in time of war. https://www.refworld.org/docid/3ae6b36d2.html 10. kitowski, i., sujak a., & drygaś m. (2023). the water dimensions of russian – https://doi.org/10.3992/jgb.5.3.147 https://doi.org/10.1016/j.enpol.2017.11.037 https://doi.org/10.1111/1477-8947.12052 https://ceobs.org/ukraine-conflict-environmental-briefing-water/ https://doi.org/10.1080/00139157.2017.1301167 https://doi.org/10.29295/2311-7257-2022-108-2-60-67 https://www.refworld.org/docid/3ae6b36d2.html principles of water infrastructure management in ensuring sustainable water use in ukraine 82 ukrainian conflict. ecohydrology & hydrobiology. https://doi.org/10.1016/j.ecohyd.2023.05.001. 11. khumarova, n., & mahats, n. (2023). implementation of the conceptual principles of business social responsibility in ensuring rational water use. economic forum, 1(1), 817. https://doi.org/10.36910/6775-2308-8559-2023-1-2 12. khumarova, n.,& mahats, n. (2022). wastewater reclaiming and recycling: essence and directions for implementation. economic innovations. 24, 2(83), 195-204. https://doi.org/10.31520/ei.2022.24.2(83).195-204 13. khvesyk, m., & golyan, v. (2014). modernization of water infrastructure as a factor in accelerating the socio-economic development of rural areas. the economy of agroindustrial complex, 7, 121-126. http://eapk.org.ua/sites/default/files/eapk/14_07_121126.pdf 14. kovshun, n. (2015). financing of the water management complex: mechanisms, trends and prospects. mechanism of economic regulation, 4, 118–126. https://mer.fem.sumdu.edu.ua/content/acticles/issue_27/natalia_e_kovshunfinan cing_water_complex_mechanisms_trends_and_perspective.pdf 15. ministry for communities and territories development of ukraine. (2021). national report on the quality of drinking water and the state of drinking water supply in ukraine in 2020. https://www.minregion.gov.ua/wp-content/uploads/2021/12/naczionalnadopovid-pro-yakist-pytnoyi-vody-ta-stan-pytnogo-vodopostachannya-v-ukrayini-u-2020roczi.pdf 16. ministry for communities and territories development of ukraine. (2022). national report on the quality of drinking water and the state of drinking water supply in ukraine in 2021. https://www.minregion.gov.ua/wp-content/uploads/2022/12/naczionalnadopovid-pro-yakist-pytnoyi-vody-ta-stan-pytnogo-vodopostachannya-v-ukrayini-u-2021roczi.pdf 17. ministry for development of economy and trade of ukraine. (2017). national report "sustainable development goals: ukraine". https://www.kmu.gov.ua/storage/app/sites/1/natsionalna-dopovid-csr-ukrainy.pdf 18. pauli, g.a. (2010). the blue economy: 10 years, 100 innovations, 100 million jobs. paradigm publications. 19. ramos, h.m., mcnabola, a., lópez-jiménez, p.a., pérez-sánchez, m. (2020). smart water management towards future water sustainable networks. water, 12(1), 58. https://doi.org/10.3390/w12010058 20. shumilova, o., tockner, k., sukhodolov, a. et al. (2023). impact of the russia–ukraine armed conflict on water resources and water infrastructure. nature sustainability. https://doi.org/10.1038/s41893-023-01068-x 21. unicef. (2022). ukraine country office humanitarian situation report no. 24. https://www.unicef.org/ukraine/media/29836/file/ukraine-humanitarian-sitrepdecember-2022.pdf 22. world bank, government of ukraine, european commission. (2022). the ukraine rapid damage and needs assessment. https://www.minregion.gov.ua/wpcontent/uploads/2022/09/ukraine-rdna_report_print.pdf https://doi.org/10.1016/j.ecohyd.2023.05.001 https://doi.org/10.36910/6775-2308-8559-2023-1-2 https://doi.org/10.31520/ei.2022.24.2(83).195-204 http://eapk.org.ua/sites/default/files/eapk/14_07_121-126.pdf http://eapk.org.ua/sites/default/files/eapk/14_07_121-126.pdf https://mer.fem.sumdu.edu.ua/content/acticles/issue_27/natalia_e_kovshunfinancing_water_complex_mechanisms_trends_and_perspective.pdf https://mer.fem.sumdu.edu.ua/content/acticles/issue_27/natalia_e_kovshunfinancing_water_complex_mechanisms_trends_and_perspective.pdf https://www.minregion.gov.ua/wp-content/uploads/2021/12/naczionalna-dopovid-pro-yakist-pytnoyi-vody-ta-stan-pytnogo-vodopostachannya-v-ukrayini-u-2020-roczi.pdf https://www.minregion.gov.ua/wp-content/uploads/2021/12/naczionalna-dopovid-pro-yakist-pytnoyi-vody-ta-stan-pytnogo-vodopostachannya-v-ukrayini-u-2020-roczi.pdf https://www.minregion.gov.ua/wp-content/uploads/2021/12/naczionalna-dopovid-pro-yakist-pytnoyi-vody-ta-stan-pytnogo-vodopostachannya-v-ukrayini-u-2020-roczi.pdf https://www.minregion.gov.ua/wp-content/uploads/2022/12/naczionalna-dopovid-pro-yakist-pytnoyi-vody-ta-stan-pytnogo-vodopostachannya-v-ukrayini-u-2021-roczi.pdf https://www.minregion.gov.ua/wp-content/uploads/2022/12/naczionalna-dopovid-pro-yakist-pytnoyi-vody-ta-stan-pytnogo-vodopostachannya-v-ukrayini-u-2021-roczi.pdf https://www.minregion.gov.ua/wp-content/uploads/2022/12/naczionalna-dopovid-pro-yakist-pytnoyi-vody-ta-stan-pytnogo-vodopostachannya-v-ukrayini-u-2021-roczi.pdf https://www.kmu.gov.ua/storage/app/sites/1/natsionalna-dopovid-csr-ukrainy.pdf https://doi.org/10.3390/w12010058 https://doi.org/10.1038/s41893-023-01068-x https://www.unicef.org/ukraine/media/29836/file/ukraine-humanitarian-sitrep-december-2022.pdf https://www.unicef.org/ukraine/media/29836/file/ukraine-humanitarian-sitrep-december-2022.pdf https://www.minregion.gov.ua/wp-content/uploads/2022/09/ukraine-rdna_report_print.pdf https://www.minregion.gov.ua/wp-content/uploads/2022/09/ukraine-rdna_report_print.pdf medimond template 6 agora international journal of economical sciences, aijes, issn 2067-3310, e issn 2067 – 7669, vol. 15 (2021) some issues on the correlation between wage income and labour productivity rica ivan1, călin tănase ladar2 1 faculty of electrical engineering and information technology, control systems engineering and management department, university of oradea, oradea, romania 2 faculty of environment protection, university of oradea, oradea, romania e-mails rika_ivan2005@yahoo.com, ladarcalin@yahoo.com abstract in romania, both the business environment stakeholders and the academics consider that the path on reaching the average level of development of the european union and implicitly the adoption of the euro currency, can be achieved only by improving the standard of living that is the citizens’ income, which can be reached only by increasing labour productivity. one of the objectives of the european union is to reduce the disparities between regions, as confirmed by the evolution of gdp/ capita in the less prosperous eastern europe countries in comparison with the more developed eu members states from western europe. there are a number of factors impacting the labour productivity and wage incomes, and the onset of the covid 19 pandemic has accelerated the adoption of automation, digitalisation and remote work, which will significantly contribute to the disappearance of less skilled jobs and the consolidation of those who are highly qualified ones, the latter being less sensitive to the adoption of new technologies. keywords: labour productivity, wage income, automation, pandemic, increased competitiveness, european union 1 introduction according to the national bank of romania, the relationship between the average gross wage and labour productivity marks two inextricably linked indicators. however, labour productivity is not the only factor that influences the dynamics of wage costs, the latter being also affected by the phase of the economic cycle, and how relaxed/ tightened the labour market is. according to nbr data, over the period 2009-2017 the average real wages increased by about 45%, while labour productivity increased by only 27%, urging caution in terms of wage increases. in order to join the euro area, in addition to other core economic indicators, romania must also reach a minimum level of real convergence of 75% of the eu average in terms of gdp per capita. romania’s per capita income gap is now much larger than the average of the top 10 eurozone members states, when compared to the income that portugal, slovakia or spain were facing with when they joined the euro area. therefore, in the absence of a per capita income close to the european average, romania cannot consider itself as being a developed economy, comparable to that of the euro area members states, and it remains part of the area of developing countries. in january 2021, the average gross wage in romania was 5,549 lei, that is an average net wage of 3,176 lei net. i.e. about 660 euros. a key factor in getting closer to the average level of development of the euro area member states is to increase competitiveness, i.e. productivity. however, capping the pace of wage growth in relation to the productivity rate increase leads to the continuation of the exodus of romania's labour force to developed economies, which, in turn, leads to a slowdown in economic development. mailto:rika_ivan2005@yahoo.com mailto:ladarcalin@yahoo.com 7 the salary level in a company depends on several factors such as: the size of the company, the economic sector in which it operates, whether it is a national or a multinational company, the relationship between labour supply and demand in that economic sector, its position on the market and its market share, the profitability of the business field, the employee's salary history, and, last but not least, labour productivity. the tremendous differences between wages paid within the developed countries when compared to the developing countries, such as romania, are not caused as much by differences in productivity rate per capita as by other factors such as immigration control. if free movement of labour was total, most workers in developed countries would be replaced by workers in developing countries, who would accept lower wages. in 2019, a bus driver in romania was paid on average net wage of about 3,000 lei net i.e. about 630 euros. in the same year, his peer in sweden was paid at least 34,000 sek i.e. about 3,200 euros. in other words, the swedish driver is paid more than 5 times more than his romanian peer, which is not related to a productivity more than 5 times higher. in order to build a truly fair society, the myth that a person is paid according to his personal worth cannot be accepted (chang ha, 2011). even in those sectors of developed economies where employees are truly more productive than their peers working in the economies of the developing countries, their high(er) productivity is largely due to the system, organizational structure of companies and not to individuals themselves. the productivity of these employees is due to the fact that they live in economies with superior technologies, better organized companies, better institutions, and with a more developed infrastructure, all these being factors that have been achieved in time, over generations. according to the data published by the oecd in 2019 and having 2010 as reference year, romania recorded almost the highest rate of increase in labour productivity per hour among all the 43 countries reviewed, reaching in 2019 to a ratio of 140.3 compared to 2010, being the second best after ireland (142.4), while the poorest performers were greece (93.0), luxembourg (100.8) and italy (101.2). according to the data presented in the “ziarul financiar” newspaper romania had the fastest increase in wage income over the period 20132018, as well as one of the largest increases in terms of labour productivity rates in the european union, but the share of value added that was transferred to labour factor was small. the business model of keeping labour costs low, especially below the level of labour productivity growth, especially in central and eastern european countries which was imposed by foreign investors has reached its limits. economic growth, as a consequence of increasing labour productivity in an economy, is directly proportional to the production and consumption of resources, which inevitably affects the environment. thus, societies need to rethink the economic model on which they rely on with a focus on sustainable and environmentally friendly growth, while improving the quality of people’s lives. 2 main productivity concepts used the oecd uses the concept of labour productivity in terms of gdp per hour worked as a basic indicator for calculating labour productivity. this concept measures the efficiency of the labour factor combined with other factors of production used in the production process. thus, labour productivity only partially reflects the capacity of workers or the intensity of their effort, and it depends on other factors such as invested capital, technological or organizational changes, economies of scale, etc. another concept used is total factor productivity (tfp), which refers to how efficient and intense the inputs used in the production process are. the increase in this type of productivity is the result of technological improvements and innovations adopted over time. technological 8 progress is inversely proportional to the labour factor, in the sense that an increase of technological progress leads to a decrease in the amount of labour incorporated. according to eurostat, labour productivity measures the amount of goods made and services performed by each person that is labour factor or the output/ input ratio of labour. in the case of structural indicators, labour productivity can be measured by multiplying gross domestic product (gdp) by the number of people employed or the number of hours worked. productivity is influenced by several factors, among which the most important to mention are: efficiency, a factor that means the amount of goods/ services that can be obtained using a certain volume of production factors; technology, a factor that includes scientific outcomes, organizational techniques, quality of the new elements generated meaning the goods produced and services provided; decreasing real costs while maximizing profit; correlation with the current economic cycle since there are periods of productivity increase or slowdown, depending on the phases of the economic cycle. firms tailor their capital and labour force according to fluctuations in terms of demand. another factor is the standardization of production processes, in the sense that the comparison of different production processes may lead to finding the less efficient production processes. structuralism is a contemporary theory suggesting that wage growth demands drive up the inflation rate, and the pace of wage growth rising should be one percentage point above the rate of productivity growth in order to achieve an annual inflation rate of 2-3%, which is targeted by central banks. labour productivity may also be defined as the production obtained in relation to the labour force unit, which can consist in the number of hours worked, as well as in the number of employees. the variant that is based on the number of hours worked is the most used, being considered the most appropriate; at the opposite pole is the labour productivity related to the number of employees which is appreciated due to its simplicity, yet it does not consider the changes in the average time worked or the role of those workers who do not have the status of employees, but who can have an important contribution in the production process. the theory of wage income efficiency (galgóczi, 2017) considers that firms that adopt the model of paying their employees wages over the market level compared to those that believe that revenues should increase only with increasing labour productivity is a rational solution, since this model acts reversibly, first by increasing wage income leading to increased labour productivity and thus avoiding the trap of maintaining low wages. the efficiency in using labour does not depend strictly on the material conditions of production, but also on the quality of the labour force. nowadays, the workforce is subject to higher demands than in the past when more rudimentary production techniques were used. the technical progress determined the change of the weight of the effort from the physical side to the intellectual side, determining more accuracy in the lucrative activity. thus, the increased qualification has become an important condition for the efficient use of human resources. the skilled workforce generates a greater amount of production in the same unit of time than in the case of the less skilled labour force. there is a strong positive correlation between the level of professional training and labour productivity. the advent and development of computers has led to improved efficiency of employees, leading to an increase in demand for highly skilled labour, which has triggered increased wages for the latter compared to lowor unskilled employees. the impact of unequal income in relation to economic growth depends on a number of factors, including the initial level of income and the geographical distribution thereof within an area or region. urbanization degree influences economic growth depending on the level of 9 development of an economy and the initial distribution of income. while high levels of income inequality can be limiting factors in long-term economic growth, increasing income gaps as well as urban agglomerations. thus, many developing countries currently face a high share of low per capita income, but also high income, yet in a much lower share. there is no emphasis in the literature on the fact that economic growth and income inequality are not equal in an economic space and that the effects of income inequality on economic growth may differ depending on the geographical concentration of economic activity. it is important to consider both factors i.e. income inequality and urban agglomeration factors, as well as changes incurred in these factors within an economy, but also how these two factors interact with each other. in conclusion, the literature emphasizes that, in the short run, there is a positive correlation between income inequality and economic growth, but in the long run, this correlation tends to become negative. moreover, high levels of income inequality appear to negatively affect low-income countries compared to those with high incomes. employees working in larger cities are paid higher wages, a kind of urban wage premium (ehrlich m., overman h. 2020), because they make workers more productive. larger cities also tend to attract better-educated employees who are more productive and have higher earnings. consequently, gdp per capita is higher in these cities. labour productivity should not be mistaken with the total factor productivity, which excludes human impact and the physical accumulation of capital, focusing only on the contribution of new changes in technology and in business management (mckinsey global institute, 2021). according to recent studies (ilo, 2020), income inequality tends to be less predominant in countries where there are a large number of employees who benefit from collective labour agreements. 3 the impact of the covid19 pandemic on the correlation between income and labour productivity the onset of the covid 19 pandemic was an incentive factor for many companies to accelerate the use of technologies such as digitalisation and automation, which has led to increased productivity by replacing employees or increasing production per employee. prior to the covid 19 pandemic, productivity growth was not always correlated with wage growth. for example, in the us, the average wages increase was 19% below productivity growth as compared to year 2000. if the average wage of a us employee had increased in the same pace with the productivity, by 2020 it would have been approximately 9,000 usd/ year higher. the onset of the pandemic has triggered a dramatic drop in terms of consumption but also to an increase in savings, especially in the case of high-income households, as well as job losses, especially in the case of lower-income households. the analyses made by specialists show that approximately 60% of the productivity increase is due to firms that have applied measures to reduce labour costs as well as other production costs, such as, for instance, via automation. since these productivity gains are not used to generate new jobs and increase wage incomes, then there will be a growing gap between productivity and wage growth. trade automation and liberalization have profoundly altered the labour market in the developed economies, offering disproportionate benefits for highly qualified employees to the detriment of other employees. technological changes have reduced the demand for lowand middle-wage employees, who work, for example, on factory assembly lines, and have increased demand for highly-skilled employees who are also better paid. 10 according to recent studies (mckinsey, 2020), in europe, approximately 53 million jobs will be subject to the automation process, and a large part of the jobs that will be lost will be replaced by technology and health investments based jobs. the outbreak of the covid 19 pandemic has led to an increase in remote work, leading to increased productivity, by reducing costs related to office space, equipment and supplies, giving companies the opportunity to hire highly skilled workers who do not reside in the locality where the companies have their headquarters. however, remote work is not possible in all industries, such as agriculture or construction, and differs from one country to another, depending on the degree of digitalisation thereof. with regard to the ever-increasing implementation of technology and especially of artificial intelligence (ai), it is very likely that it will significantly contribute to loss of jobs involving low or medium skill levels, but without having a major impact on jobs requiring high qualification. these technology-related professional changes are more likely to occur, especially in cities with large urban agglomerations. automation and use of ai in economic processes causes a major increase in labour productivity, but also a decrease in the number of employees. however, these factors do not evenly influence the industries or jobs in one industry. for example, the table below presents the jobs with the highest and lowest productivity are not likely to be affected by automation in the coming years in europe are shown in the following table: jobs most likely to be influenced by automation and artificial intelligence jobs less likely to be influenced by automation and artificial intelligence mine, construction, manufacturing, and transportation workers teachers machine operators and assembly line workers medical and bioscience personnel, physicists, mathematicians, engineers office workers managers and personnel in the legislative and administrative field vehicle operators skilled agricultural workers source: nedelkoska and quintini (2018) highly qualified jobs imply the existence of problem-solving skills, and they are not characterized by routine tasks or require high communication skills, which makes it difficult to adopt automation. countries such as sweden, which have a significant share of its workforce employed in areas involving high skills, are less exposed at risk entailed by automation. job market in northern european countries is less sensitive to automation than those in eastern europe, mainly due to the way the work is organized within the same economic sectors and only to a lesser extent due to the structure of the economy. the changes generated by the automation and digitalisation trigger a tendency of polarization of the labour market, in the sense of increasing inequalities; currently one finds that a greater focus is put on investments related to increased digitalisation and less on investments related to the qualification of manpower. 4 conclusions despite the fact that the gdp/ capita indicator is often used in comparing the level of development between different economic areas, given the high inequalities between the incomes of its inhabitants, gdp growth would only partially reflect the reduction of the poverty rate. the improvement of the living standard, of social welfare, the increase of the 11 labour productivity and implicitly of the national wealth, all of the above up determine the degree of development of an economy. in order to converge towards the level of developed countries in the european union, romania should focus on economic activities that involve creativity and innovation, an increased added value in the case of exports, which determines the existence of higher wage incomes, as against the current model which focuses on economic activities related to distribution, marketing, etc. which entail the presence of a less skilled labour force, lower wages and thus remaining caught in the poverty trap. in order to avoid the trap of low income capping and to achieve sustainable economic growth, romania needs to focus on at least four strands of action, namely: digitalisation, innovation, mitigating climate change, developing workforce skills and social inclusion. references [1] banca naţională a româniei (www.bnr.ro) [2] https://data.oecd.org/lprdty/gdp-per-hour-worked.htm [3] bērziņa s (2020), remote work – a forced experiment during the covid-19 era or a lasting value? https://www.macroeconomics.lv [4] brekelmans, s. and g. petropoulos. (2020) ‘occupational change, artificial intelligence and the geography of eu labour markets’, working paper 03/2020, bruegel [5] castells, vincente (2011), agglomeration, inequality and economic growth, research institute of applied economics, 2011/14 pp 40 [6] chang ha-joon (2011), 23 de lucruri care nu ti se spun despre capitalism, editura polirom, pp 41-48 [7] comisia europeană (2020), raportul de țară din 2020 privind românia, https://ec.europa.eu/ [8] dăianu d. & co (2017), românia și aderarea la zona euro: întrebarea este în ce condiții!, institutul european din romania, bucurești [9] ehrlich m., overman h. (2020), place-based policies and spatial disparities across european cities, centre for economic performance london school of economics and political science, cep discussion paper no 1726, pp 2 [10] galgóczi b (2017), why central and eastern europe needs a pay rise, european trade union institute, working paper 2017.01 [11] gereben a, wruuck p (2021), towards a new growth model in cesee: convergence and competitiveness through smart, green and inclusive investment, eib working paper 2021/01 [12] kolodko, grzegorz (2014), whither the world: the political economy of the future, palgrave macmillan, pp 209-240 [13] kohli ulrich (2015), explaining total factor productivity, university of geneva, www.business.unsw.edu.au [14] international labour office (2020), global wage report 2020–21: wages and minimum wages in the time of covid-19, ilo cataloguing in publication data, geneva [15] mckinsey global institute (2020), the future of work in europe. automation, workforce transitions, and the shifting geography of employment, www.mckinsey.com/mgi [16] mckinsey global institute (2021), the postpandemic economy. will productivity and growth return after the covid 19 crisis? www.mckinsey.com/mgi, pp 4-7 [17] mankiw n.g., (2015), principles of macroeconomics, cengage learning, pp 310 [18] mungiu-pupăzan m.c (2011)., productivitatea – modalitate de exprimare a performanţei şi eficienţei economice, analele universităţii “constantin brâncuşi” din târgu jiu, seria economie, nr.3./2011, p.124 [19] nedelkoska, l. and g. quintini (2018), automation, skills use and training, oecd social, employment and migration working papers no. 202, organisation for economic co-operation and development 12 [20] peterson institute for international economics (2021), how to fix economic inequality? mit press, pp 11-16 [21] taylor l., barbosa-filho n. (2021), inflation? it’s import prices and the labor share! institute for new economic thinking, working paper no. 145, pp 3-4 [22] https://playtech.ro/stiri/cat-castiga-un-sofer-de-autobuz-stb-si-de-ce-sunt-carati-pasagerii-precum-nistesaci-de-cartofi-29118 [23] https://www.thoughtco.com/total-factor-productivity-definition-1147262 [24] https://ec.europa.eu/eurostat/statistics-explained/index.php?title=glossary:labour_productivity [25] https://www.eea.europa.eu/publications/growth-without-economic-growth [26] https://www.zf.ro/profesii/fundatia-friedrich-ebert-romania-afla-primul-loc-ue-productivitate 1 agora international journal of economical sciences, aijes, issn 2067-3310, e issn 2067 – 7669, vol. 16 (2022) credit institutions – financing entities during the covid-19 pandemic cristina ioana antik1, 1faculty of juridical and administrative sciences, agora university of oradea, oradea, romania e-mail antikcristina@yahoo.com abstract the impact of the covid-19 pandemic affected the financial situation of debtors, both individuals and legal entities, as they sought to find the best solutions for the recovery and functioning of their business. this paper aims to analyse the decision to finance an economic entity during the covid-19 pandemic, generated by the need to acquire a tangible fixed asset necessary to carry out the core business. for this purpose, a series of financial and accounting aspects regarding the financing alternatives are highlighted using the following research tools: the observation method, the descriptive method, the case study method. keywords: financing decision, financial leasing, bank loan, pandemic, debtor. 1. introduction the application of restrictive measures to combat and prevent the spread of the sars-cov-2 virus, initially established by the decree of the president of romania no. 195/2020 regarding the establishment of the state of emergency on the territory of romania and later extended by the decree of the president of romania no. 240/2020, had adverse repercussions on the financial situation of debtors, individuals and/or legal entities, in certain cases their incomes were significantly reduced. for companies, an alternative in terms of financing is the leasing system. this option is a solution when the company does not have sufficient liquidity to purchase the goods, using them in exchange for a periodic payment, thus managing to finance the investment within the company. another way of financing an investment in the case of an entity is through bank loans. the important factors in the lending decision are the financing costs that the company will have to bear, taking into account the financial potential and the economic management plan. although numerous comparative studies have been carried out over time regarding financing alternatives through leasing and credit purchase, it is very difficult to assess which of the two methods is more advantageous. 2. reanalysis of specialized literature the normative act that regulates leasing operations in romania is the government ordinance no. 51/1997 on leasing operations and leasing companies, republished, with subsequent amendments and additions. according to art. 1 paragraph (1) of this normative act, leasing operations are defined as those through which one party, called the lessor/financier, transfers for a determined period the right of use over an asset, the owner of which is, to the other party, called the lessee/user , at its request, against a periodic payment, called the leasing rate, and at the end of the leasing period, the lessor/financier undertakes to respect the option right of the lessee/user to buy the asset, to extend the leasing contract without changing the nature leasing or to terminate contractual relations. the lessee/user can choose to buy the tangible fixed asset before the end of the leasing period, but not mailto:antikcristina@yahoo.com 2 earlier than 12 months, if the parties so agree and if they pay all the obligations assumed by the contract. at art. 2 lit. d) the ordinance defines the leasing rate, distinguishing between financial leasing, in which the rate represents a share of the input value of the asset and the leasing interest, which is established based on the interest rate agreed by the parties, and operational leasing, in which the rate represents the rent, which is determined by the agreement of the parties. also, references to the development of leasing contracts in romania can be found in law no. 227/2015 regarding the fiscal code, with subsequent amendments and additions, to title i "general provisions", art. 7 points 7-8, as follows:  financial leasing contract any leasing contract that meets at least one of the following conditions: a) the risks and benefits of the right of ownership of the asset that is the object of the lease are transferred to the user at the time when the leasing contract takes effect; b) the leasing contract expressly provides for the transfer of ownership of the asset that is the object of the lease to the user at the time of the expiration of the contract; c) the user has the option to buy the asset at the time of the expiration of the contract, and the residual value expressed as a percentage is less than or equal to the difference between the maximum normal operating time and the duration of the leasing contract, compared to the maximum normal operating time, expressed as a percentage ; d) the leasing period exceeds 80% of the maximum normal operating time of the asset the object of the lease; within the meaning of this definition, the leasing period includes any period for which the leasing contract can be extended; e) the total value of the leasing installments, minus the accessory expenses, is greater than or equal to the input value of the asset";  operating leasing contract – any leasing contract concluded between the lessor and the lessee, which transfers to the lessee the risks and benefits of the right of ownership, less the risk of capitalizing the asset at the residual value, and which does not meet any of the conditions provided for in point 7 letter. b)-e); the risk of capitalizing the asset at its residual value exists when the purchase option is not exercised at the beginning of the contract or when the leasing contract expressly provides for the return of the asset at the time of contract expiration". taking into account the criteria according to which it is classified, leasing takes several forms. according to vintilă (2004), it can be movable and immovable, related to the involvement of the parties, directly or indirectly, and depending on the procedures for calculating the rates, it can be net or gross. in romania, a special form of leasing is sale-and-leaseback, characterized according to the authors molico and wunder (2003) by the fact that the leasing user, first of all the owner of a leased object, sells and assigns ownership of this object to a lessor of leasing, in order at the same time to get it back for use on the basis of a leasing contract. from an accounting point of view, companies that are required by law to use international financial reporting standards as the basis of their accounting will apply ifrs 16 leases. in romania, the general legal accounting regulation for the application of ifrs is the order of the minister of public finance no. 2.844/2016 for the approval of the accounting regulations in accordance with the international financial reporting standards, with subsequent amendments and additions. mihalciuc (2019) states that the provisions of ifrs 16 apply to all companies that report financially according 3 to international financial reporting standards (listed or unlisted companies that have chosen ifrs for consolidated accounting, including their subsidiaries) and, also, the majority of leasing contracts, including those for assets related to the right of use within a leasing subcontract, with certain exceptions provided by the standard (leasing regarding the exploration of ores or biological assets, service concession commitments, intellectual property rights, license). in our country, the entities obliged to report according to ifrs are credit institutions, nonbanking financial institutions, insurance and reinsurance companies, brokerage companies, as well as companies listed on the bucharest stock exchange. companies that do not fall into this category apply the provisions as the basis of accounting order of the minister of public finance no. 1,802/2014 for the approval of the accounting regulations regarding individual annual financial statements and consolidated annual financial statements, with subsequent amendments and additions. with regard to lending activity in romania, credit institutions grant loans only in compliance with the legal regulations in force, namely government emergency ordinance no. 99/2006 on credit institutions and capital adequacy, with the subsequent amendments and additions, of internal normative acts and internal approval powers. loans are granted in the local currency and in all currencies quoted by the national bank of romania, under the cost conditions established by the bank's steering committee (david, 2009). in order to come to the aid of debtors in difficult situations from a financial point of view, caused by the outbreak of the covid-19 pandemic, in romania the government's emergency ordinance no. 37/2020 regarding the granting of facilities for loans granted by credit institutions and non-bank financial institutions to certain categories of debtors, which provides for a series of measures aimed at facilities for holders of leasing contracts and credit contracts, which has subsequently undergone changes. in the category of creditors who can grant the facilities, according to art. 1 lit. a) from the normative act mentioned above, credit institutions defined according to geo no. 99/2006 and non-bank financial institutions defined by law no. 93/2009, with subsequent amendments and additions, as well as the branches of credit institutions and non-bank financial institutions from abroad that carry out activity on the territory of romania. financial leasing companies are established in the form of joint-stock companies and as non-banking financial institutions, while operational leasing companies are established and operate according to companies law no. 31/1990, republished, with subsequent changes and additions, og no. 51/1997 requiring them to have as their main object of activity the carrying out of leasing operations and a minimum share capital, subscribed and fully paid in cash, upon establishment, equal to the equivalent in lei of the sum of 200,000 euros. the period for which the suspension of payment obligations can be requested is between one and nine months, without being able to exceed the date of december 31, 2020. 3. research methodology in order to achieve the objective formulated regarding the subject addressed, the study is based on certain methods of scientific research: the observation method, the descriptive method and the case study method. 4. research results 4 the objective of the research is the analysis of the financing decision in the case of an economic entity, during the covid-19 pandemic, generated by the need to purchase a tangible fixed asset necessary for the performance of the basic activity. for this, we chose a micro-enterprise economic entity whose main activity is transport, whose turnover is less than 100,000 euros. in order to carry out the basic activity, the company administrator analyzes the need to purchase a truck intended for the transport of goods and decides that it is indispensable in carrying out his activity, considering that it is not appropriate to choose a rental service in this case. from the offer of existing financial institutions on the market, the company's representative opts for banca transilvania, going to decide which is the financing option that benefits him the most: financial leasing or bank credit. 5. presentation of the financial-accounting aspects based on a financial leasing contract contract conditions if the transport company concludes a financial leasing contract for a period of 4 years with bt leasing transilvania ifn sa in may 2020, for a truck intended for the transport of goods, the contractual clauses provide for a contract value of 120,000 lei , while the advance that must be paid by the lessee is 25% of the value of the immovable asset. also, the costs regarding this type of financing can be found in the interest charged by the lessor, of 7.9%, and in the monthly management fee, of 20 lei, while the file analysis fee is 450 lei. the company will also pay a monthly insurance in the amount of 254.72 lei to bt intermedieri agent de asigurare srl. from the analysis of the repayment schedule of the financial leasing installments, the specifics and value of the expenses borne by the company can be seen as follows: • total interest payment (financial expenses) – 7,110 lei, representing a monthly value of 148.12 lei throughout the financing period; • insurances and commissions (operating expenses) – 13,187 lei, of which 960 lei – the management commission with a monthly value of 20 lei during the financing period and 12,227 lei – the insurance borne each month during the contractual period, in the amount of 254.72 lions; • the amount to be paid – 140,297 lei, respectively 120,000 lei – the value of the contract and 20,297 lei – the expenses related to the contractual period; • total to be paid, with the file analysis commission, in the amount of 450 lei 140,747 lei. the flow of accounting records in the case of financial leasing based on the contract concluded with the leasing company, the lessee makes the following entries in the accounting: in may 2020:  receipt of the advance invoice (25%): 35.700 lei % = 404 „property providers” 35.700lei 30.000 lei 4093 „ advances granted for tangible assets” 5.700 lei 4426 „deductible vat” 5  payment by bank transfer of the advance invoice: 35.700 lei 404 = 5121 35.700 lei „property providers” „bank accounts in lei”  registration of the financial leasing contract: 120.000 lei 2133 = 167 120.000 lei „means of transport” „other assimilated loans and debts”  highlighting the interest in off-balance sheet accounts, according to the due date ((120,000 lei–30,000 lei) x 7.9%): debit 8051 7.110 lei „payable interest”  retention of the advance: 30.000 lei 167 = 4093 30.000 lei „other assimilated „advances granted for loans and debts” tangible assets” the tax on the means of transport owed to the local public administration by the lessee, according to art. 471 para. (6) lit. a) and b) of the fiscal code, will be determined by the taxation decision issued starting from the first day of the year following the one in which the financial leasing contract was drawn up. the lessee's obligation when he takes over the asset in the financial leasing system is to submit the tax declaration to the tax authority in whose territorial competence the means of transport will be registered, within 30 days from the preparation of the processhandover-receipt report.  registration of the invoice regarding the file analysis commission: 535,50 lei % = 401 „providers” 535,50lei 450,00 lei 628 „ other service charges executed by third parties” 85.50 lei 4426 „deductible vat”  payment by bank transfer of the file analysis commission: 535,50 lei 401 = 5121 535,50 lei „providers” „bank accounts in lei” in june 2020:  receipt of the financial leasing invoice related to the first installment: 2.431,32 lei % = 404 „property providers” 2.431,32 lei 1.875,00 lei 167 „other service charges executed by third parties” 6 20,00 lei 628 „other service charges executed by third parties” 148,12 lei 666 „costs regarding interest” 388,20 lei 4426 „deductible vat”  payment by bank transfer of the invoice: 2.431,32 lei 404 = 5121 2.431,32 lei „property providers” „bank accounts in lei”  non-accounting registration of the interest paid: credit 8051 148,12 lei „payable interest”  depreciation recording: being a financial leasing contract, it entitles the lessee to record the depreciation of the asset in accordance with the accounting policies practiced by him. thus, the amortization method chosen is the linear one, the value related to the operating expenses regarding the amortization being calculated as follows: annual depreciation = entry value/lifetime = 120,000 lei/4 years = 30,000 lei monthly depreciation = annual depreciation/12 months/year = 30,000 lei/12 months = 2,500 lei 2.500 lei 6811 = 2813 2.500 lei „operating expenses „depreciation of fixed assets” regarding depreciation and means of transport”  receiving the invoice for insurance services issued by the insurance company: 254,72 lei 613 = 401 254,72 lei „insurance expenses” „providers”  payment by bank transfer of the invoice for insurance services: 254,72 lei 401 = 5121 254,72 lei „providers” „bank accounts in lei” the company will record these operations until the date of completion of the financial leasing contract. costs of financing through the financial leasing contract the expenses that the company must bear monthly can be found in the commission charged by the lessor, the interest related to the financial leasing contract and the amount of insurance expenses. these are maintained at a constant value, at a total of 422.84 lei, of which 148.12 lei interest, 20 lei management commission and 254.72 lei insurance. the monthly installments also bear the vat rate, being deducted from the invoices received from the insurance company and the lessor. the total financing costs amount to 20,747 lei, of which 7,110 lei total interest, 960 lei total management fees, 12,227 lei total insurance paid, the latter registering the highest value of the total costs, and 450 lei the commission file analysis, initially supported. 7 6. conclusions the covid-19 pandemic has affected the activity of all economic entities, which are obliged to adapt their financial and accounting policies to the new requirements. the romanian authorities came to the aid of debtors in difficulty by issuing geo no. 37/2020, which, under certain conditions, helps them benefit from the suspension of payment obligations. the financing decision during the pandemic was affected by a slight increase in interest costs and commissions related to existing financing instruments in romania. in the case of our study, the financial leasing situation and the bank loan offered by banca transilvania were compared. the advantages of credit-based financing are: the asset passes into the beneficiary's patrimony as soon as the contract is signed, there is the possibility of refinancing the loan at another bank, and the beneficiary can determine the period for which he wishes to contract the loan. the disadvantages of credit-based financing are: a longer period of approval of the credit file, the need for additional guarantees and higher financing costs. the advantages of financing based on the financial leasing contract are: the signing of the leasing contract takes place in a short period, the conclusion of such a contract does not require the existence of additional guarantees, access can be made by a wider range of users, the right of use is acquired even if the full payment of the asset has not been made, and the interest expenses are tax deductible. the disadvantages of financing on the basis of the financial leasing contract are: the mandatory payment of an advance as a percentage of the contract value according to the contractual commitment, possession of the asset is possible only at the end of the contract, after the full payment of the installments, through the option shown by the lessee, maintenance expenses and the repairs of the property are borne by the lessee. references [1] david, d. (2009), contabilitatea bancară a creditelor acordate clientelei nefinanciare, editura univers, arad. [2] mihalciuc, c.c. (2019), noi modificări aduse reglementărilor contabile cu privire la contabilizarea şi recunoaşterea în raportările financiare a contractelor de leasing, în conferinţa ştiințifică internaţională „contabilitatea şi educaţia contabilă în societatea digitală” (“accounting and accounting education in the digital society”), ediţia a viii-a, chişinău. [3] molico, t., wunder, e. (2003), leasingul, un instrument modern de investiții și finanțare, editura ceccar, bucurești. [4] vintilă, a. (2004), aspecte teoretice şi practice privind operaţiunile de leasing, curentul juridic, anul vii, nr. 1-2 (16-17). [5] legea nr. 93/2009 privind instituțiile financiare nebancare, publicată în monitorul oficial nr. 259/21.04.2009, cu modificările și completările ulterioare. [6] legea nr. 227/2015 privind codul fiscal, publicată în monitorul oficial nr. 688/10.09.2015, cu modificările şi completările ulterioare. [7] ordinul ministrului finanțelor publice nr. 1.802/2014 pentru aprobarea reglementărilor contabile privind situațiile financiare anuale individuale și situațiile financiare anuale consolidate, publicat în monitorul oficial nr. 963/30.12.2014, cu modificările și completările ulterioare. [8] ordinul ministrului finanțelor publice nr. 2.844/2016 pentru aprobarea reglementărilor contabile conforme cu standardele internaţionale de raportare financiară, publicat în monitorul oficial nr. 1.020/19.12.2016, cu modificările și completările ulterioare. [9] ordonanța de urgență a guvernului nr. 99/2006 privind instituțiile de credit și adecvarea capitalului, publicată în monitorul oficial nr. 1.027/27.12.2006, cu modificările și completările ulterioare. 8 [10] ordonanţa de urgenţă a guvernului nr. 37/2020 privind acordarea unor facilităţi pentru creditele acordate de instituţii de credit şi instituţii financiare nebancare anumitor categorii de debitori, publicată în monitorul oficial nr. 261/30.03.2020, cu modificările ulterioare. [11] ordonanța guvernului nr. 51/1997 privind operaţiunile de leasing şi societăţile de leasing, republicată în monitorul oficial nr. 9/12.01.2000, cu modificările și completările ulterioare. [12] www.ceccarbusinessreview.ro http://www.ceccarbusinessreview.ro/ agora international journal of economical sciences, aijes, issn 2067-3310, e issn 2067 – 7669, vol 10 (2016) 41 the purchase behavior of the consumer urziceanu ramona-mihaela 1 , paşcalău valentina-simona 2 abstract the paper describes the types of purchase behavior of consumers and the stages of decision made by the purchasing of the consumer, the approach in which the personal factors can affect the decision made by the purchasing of the consumer, the psychological factors which can affect the decision made by the purchasing of the consumer, the examination of the social factors that influence the decision made by the purchasing of the consumer and why is it so important that marketing has to understand consumer purchasing behavior. keywords: behavior, consumer, purchase, marketing, factors, decision introduction marketing is defined in many ways, in the academic research or in the applied business purposes; marketing is the process of planning and executing of the conception, promotion and distribution of ideas, goods and services, to conduct exchanges that satisfy individual and organizational goals. marketing is one of the most essential tools for business success through business orientation towards the market, in other words, customer orientation. the study of consumer behavior became a concern for marketers, as they can learn how buyers choose their goods and services to satisfy the many needs that are stimuli, factors that influence their choice. the consumer purchasing behavior, as recent research field of marketing, refers to the behavior of final consumers who purchase goods and services for personal consumption individuals and households by fulfilling the current requirements or indicate their role in society. marketing deals with the concept of consumer behavior both narrowly and broadly. the american marketing association defines consumer behavior as "an interaction on impression and perception, behavior and common natural events that human beings direct their changes in their lives." the consumer behavior is defined as "all acts of individuals directly related to the purchase of goods and services, which includes the whole decision-making process that precedes and determines these acts". 3 there are three essential elements that define human behavior: stimulus that is cause; need is a desire that can be achieved; the objective of which is its purpose. as the needs multiply exponentially due to technical and scientific progress, leads to the invention of others and the need of satisfy leads to others, obviously the individual behavior changes, too. it is also important to remember some key points for defining consumer behavior:  the consumer behavior is dynamic, both because of the time evolution of generation of consumers faced with the changes which they produce and due to the emergence of new factors directly influencing their behavior. the overtime change, determine the leading producers to monitor the safety of customers to have a real perception, fairly;  the consumer behavior is the individual's reaction to various endogenous and exogenous variables.  the consumer behavior, involves the successive or simultaneous actions for selecting an alternative, resulting in decisions 4 . the consumer behavior is a complex system of events, attitudes, motivations, decisions; 1 agora university of oradea, romania, e-mail: ganearamona2002@yahoo.com 2 agora university of oradea, romania, e-mail: simonavali@yahoo.com 3 o.c..ferrel, william m.pride, marketing,. houghton mifflin company publishing house, boston ,1991, p.140. 4p. mâlcomete (coord.), lexicon de marketing, junimea publishing house, iaşi, 1994, p.67. 42  the development of human individuality both naturally and through education is reflected in his behavior through preferences, dislikes, beliefs, attitudes and values, in the position occupied in society, in the attended entourage, etc. thus by combining individual circumstances and psychology will influence the purchasing decisions of each individual;  the consumer behavior determines interactions and therefore it is important to know "what consumers think (perception), feel (impression) and what do they do (behavior), what are the things and places that influence" 5  the consumer behavior determines changes between people and therefore "if the relationship between the consumer who demands and the producer, who offers on the market, mutual understanding is essential in the purchase process and in the production of goods and services" 6 .  the scope of consumer behavior widens, especially due to the development and diversification of the services sector in the no labor sphere. as a result "within the current social marketing meaning, the consumer behavior requires such a comprehensive approach to express the position of the people to all tangible and intangible assets arisen in the final consumption" 7 the stages of decision made by the purchasing of the consumer in the literature we find five stages (phases, stages, and moments) to adopt a complex decision: identify the problem, search for information, evaluation of alternatives, the choice, post-purchase evaluation. 8 the involvement of the consumer in every stage of the decisional process is reflected in the cognitive behavior (the utility and affective motivations are focused on the functional characteristics of the product), 9 and the intensity has its roots in the importance of the product or service for the consumer and the risk that it involves his purchase. ”as a result, it can delineate the low, medium or highly involvement, as shown in the following table. therefore, the concept of the involvement of different types presents: 1 the poor involvement decisions, which does not mean a proper decision, because the experience provides a unique solution preferred, the product being purchased. so, the decisions are taken on the basis of routine, an important role being played by fidelity, like learning. it results from the repeated purchases. 2 the decisions with strong involvement are usually complex decisions that go through all the decision making stages if we consider how the purchase decisions are done, we can classify them in: 1 scheduled decision – characterized by repetition and similarity in the way of adoption. they are routine decisions for the purchase of most products and services with high frequency and high fidelity; 2 unscheduled decision – it refers to new situations, restructured and they have strong financial and psychological implications, because there is no precedent that involves greater risk and have a more complicated structure. if you take into account the level of effort expended for the decision, going through the phases determined by the rate decision-making process, the nature of the products and the importance given decision, it defines five distinct shopping categories: 1 impulse shopping made unplanned due to a motivation instant, sudden, driven mainly by visual stimulus, asks minimal effort; 2 routine shopping which are regularly planned without great expense of time and effort; 3 family shopping commonly consumed product, but the consumer is willing to extra effort for another version of the product. in this situation the advertising plays an important role; 4 unfamiliar shopping involve a great effort, the decision process is lengthy because it uses different criteria for purchase; 5j. blythe , comportamentul comsumatorului, teora publishing house,1998, p.11. 6i. mihuţ, m. pop, consumatorul şi managementul ofertei , daciapublishing house, cluj – napoca 1996, p.14 7p. mâlcomete ,marketing , academicăpublishing house – gh. zane, iaşi l993, p.51. 8 o.c.ferrel, william m.pride, marketing, ed. houghton mifflin company, boston, 1991, p.142. 9 c.w. park, s.m. young – “consumer response to television commercials, the impact of involvement and background, music on brand attitude formation” – journal of marketing research, 1986, 23,1 p.11-21. 43 5 critical shopping involving high risk and therefore a special effort to get information and compare options.” 10 table1 the involvement of the buyer in the stages of decision characteristics low medium high type routine partial solution of the choice complete resolution of the problem of choice problem related selective generic generic information reuest limited intern external limitation intern extern the alternative rating intern few attributes simple decision rules few alternatives many attributes complex decision many alternatives purchase purchase purchase purchase post purchase behavior without dissonance limited rating without dissonance limited rating dissonance, rating complex rating source: sica stanciu, ” bazele generale ale marketingului”, http://ebooks.unibuc.ro/stiinteadm/sica/5.htm factors determining consumer behavior dubois and jolibert group the factors that influence consumer behavior 11 in:  individual factors, which include: personality, cognitive style, lifestyle and perceived risk;  environmental factors, which include: socio-demographic factors (curve family life, social classes), reference groups, family, economic environment. in the extensive analysis that makes of consumer behavior, ph. kotler starts from analyzing the factors which influence 12 , in groups:  cultural factors represented by: culture, subculture and social class;  social factors which include reference groups, family, roles and statuses;  personal factors relating to: the age and stage of life cycle, occupation, lifestyle, economic circumstances, personality and opinion of oneself;  psychological factors nominated by: motivation, perception, learning, beliefs and attitudes. conclusion knowing all these types, shapes, situations has a great practical importance, as the purchaser acts as an active partner and imperative in the economic transaction and the seller must be equally active and conscious, using marketing tools, to help the potential buyer. currently, all marketers agree that "the buying process begins and ends long before the actual purchase" 13 customer orientation does not mean that we must do everything the customer claims, but to recognize his needs and to offer services and products that bring real use. in doing so, we can transform the client in collaborator and, in turn, he will recommend us to others. increasing the level of knowledge held by consumers, the availability of information and instant communication are factors that determine the almost total transparency for companies globally. bibliography 10 sica stanciu, ” bazele generale ale marketingului”, http://ebooks.unibuc.ro/stiinteadm/sica/5.htm 11p.l. dubois, a. jolibert, marketing teorie şi practică, universitatea de ştiinţe agricole, cluj-napoca, vol. i, 1992, vol. ii, 1994. 12 ph. kotler, managementul marketingului,. teora publishing house, bucharesti 1997. 13ph. kotler , g. armstrong , j. saunders , v. wong , principiile marketingului, teorapublishing house, bucharest, 1998. http://ebooks.unibuc.ro/stiinteadm/sica/5.htm http://ebooks.unibuc.ro/stiinteadm/sica/5.htm 44 1. blyhte jim, “comportamentul consumatorului”, eitura teora, bucureşti, 1998. 2. dubois pieré-louis, jolibert alain, “marketing teorie şi practică”, universitatea de ştiinţe agricole, cluj-napoca, vol. i, 1992, vol. ii, 1994. 3. ferell o.c., william m. pride, marketing, editura houghton mifflin company, boston, 1991. 4. kotler philip, “managementul marketingului”, editura teora, bucureşti 1997. 5. kotler philip, armstrong gary, saunders john, wong veronica, “principiile marketingului”, editura teora, bucureşti, 1998. 6. mâlcomete petre, “marketing”, edituraacademica “gh. zane”, iaşi, 1993. 7. mâlcomete petre (coord.), “lexicon de marketing”, editura junimea, iaşi, 1994. 8. i. mihuţ, m. pop, consumatorul şi managementul ofertei , editura dacia cluj – napoca 1996. 9. c.w. park, s.m. young – “consumer response to television commercials, the impact of involvement and background, music on brand attitude formation” – journal of marketing research, 1986. 10. sica stanciu, ” bazele generale ale marketingului”, http://ebooks.unibuc.ro/stiinteadm/sica/5.htm http://ebooks.unibuc.ro/stiinteadm/sica/5.htm tratamentul contabil al mărfurilor aflate la terţi agora international journal of economical sciences, aijes, issn 2067-3310, e issn 2067 – 7669, vol. 12 (2018) accounting treatment of operations in public catering services răzvan vonea1 1agora university of oradea, str. p-ța tineretului, no. 8, oradea, romania e-mail vonea_razvan@yahoo.com abstract the existing article proposes to bring to light the organization and management approach in conducting the accounting in the food service businesses. i first introduced a short abstract presentation of the food service structure types in the romanian legislation. i also established an intrinsic relationship between the hotel and hospitality industries as components of the touristic phenomenon exponentially developed worldwide in the last decades. i proposed some accounting cases concerning the accounting entries of different operations referring to the food service business. keywords: food service, restaurant, inventory items, retail price, menus, server / waiter / waitress, raw materials, individual producers / manufacturers 1.introduction tourism, as an important component of the tertiary sector, has established itself exponentially in social and economic life, through a significant expansion especially in the second half of the last century. the source of this relevant progress is the general economic growth, associated with the increase in leisure time and paid leave, increased long-term income, but especially the expansion of transport factors that have made travel more frequent, fast, comfortable and accessible. more and more countries are beginning to enjoy the economic benefits generated by tourism: new jobs are being created, new untapped resources are being found, the balance of external payments is being balanced, infrastructure is improving a favorable macroeconomic situation. as for cultural values, through tourism states share their national identity, creating added value to their international image. in the period between 1950-1977, the world population increased 2.5 times, and the number of arrivals in international tourism multiplied more than 20 times compared to 1950, when there were only 25 million arrivals, it follows a growth rate 10 times faster. the growth trend of international tourism from 1950 to the present is maintained, but there is also a marked slowdown as follows: the average growth rate over the four decades continues to decline from 11.7% in 1950-1959 to 8.3% in 1960-1969 to 6.1% in 1970-1979, to reach 4.0% in 1980-19891. given this global trend, accommodation and catering services are the basic services of a tourist program. the interdependent relationship between public catering and tourism is obvious, as they are concentrated in an independent sector of economic activity, called the hotel industry. according to the methodological norms and classification criteria, the following types of tourist reception structures with public catering functions can operate in romania2: 1. restaurant profile ✓ classic; ✓ specialized: fishing, hunting, rotisserie, zahana, dietetic, lacto-vegetarian, family / pension;with specific: winery, with local specifics, with national specifics; ✓ with artistic program; ✓ brasserie or bistro; ✓ brewery; ✓ summer garden; 1 stănciulescu, g., tehnica operaţiunilor de turism, editura all, bucureşti, 1998, p. 2 2 ordinul ant nr. 65/2013, publicat în mo partea i, nr. 353 bis/14.06.2013 mailto:vonea_razvan@yahoo.com 2 ✓ terrace; 2. bar profile ✓ nightclub; ✓ day bar; ✓ cafe-bar or cafe; ✓ club or disco-bar; ✓ bufet-bar; 3. fast-food profile ✓ self-service restaurant; ✓ express buffet; ✓ pizzeria; ✓ snack-bar; 4. cake shop 5. pastry, pie, simigerie regardless of the form in which these structures with public catering functions are organized, this is in fact also a form of retail trade, characterized by the intervention of the human factor engaged in the preparation of the purchased materials. the organization and management of the accounting of public catering units must take into account certain inherent aspects of the specifics of this activity, such as: a. the preparation of the menus is done, in general, without permanent storage of materials and materials; b. changing / updating / adding new menus or the structure of the dishes made; c. the demand for public alimentation products is variable and varies according to different parameters: seasonality, schedule, days of the week, periods of celebration, holidays and vacations, etc.; d. the need to schedule as accurately as possible the quantity of products to be prepared and prepared for the next day; e. the need to respect the validity period of the public alimentation products prepared and not sold on the same day, because their commercialization term is limited, according to the sanitary legislation; f. the determination of the production costs of the public alimentation products carries a special regime, including the acquisition cost of the purchased materials and other expenses related to the food preparation, their preparation, according to some recipes approved at unit level. 2. case studies 2.1. case study no. 1: niculina restaurant sends an employee to the agri-food market in order to buy vegetables from individual producers. for this purpose, the company grants him an advance for travel in the amount of 300 lei, cash, according to the payment order no. 26 / 15.1.2020. it is bought from individual producers: potatoes, celery, carrots, parsley, horseradish, worth 284 lei, according to the marketing book no. 224 / 01.15.2020. the equivalent value of the vegetables purchased in cash is paid according to the payment order no. 28 / 15.1.2020. the remaining unspent cash difference is deposited at the cashier. a. granting the advance for travel to the agri-food market: 542 „cash advances” = 5311 „cash in ron” 300 according to the payment order no. 26/15.01.2020 b. purchase of goods for processing at the restaurant: 371 „goods” = 462 „various creditors” 284 according to the marketing book no. 224/15.01.2020 3 c. payment of the value of the goods purchased to the individual producer: 462 „various creditors” = 5311 „cash in ron” 142 according to the payment order no. 28/15.01.2020 d. payment of the value of the goods purchased to the individual producer: 5311 „cash in ron” = 542 „cash advances” 16 according to the payment order no. 29/15.01.2020 observation: we opted for the registration of the purchased goods in order to process them in the public catering process, treating them as goods, the accounting records being kept at the acquisition cost, the discharge being also carried out. sales in public catering through the cash register are reflected in the selling price that generates income from sales of goods. 2.2. case study no. 2 raluca restaurant buys from the supplier deep plates, flat plates, cutlery for its own kitchen, in a total value of 700 lei, 19% vat, according to the fiscal invoice no. 1414 / 15.01.2020. the payment of the debt to the supplier is made by promissory note. the dishes thus purchased are put into use. a. purchase of dishes for the restaurant kitchen: % = 401 „providers” 833 303 „inventory items” 700 4426 „deductible vat” 133 according to the invoice no. 1414/15.01.2020 b. purchase of dishes for the restaurant kitchen: 401 „providers” = 403 „payment effects” 833 according to the promissory note no. 125 c. off-balance sheet recording of inventory items: d 8035 „stocks of the nature of inventory items 700 given in use” according to the inventory item record sheet d. commissioning of purchased inventory items: 603 „expenses with materials of = 303 „materials of the nature 700 the nature of inventory objects” of inventory objects” according to the consumption receipt no. 30/15.01.2020 2.3. case study no. 3 at the end of a day, the diana restaurant records sales from serving meals in a total value of 1570 lei, of which 355 lei collected through pos, and the rest in cash. at the end of the day, the waiters hand over the amount of 1215 lei from the sale of the goods. the management of sold goods is downloaded, at a purchase cost of 720 lei. during the day, cracks of plates, glasses, ashtrays are registered, valued at 25 lei, amount recovered from the waiters. a. recording sales from catering: 4111 „clients” = % 1570 707 „income from sale of goods” 1495,24 4427 „collected vat” 74,76 according to the fiscal report z no. 155/20.01.2020 4 b. cash collection of sales / delivery by the waiters of the cash collected: 5311 „cash in ron” = 4111 „clients” 1215 according to the fiscal report z no. 155/20.01.2020, monetary no. 190/20.01.2020 c. pos collection of sales: 5121 „bank accounts in ron” = 4111 „clients” 355 according to settlement characteristics:  the amounts collected by the waiters through the credit card representing the equivalent value of the customers' consumption appear in the daily fiscal report of the restaurant;  the amounts collected from customers through credit cards are not entered in the cash register;  no invoice is issued for the amounts collected by credit cards. d. discharge with the goods sold: 607 „expenditure on goods” = 371 „goods” 720 according to the accounting note no. 20/20.01.2020 and recipes in the specific program observation: the discharge is made at the cost of purchasing the goods, through computer software in which all the entries of goods are entered (purchases of goods from individual suppliers or producers) and based on the existing recipes in these software the discharge is performed at acquisition cost. e. record breaks at the end of the day: 5311 „cash in ron” = 4281 „other staff debts” 25 according to the collection order no. 15/20.01.2020 observation: in order to have analytical records on each waiter, account 4281 can be developed on analytical accounts, on each waiter. 3. conclusions we conclude the specifics of public catering accounting by the fact that the goods purchased within these units can be treated as goods, being goods that are resold after a prior processing; the processing can consist either in alcoholic beverages that are sold in the form of coffee, cocktails, other specific alcoholic and non-alcoholic beverage preparations, or in the kitchen where the purchased goods are processed and become culinary preparations. references [1] deaconu, s. c., particularităţi ale contabilităţii entităţilor, editura c.h. beck, bucureşti, 2012; [2] draica, c., ghid practic de turism intern şi internaţional, editura all beck, bucureşti, 1999; [3] robu, m., contabilitate în comerţ şi turism, editura universităţii suceava, 1999; [4] stănciulescu, g., tehnica operaţiunilor de turism, editura all, bucureşti, 1998; [5] omfp nr. 1802/29.12.2014 pentru aprobarea reglementărilor contabile privind situațiile financiare anuale individuale și situațiile financiare anuale consolidate; [6] ordin ant nr. 65/2013; [7] legea nr. 227/2015 privind codul fiscal cu modificările şi completările ulterioare. medimond template 13 agora international journal of economical sciences, aijes, issn 2067-3310, e issn 2067 – 7669, vol. 15 (2021) application of b2c digital marketing valentina simona pașcalău1 1 doctoral school of economics and business administration, west university of timișoara, romania e-mail valentina.pascalau73@e-uvt.ro abstract the purpose of this paper is to understand the application of digital b2c marketing. companies market directly to end customers or decision-makers through b2c marketing. most b2c customers base their decisions on how they feel about a product or service, not on facts or how useful it is. b2c marketers can take advantage of this by developing customized content that appeals to the emotions of their target audience. keywords: b2c online markets, company perspective, consumer perspective, online shopping behavior 1 introduction the widespread adoption of digital technologies by consumers and businesses has resulted in significant changes in marketing practices. the expansion of customers' knowledge levels as a result of increased access to information and the digital transformation of business and exchange activities, necessitates the creation of new application of b2c digital marketing. to begin with, b2c stands for business to consumer and b2c marketing is defined as the promotion of a company's products and services to potential customers. with that in mind, it's no surprise that businesses employ b2c digital marketing to reach out to the customer. because b2c digital marketing is heavily reliant on technology, firms now have access to a wide range of channels through which to reach out to their target audiences. business-to-consumer (b2c) markets have made a substantial contribution to the commercial development of the internet by encouraging transactions on various e-commerce sites from a growing number of customers around the world. in order to become a sustainable enterprise in the face of an uncertain business environment, world marketing masters kotler and kartajaya (2000) proposed that decision makers can formulate marketing strategies from three aspects: corporate strategy, corporate tactics, and corporate value. b2c e-commerce platforms are facing new hurdles as the consumer market changes. 2 b2c online markets b2c online markets will be analyzed from two perspectives: the consumer perspective and the company perspective. 2.1 the consumer perspective the online consumer profile is a profile that has a significant impact on a customer's online shopping behavior and experience, as well as assistance in identifying online shopping intentions. mailto:valentina.pascalau73@e-uvt.ro 14 consumer loyalty is something that b2c e-commerce platforms strive for, and it is based on the value they provide. brand building is at the heart of value creation, and brands require the backing of services and processes. first and foremost, brand development. the communication of platform brand culture and the optimization of platform merchants' quality are required for the development of b2c e-commerce platform brand image. factors such as ease of access to the internet, level of technological skill, perceived benefits of making an online purchase, and demographic variables all influence online purchasing behavior. an online store offers several benefits to its shoppers: it is open 24 hours a day, offers instant personalized promotions, prices are dynamic and reflects market demand, offers recommendations and reviews from site users. online consumer behavior can be analyzed from two perspectives (doherty and ellischadwick, 2006): the profile of online consumers and the online shopping experience of consumers. there are two types of variables in a consumer profile: classification variables and character variables. personal characteristics that tend to remain static throughout a person's life or vary slowly over time are called classification variables (age, education, income, mobility, race, ethnicity). these factors can be used to classify potential customers into target groups that can be contacted through various communication channels. because character variables include traits related to customer perceptions, beliefs, and attitudes, they are more difficult to understand and recognize (innovation, experiences, emotions).these factors increase, change, or change significantly faster than time-varying variables. consumer attitudes regarding the internet and their purchasing intentions are influenced by their opinions about many aspects. variables that can be considered: customers want their specific personal information and financial information to be stored securely when they supply it. regarding the risk, online shoppers make purchases in an uncertain atmosphere, with little information about the exchange relationship and the risk involved. consumers face six sorts of risks, according to bauer (1960): financial, product performance, social, psychological, physical, and time-wasting dangers. risk reduction has the ability to increase trust. because it's impossible to totally eliminate the risks of online shopping, one possible option is to identify ways to boost client confidence (chang et al., 2013). online shopping is hampered by a lack of confidence. service provider skill, product performance, corporate reputation, happiness with previous contacts, and resemblance are all factors that influence trust. the degree to which an individual believes a new technology will enhance and improve their performance is referred to as perceived utility. when used in the context of online buying, the utility refers to the time and effort required to learn how to shop online in comparison to the retailer's level of service excellence. ease of use refers to an individual's belief that using a new technology will be simple. several features of the online shopping experience have been recognized as having an impact on the consumer's perception of the process. as a result, positive experiences with service delivery and site security increase customer satisfaction (doherty and ellis-chadwick, 2006, 15 2010), while site design, ease of navigation, and a high level of valuable services and products increase loyalty customers and improve the consumer experience. customers have high expectations in the following areas: delivery, prompt response, availability, convenience, customer service. 2.2 the company’s perspective the company's perspective refers to the evolution of online retail, different types of online tactics and managerial and strategic issues. there are three categories of business strategies that can be adopted by online retailers: bricks-and-clicks companies, click-and-mortar companies and pureplay companies. brick-and-clicks companies are long-term businesses with physical locations that use the internet as a marketing tool or sales channel, either strategically or tactically. for security reasons, online shoppers prefer to buy from companies that also own physical stores. click-and-mortar companies are virtual businesses that use an online sales model to meet customer demand, but their sales are supported by a physical distribution infrastructure that includes warehouses. the advantages of this form of business include lower costs of operating a physical store and the elimination of barriers to consumer mobility. pureplay companies are a completely virtual business that operates exclusively online. these businesses do not have their own physical stores or physical delivery systems. outsourced services include storage, packaging, shipping and returns. companies become retail channels as they increase their use of the internet to provide information, provide customer service, and sell online. companies that operate in the business-to-consumer sector and use the internet both as a communication channel and as a sales channel are called retail (doherty et al., 1999). companies that operate both offline through physical stores and online through virtual stores are called omni-channel retailers. companies must consider three criteria to survive in the omni-channel world: stocks are being phased out, and a separate user experience is being created throughout the purchasing process. companies must develop ways to tie the internet and offline worlds together, rather than relying on discrete marketing operations. increasing digital interaction opportunities through a better understanding of customer purchase habits (e.g., through digital advertising and mobile promotions): analyzing and measuring client buying behavior at all points of engagement in order to fully comprehend what influences buyers' choices and purchasing decisions. 3 conclusions the discrepancy between the customer's expectations for the online offer and the actual performance of the online offer influences the online performance of the retailer. tavis and glade (1988) proposes managerial and strategic challenges to address inconsistencies in performance and managerial implications, therefore, performance discrepancies relate to: the disparity between the strength of the brand and the offer on the website, the disparity between the power of the brand offline and online, the lack of alignment between the nature of the online competitive environment and the maturity of consumer demand, inertia in decision making. 16 thus, in terms of these discrepancies, companies must design sites that match consumer expectations; failing to do so can result in a drop in company sales as customers will browse and buy from other sites. additionally, increasing the strength of the internet brand is a difficulty for businesses. competitors will gain a competitive advantage if they do not spend in establishing and consolidating their online brand, even if their brand is weaker. in many areas of commerce, the online market is still in its infancy. these markets can provide businesses with a competitive advantage. barriers to reaching out to customers must be addressed. budgetary constraints are misaligned because the costs of doing nothing refer to the loss of an opportunity at best and a competitive advantage at worst, budgetary limitations are misaligned. more market segments will develop as a result of the comprehensive and in-depth integration of the new generation of information technology, the desire for innovation will rise, and the consuming scene will be constantly reconstructed. b2c e-commerce platforms will likely encounter a more volatile consumer market in the future. if b2c e-commerce platforms wish to thrive in the tumultuous retail sector, they must collaborate on marketing plans that consider three factors: strategy, tactics, and value. the focus of a company's marketing, which must be distinguished effectively, is defined by strategy. tactics to improve the company's market competitiveness and lay the groundwork for the company's brand building. value increases a company's impact, which helps it maintain its market position. references [1] bauer, r.a. , (1960), consumer behavior as risk taking, dynamic marketing for a changing world, proceedings of the 43rd. conference of the american marketing association, 389-398 [2] chang, h.h., et al (2013), building trust online: interactions among trust building mechanisms, inf. manag., 50 (7) (2013), pp. 439-445 [3] doherty, n.f., ellis-chadwick, f, hart, c., (1999), cyber retailing in the uk: the potential of the internet as a retail channel, issn: 0959-0552 [4] doherty, n.f. and ellis‐chadwick, f.e. (2006), new perspectives in internet retailing: a review and strategic critique of the field, international journal of retail & distribution management, vol. 34 no. 4/5, pp. 411-428 [5] doherty, n.f. and ellis-chadwick, f., (2010), evaluating the role of electronic commerce in transforming the retail sector, the international review of retail, distribution and consumer research, 20, pp.375-378 [6] kotler, ph., kartajaya, h., (2000), repositioning asia: form bubble to sustainable economy, asia: john wiley & sons [7] tavis, l. and glade, w. (1988), implications for corporate strategies, multinational managers and host government interactions, notre dame: university of notre dame agora international journal of economical sciences, aijes, issn 2067-3310, e issn 2067 – 7669, vol. 13 (2019) increase of public debt and budget deficit and their sustainability rica ivan1, călin tănase ladar2 1faculty of electrical engineering and information technology, university of oradea, str. universității, nr. 1, oradea, romania 2faculty of environment protection, university of oradea, str. universității, nr. 1, oradea, romania e-mails rika_ivan2005@yahoo.com, ladarcalin@yahoo.com abstract taking into account the need to ensure a standard of living adequate for citizens, by providing jobs, infrastructure, housing, etc., governments seek to allocate resources for that purpose, most often exceeding the ability to collect revenues to state budget and thus leading to accumulation of budget deficits and, implicitly, to increased public debt. economic growth is the most important instrument for achieving the social and economic objectives of a central government. all these elements aforementioned intertwine with the external economic environment, the evolution thereof, while negative effects such as the economic crises have a contagious effect on the economy and society in general. after the economic and financial crisis of 2007, the public debts of the states increased, and the sustainability of the public finances has become a matter of major concern. keywords: public debt, budget deficit, economic growth, debt crisis, european union, sustainability. 1. introduction the first economist who addressed the issue of financing government spending through loans or by raising taxes and levies was david ricardo, who in his fundamental paper "principles of political economy and taxation" advocated for debt neutrality, because taxpayers should be aware that loans accumulated in time by the government shall lead to tax increases in the future (kishtainy, 2012). this theory, whereby budget deficits were considered hazards since they led to economic ruin, was seriously challenged by the great crisis of 1929-1933, at which point john maynard keynes argued that overcoming economic crisis can only be achieved through state intervention in the economy, and this intervention entails making loans and an increased budget deficits in order to stimulate public spending, which will create thereafter jobs creation and implicitly will support economic welfare. nowadays there are still supporters of the theory of debt neutrality, such as economists robert barro, robert lucas and thomas sargent who belong to the new school of classical macroeconomics, as well as supporters of keynesian theory, such as hyman minsky and paul krugman. as we have shown above, the central topic of the supporters of the neoliberal macroeconomics school is fiscal prudence according to which governments should not spend more than they collect, since spending more than the budgetary revenues generate inflation and undermine economic stability, which affects economic growth and decrease the standard of living of those with fixed incomes. the supporters of the neo-keynesian economics argue that the public budgets must be balanced, but not on annually basis, but following an economic cycle, since it is necessary to make some extra-budgetary expenses during the economic downturn and to generate budget surplus during the upward trend in a country. it is normal for a developing country to make medium-term extra-budgetary spending on a steady basis as long as the debt is sustainable (h.j chang, 2012). 2. definitions mailto:rika_ivan2005@yahoo.com mailto:ladarcalin@yahoo.com 2 the term public debt generally refers to the debt of a country made as a result of contracting loans by central and local governments from legal and natural persons residents in the territory of that country or abroad and which are to be repaid at a certain time. thus, the public debt can be external or internal, and its structure differs depending on development level of a country. thus, in the economically developed countries the internal debt has a larger share in the public debt, while in the less developed countries the external debt has a higher percentage in the public debt. there is no single definition of public debt for which there several approaches, both in the narrow and the broader sense. according to the national bank of romania (nbr) and the esa 2010, government debt is defined as the total consolidated gross debt in nominal terms at end of period for the following categories of government liabilities (defined in esa2010): currency and deposits, securities other than shares excluding financial derivatives, and loans. the public debt is correlated with a country’s budget deficit. states are looking to contract loans, in particular, to finance the government's budget deficits. according to the nbr, the government deficit/ surplus is the net financing requirement for the running of the public administration. the debt of a country is formed by the sum of the debts generated by the central and local governments of a state, and by the public and private companies that operate in a national economy. public debt is a necessary tool for governments to finance public spending, especially during periods when there is no possibility to increase taxes or to reduce public spending. increasing a country's public debt can lead to economic instability and even generate economic downturn. a high level of public debt in gdp is perceived as an economic problem by investors and policy makers, because it can negatively influence the capital market and can trigger decreased investments, reduced employment and negative economic growth (coccia, 2018). the public financial imbalance is underpinned by the budget imbalance. the public financial imbalance occurs as a result of the increased demand for financial resources in relation to the revenues obtained by the state from taxes and levies. increasing or decreasing public debt is directly related to the evolution of budget deficits. if the public expenses are higher than the public revenues, there are created prerequisites for the need to make loans in order to cover such expenses and thus contributing to the increase of the public debt. 3. an overview of debt in the economies of european countries most of the economies of the european countries are characterized by high public debt and a significant fiscal deficit. states with high public debt are facing many problems when contracting international loans, as was the case in greece in 2012, if they do not accept repayment plans established by creditors, in order to maintain access to the international market and sustainable interest rates with regard the sovereign debt. the credibility of governments with regard to the management of public debt depends not only on the reputation of the debtors, but also on the financial institutions that would be able to prevent the occurrence of defaults. romania, as a member of the european union, has pledged itself to respecting the budgetary discipline imposed by the maastricht treaty, namely not to exceed a budget deficit larger than 3% of gdp and public debt larger than 60% of gdp. these levels are based on concepts defined in the methodology of the european system of national and regional accounts (esa) 2010 edition. due to the occurrence of the debt crisis in the countries of europe, the ability to repay and rescheduling the debts of certain european economies has become a matter of major concern for the european union (eu), with question marks regarding the economic integration thereof. following the outbreak of the 2007 financial and economic crisis, international monetary fund (imf) imposed on developing countries, including romania, budgetary balancing conditions 3 or even the requirement to register a surplus, regardless of the stage in which the country is within an economic cycle or the development strategy of that country. in the first years after the global economic crisis, many countries and financial institutions in europe emphasized the implementation of austerity programs to cut the large budget deficits they faced. the effect of these measures on the evolution of public debt in the national economies of europe remains uncertain and difficult to assess. reinhart and rogoff (2010) have shown that public debt calculated as a share of gdp can have a detrimental effect on the real gdp growth rate. thus, if the public debt to gdp ratio is more than 90%, this may slow down economic growth. this slowdown occurs because financial resources of future generations shall be used to pay interest on current public debts. moreover, the very existence of a high debt also implies a reduction of the margins of manoeuvre with regard the decrease of taxes and levies. it is considered that a reduction of taxes and levies will lead to the improvement of the economic situation in the long term, but, in the short run, it will result in the deterioration of the public debt. subsequently, the study carried out by reinhart and rogoff proved to be wrong, which affected the economy of the countries which were imposed harsh austerity programs by the imf. thus, olivier blanchard, chief economist of the imf, pointed out that the fund misjudged the impact of austerity on european economies, considering that the researchers underestimated the increase in unemployment and the decrease in domestic demand associated with fiscal consolidation (blanchard, 2013). the consequences of the austerity budgets, for which budgetary expenditures were drastically reduced, consisted of the reduction in gdp per capita in 2012 compared to 2007 by 26% in greece, 12% in ireland, and 7% in spain. thus, it was found that reducing government spending in a stagnant or shrinking economy does not trigger its recovery (h.j chang, 2014). 4. sustainability of romania's public debt romania has recently expressed its intention to join the euro area. however, it is a country where the budget deficit and public debt have increased. for 2019, there are forecasts for a budget deficit of up to 3% of gdp and a public debt of around 40% of gdp. recently, the new liberal government has expressed its intention to increase this deficit up to 3.5% or even 4.4%. romania has a significant deviation from the medium-term budgetary objective of 1% of gdp provided by the eu "stability pact". thus, the eu council recommends that the romanian authorities take the necessary measures to ensure that the increase rate of net primary government expenditure falls within the established limits, but it is noted that no measures have been taken in this respect. thus, the eu commission draws attention to the risks and vulnerabilities the romanian economy faces, such as the unsustainable increase of the level of public debt burden (instalment payments + interest rates) in the coming years, with obvious foreseeable negative effects on the standard of living of romanian people. fig. 1 the evolution of romania's public debt (1990-2018) source: https://datoria.ro/ 0,9 8,62 20,4521,9517,5421,61 28,7427,3627,7132,6731,1128,5828,7425,8422,4420,3118,2519,6820,94 28,8629,9134,1937,2737,7639,3937,9937,5635,1434,9535,09 0 20 40 60 1 9 9 0 1 9 9 1 1 9 9 2 1 9 9 3 1 9 9 4 1 9 9 5 1 9 9 6 1 9 9 7 1 9 9 8 1 9 9 9 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 2 0 1 7 2 0 1 8 2 0 1 9 .5 share of public debt of romania in gdp 4 the sustainability of public debt is calculated by the dynamics of government debt in gdp and not by the dynamics of the amount in absolute terms. romania has the fifth lowest share of government debt in gdp among eu28 members states, i.e. 34.2% of gdp, according to the latest data published by eurostat in the second quarter of 2019 well below the alert threshold calculated at 45% of gdp; it has also benefits from a reduced pressure of short-term debt service and a diversified investor base. long-term foreign debt was approximately € 73,831 million in september 2019, while the short-term external debt was € 34,407 million. according to nbr data, in 2019 the degree of short-term external debt coverage with foreign exchange reserves was 77% compared to 74.3% at 31.12.2018, which indicates a lower probability of facing liquidity crisis. from this point of view, the concerns of the eu commission do not seem to be well founded, but such concerns concern the stagnation of the structural reforms and the fiscal-budgetary consolidation, given that year-to-year romania's economic growth is mainly due to stimulating the consumption led growth and not due to production-led growth drivers. before the onset of financial and economic crisis of 2007, romania's public debt has been relatively small, around 20% of gdp, but it doubled by 2014. the main cause was the increase of the budget deficit, caused by the bankruptcy of many companies, the increase of unemployment rate and disintermediation in the banking system overwhelmed by accumulation of defaults. the factors underpinning the sustainability of the public debt are as follows: the ability of a country's economy to generate primary surpluses, the size of interest on state loans, the risk premium attached, and its own economic growth rate (socol, 2013). thus, for the level of public debt in the coming years to be sustainable it is necessary to reduce the primary deficits and/or to generate primary surpluses. one possible solution would be that the interest rates on loans made by the romanian state do not exceed the rate of economic growth of our country. 5. social and environmental limits of economic growth in recent decades, both from a macroeconomics and a microeconomics perspective, the level of debt has increased. this was not due to the shortages, but to the surplus and excess. the society did not suffer from hunger, but faced another dilemma: how to offer a meal to someone who ate too much (sedlacek, 2012). the global financial and economic crisis of 2007 shows how much dependence there is on economic growth and how difficult it is to accept the decline of gdp, an indicator introduced and measured consistently, for the first time in 1790 in the u.s.a. the lack of constraints on government decision-makers regarding spending, taxation or borrowing leads to a significant increase in public debt, and the new generations of taxpayers are facing insurmountable tax burdens. those countries where there is an increase in terms of employed economically active population benefit from greater room to manoeuvre in terms of tax cuts, leading to a reduction in long-term pressure on public budget. even if lowering taxes has a short-term beneficial effect on the government budgetary situation, if this tax reduction takes place amid a reduction in terms of employment of the active population, it can lead to a deterioration of the long-term budgetary situation of that country. since public debt is measured as a percentage of gdp, a reduction of debt in order to avoid economic turmoil can be achieved by supporting gdp growth through investment and gdp expansion policies, rather than by reducing public debt through additional taxation measures. the way in which interest rates are set by central banks can influence public debt both in terms of current financing conditions and in terms of government expectations. thus, central banks have a key-role in determining the government to pursue public debt stabilization policies. 5 it should be stressed that the gdp level is not a landmark for quality of life and no landmark for economic sustainability. there are extremely important elements, which escape the scope of gdp, such as the assessment of health status, education level, housing conditions of the people, quality of the environment, which are subjective, but also very important elements in human society. gdp is an indicator specific to the present time. it does not take into account what remains to future generations, especially in terms of quality of the environment. sustainability is a milestone of ongoing developments. we may state that an economy is sustainable if the future generations will have at least the same capital (resources) we have at our disposal today. therefore, it is about the aggregation of several types of capital (resources): economic capital (corporate, household and public sector’ assets), human capital (educational expenses) and natural capital (environment) (diemer, 2015). under the aegis of the european commission, a report was prepared (stiglitz sen fitoussi, 2009) in order to find those tools that are able to quantify, at its true scale, the economic performance of a country, and set a set of 12 recommendations were made, of which we mention the one that underlines that the assessment of sustainability requires a set of clearly defined indicators, which will allow the measurement of the quality of life’s dimension in addition to a monetary index. the issue of pace and limits of economic growth was discussed and debated upon on several occasions, starting with thomas malthus, and continuing with the club of rome, until now when climate change affects large areas of our world. economic growth has its limits, the density of the earth’s human population has been increasing, and the discovery of new deposits of raw materials is declining. although economic and technical progress supports the economic growth, it is very unlikely that energy supply failures or natural resources shortcoming will not occur in the future, in order to keep the annual growth rate of gross world product (gwp). in order to prevent the depletion of resources used in production, the pace at which they are consumed must be reduced (kolodko, 2014). 6. conclusions the advanced economies should aim at slowing down their economic growth pace and, while doing so, they should not be constrained by the social and ecological restrictions, as increasing production does not trigger automatically an increased level of social satisfaction. developing countries need to be aware that implementation of their aim to accelerate production growth is at the expense of environment safety and generate a rapid depletion of natural resources, ultimately leading to a lower quality of life. according to prof. jorgen randers the author of a comprehensive global forecast based on an unprecedented calculation of gwp – by multiplying the number of people aged 15 to 65 who are able to work worldwide with the output they generated, the output it will grow year by year, but the rate of economic growth will decrease by 2050 (randers, 2012). the current state of play together with the future constraints will trigger a change in the perception of the economic development of the countries, and the companies shall be evaluated not only by their financial statements, but also by the social and environmental impact of their operations. the interventionist role of the state and the importance of resource allocation related policies by governments shall increase, because the market will not be able to cope by itself with the problems that will arise in the process. references [1] blanchard olivier, leigh daniel(2013), growth forecast errors and fiscal multipliers, imf working paper, wp/13/1 [2] chang ha-joon (2012), samaritenii cei răi. mitul liberului schimb și istoria secretă a capitalismului, editura polirom, 58-60 6 [3] chang ha-joon (2014), economia. ghidul utilizatorilor, editura polirom, 152-154 [4] coccia m. (2018), national debts and government deficits within european monetary union: statistical evidence of economic issues, coccia lab working paper 2018 – no. 34/bis [5] diemer mr. (2015), la croissance économique. iufm auvergne, partie ii, chapitre 4 [6] kishtainy niall (2012), the economics book: big ideas simply explained, dorling kindersley limited, pp76-77, 298-299 [7] kolodko, grzegorz (2014), whither the world: the political economy of the future, palgrave macmillan, pp 227-260 [8] reinhart c.m., rogoff k.s. (2010), growth in a time of debt, the american economic review, vol. 100, no. 2, pp. 575 [9] sedlacek tomas (2012), economia binelului și a răului: în căutarea sensului economic de la ghilgameș la wall street, editura publica, pp. 380-387 [10] socol, a. (2013). sustenabilitatea datoriei publice în contextul crizei financiare, economie teoretică şi aplicată, volumul xx, no. 3(580), pp. 4-14 [11] stiglitz j.e., sen a., fitoussi j.p (2009), report by the commission on the measurement of economic performance and social progress, http://www.stiglitz-sen fitoussi.fr [12] banca naţională a româniei (www.bnr.ro) [13] http://www.aeepapers.ase.ro/wp-content/uploads/2018/09/asigurarea-fiscala-si-managementul-datorieipublice.pdf [14] https://ec.europa.eu/info/sites/info/files/2019-european-semester-country-specific recommendationcommission-recommendation-romania_ro.pdf comisia europeană, recomandarea consiliului privind programul național de reformă al româniei pentru 2019, bruxelles, 5.6.2019, p. 3-4 [15] https://ec.europa.eu/eurostat/databrowser/view/teina230/default/table?lang=en [16] https://datoria.ro/ [17] https://www.cisl.cam.ac.uk/resources/publication-pdfs/jorgen-randers-2052-a-global-forecast-for-thenext.pdf http://www.stiglitz-sen/ http://www.bnr.ro/ http://www.aeepapers.ase.ro/wp-content/uploads/2018/09/asigurarea-fiscala-si-managementul-datoriei-publice.pdf http://www.aeepapers.ase.ro/wp-content/uploads/2018/09/asigurarea-fiscala-si-managementul-datoriei-publice.pdf https://ec.europa.eu/eurostat/databrowser/view/teina230/default/table?lang=en https://datoria.ro/ https://www.cisl.cam.ac.uk/resources/publication-pdfs/jorgen-randers-2052-a-global-forecast-for-the-next.pdf https://www.cisl.cam.ac.uk/resources/publication-pdfs/jorgen-randers-2052-a-global-forecast-for-the-next.pdf agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 17, no. 2 (2023), pp. 10-16 10 investing in cryptocurrency as an alternative way of financial investments n. ashurbayli – huseynova, a. yusifov nigar ashurbayli – huseynova1, ali yusifov2 azerbaijan state university of economics (unec), azerbaijan 1 https://orcid.org/0000-0002-2641-7520, e-mail: nigar.ashurbeyli-huseynova@unec.edu.az 2 https://orcid.org/0009-0002-9251-4801, e-mail: ali.yusifov.1945@gmail.com abstract: in the realm of finance, cryptocurrency has emerged as a captivating alternative to traditional investment avenues, such as stocks, bonds, and real estate. its decentralized nature, unfettered by government or financial institution control, presents a unique proposition in the world of wealth management. the allure of cryptocurrency lies in its potential for substantial returns. its value has experienced remarkable growth in recent years, offering investors the prospect of significant financial gains. additionally, cryptocurrency serves as a valuable tool for portfolio diversification, as its performance is often uncorrelated with traditional asset classes. moreover, cryptocurrency boasts portability and accessibility, making it a convenient and inclusive investment option. its digital nature allows for seamless storage and transferability, while its global reach enables anyone with an internet connection to participate in the cryptocurrency ecosystem. however, alongside these potential benefits, cryptocurrency also harbors inherent risks. its volatility poses a challenge, as its value can fluctuate dramatically in a short period. regulatory uncertainty looms, as governments worldwide grapple with the implications of cryptocurrency and may impose restrictive measures. furthermore, security concerns persist, as cryptocurrency exchanges and wallets have fallen prey to cyberattacks, jeopardizing investors' assets. in light of these considerations, investing in cryptocurrency demands a thoughtful approach. investors must carefully assess their risk tolerance and align their investment goals with the inherent risks associated with cryptocurrency. thorough research and a well-diversified portfolio are crucial for navigating the complexities of this emerging asset class. the purpose of the article is to analyze the profitability and safety of investments in cryptocurrency and study the different methods associated with it keywords: dividend policy, crisis, cryptocurrency, fec. introduction this article summarizes information and conducts a comparative analysis of the advantages and disadvantages of investing in cryptocurrency instruments on the corresponding platforms in the conditions of existence of classical financial markets and increasing global risks in all areas of activity and investment activities and investments. the work applies the tools and methods of comparative analysis, as well as the methods of deduction, induction, classification and systematization. the work is useful for determining the peculiarities of realization of investments in cryptocurrency as an alternative channel of investment of companies and individuals in conditions of increasing variability of conditions of functioning and within the framework of all existing instruments of financial investments. in the conditions of rapidly changing macroeconomic and microeconomic conjuncture, accompanied by often large-scale structural and technological changes, crypto-instruments are becoming increasingly relevant and the cryptocurrency market is increasingly developing. the prerequisite for the rapid development of https://orcid.org/0000-0002-2641-7520 mailto:nigar.ashurbeyli-huseynova@unec.edu.az https://orcid.org/0009-0002-9251-4801 mailto:ali.yusifov.1945@gmail.com nigar ashurbayli – huseynova, ali yusifov 11 the crypto-instruments market is the growing interest of individuals and business both from the position of a settlement and payment instrument, and from the position of potential investment investments. within the framework of this article it is the investment potential of cryptocurrency and other crypto-instruments is of scientific interest, because these quasi-financial instruments can be used both for long-term and medium-term investment strategies, and for short-term investment strategies, as well as for short-term trading speculation. research methodology blockchain technology has become widespread in the world because of its unique features. these features are being actively utilized by various organizations and even some central banks (heideman, m., johnson, d., burrus, c., 1984) initially, it is necessary to give a definition of cryptocurrency. cryptocurrency, according to many modern analysts and on the actual realization of its economic functions is a special form of money, for the issuance of the which requires minimal expenditure of physical material, but requires computational power. cryptocurrencies are issued in the form of digital tokens that can be used for commodity exchange transactions with individuals or legal entities (härdle, w.k., trimborn, s., 2015. masters, b., 2023) the investment potential of cryptocurrencies is formed at the moment of its exchange for official currencies or other values. currently, in the world practice it is customary to compare the value of other currency or commodity, immovable value, converting into reserve world currencies, which are accepted for payment and convertible in most countries of the world: it is the dollar, euro, chinese yuan and others (masters, b., 2023). in this case, the essence of investment in cryptocurrency is similar to the purchase of reserve or foreign currency, different from the currency of the investor's country. because in the modern world macroeconomic processes are accelerated, and the topics of development and growth of various countries, expressed in terms of gross domestic product, differ from each other, the value of each country's currency of each country's currency in relation to the major reserve currencies and in relation to the currencies of other countries (nasekin, s., chen, c., 2020). thus, by exchanging a national currency for a reserve currency, a person can build up investment financial capital, which, as the changes in cross rates, inflationary dynamics, economic growth dynamics and many other factors may change, because under the influence of these factors the ratio of currencies operated by the investor will also change. for example, when buying u.s. dollars for turkish lira in 2021 and selling back us dollars in 2023, the amount of cash denominated in turkish lira will be higher. based on this we obtain the investment function of currencies at its convertibility (petukhina, a.a., reule, r.c.g., härdle, w.k., 2021). cryptocurrencies have similar properties, which have a certain volatility of exchange rates and are subject to fluctuations over time. at the same time, given that the amount of computing power in the world is limited, uncontrolled emission of this currency becomes extremely difficult, and therefore the full-fledged acquisition of investment properties of this asset acquires already and may be comparable, according to the estimation of some analysts, with monetary gold for these purposes. anyway, at the moment there are certain difficulties in investing in cryptocurrency. these difficulties consist of significant risks, as pointed out by public authorities, which in addition fear not only the volatility of cryptocurrencies, but also the uncontrolled issuance, use and crossborder movement of cryptocurrencies movement. currently, many cryptocurrencies are available for purchase (fig. 1), including bitcoin, ethereum and others. investing in cryptocurrency as an alternative way of financial investments 12 figure 1. top 5 cryptocurrencies by market capitalization source: https://coinmarketcap.com unlike standard financial instruments, to make a transaction using cryptocurrency, you need to register with special software and open a digital wallet, which today can be obtained at a specially organized crypto exchange. at the same time, each investor has a unique identifier, which is used to record transfer of ownership within the framework of blockchain technology and for the operation of the exchange's personal cabinet. analysts and experts highlight a number of advantages and disadvantages of using cryptocurrency as an investment asset. firstly, it is a high yield potential instrument. perhaps, the main argument of many traders and analysts in favour of using cryptocurrencies as a financial asset. cryptocurrencies as a financial investment asset compared to investments in the classical currency market or, for example, compared to the stock market, is the possibility of a high yield high returns. for example, over the five-year period to 2020, the s&p 500 index of shares of american companies with the largest capitalization grew at a rate of about 14% per year, while the bitcoin price over the same period, expressed in dollars, grew at a rate of about 14% per year. the same period, expressed in us dollars, grew at over 130% per year (some of the movement is demonstrated in figure 2). figure 2. comparison of the movements of the s&p 500 index, gold prices and bitcoin (btc) source: compiled by the author according to bitmex.com and bloomberg https://coinmarketcap.com/ nigar ashurbayli – huseynova, ali yusifov 13 the second argument in favour of cryptocurrencies for investment is the opportunity for potential diversification. as mentioned above, many traders and analysts compare cryptocurrency to gold (trimborn, s., härdle, w.k., 2018.) the comparison is usually made in the context of being able to hedge a portfolio against macroeconomic downturns, as in this case instruments behave in a multidirectional manner, so, for example, in the second half of 2021. there was a fall in the s&p 500 index and a simultaneous rise in the value of bitcoin. a portfolio with 10 per cent invested in bitcoin and 90 per cent in the s&p 500 would have delivered a compound annualized return of 26.8%. the third argument is the limited supply of this instrument. returning to bitcoin, which we use to analyse as a representative sample of the underlying cryptocurrency market, according to current estimates, there is the possibility of issuing a maximum of 21 million coins, of which more than 18 have already been created (table 1). this feature makes it possible to predict the number of bitcoins in circulation over time, given the possibility of them. the number of bitcoins in circulation in dynamics, taking into account the possibility of them. this feature makes it possible to forecast the number of bitcoins in circulation in dynamics, taking into account the possibility of their issuance, on the basis of which, in conjunction with several other factors, it is possible to predict the future dynamics of this instrument. logically, that as the mining limit is approached, the value of one bitcoin traded on the market will rise, contrary to the general rule of money, which reflects a fall in the value of a monetary unit when the mining limit is approached. an increase in their quantity without a commensurate increase of its collateral. in this sense, an analogy can also be made with gold, the extraction of which is also limited and becomes more difficult over time. table 1. dynamics of the number of bitcoins in circulation as of 31 december of each of the years from 2016 to 2021 2016 15,016 2017 16,079 2018 16,808 2019 17,483 2020 18,163 2021 18,595 source: compiled by the author based on bloomberg data in addition to the advantages of diversification and hedging inflation risks, there are several disadvantages and risks associated with cryptocurrencies. high volatility is one major concern, as the prices of cryptocurrencies can fluctuate significantly within short periods of time. (huang, x., zhang, w., tang, x., zhang, m., surbiryala, j., iosifidis, v., liu, z., zhang, j.,2021) for example, the annual percentage volatility of bitcoin and ethereum can be as high as 85%, making them highly unpredictable and risky for short-term trading. furthermore, the correlation of cryptocurrencies with other financial assets, such as stocks included in the s&p 500 index, limits their effectiveness as a means of absolute hedging of stock market risks. while correlation may not be noticeable in the long term, it can appear at certain timeframes, reducing the potential benefits of diversification. another drawback of cryptocurrencies is their constantly growing number. while there are technological limitations on the issuance of new bitcoins or other cryptocurrencies, there are no restrictions on the launch of new cryptocurrencies. this unlimited supply potential can lead to shifts in popularity, potentially causing a decline in the value and popularity of existing cryptocurrencies like bitcoin. limited acceptance and recognition is another investing in cryptocurrency as an alternative way of financial investments 14 drawback of cryptocurrencies. while bitcoin has gained widespread popularity and recognition, most cryptocurrencies are not recognized as a means of payment or financial investment instruments by central banks. only a few exceptions exist, and it is challenging to use cryptocurrencies for everyday transactions or in the traditional commodity circulation. (cortez, k., rodríguez-garcía, m.d.p., mongrut, s., 2021.) the lack of acceptance and recognition is often due to the volatility, uncontrollability, and unregulated nature of cryptocurrencies. the lack of regulation also makes cryptocurrencies susceptible to criminal activities and fraudulent manipulation. the unregulated and unsecured nature of cryptocurrencies attracts individuals involved in illegal activities. studies have indicated that a significant portion of bitcoin users and transactions are linked to illegal activities. overall, while cryptocurrencies offer some advantages, such as diversification and potential protection against inflation, they also come with high volatility, limited acceptance, and increased risks of illegal activities. these drawbacks should be carefully considered before investing in cryptocurrencies. the decision by el salvador to recognize bitcoin as legal tender has brought significant attention to the use of cryptocurrencies in the financial world. while other countries like the united states, canada, and eu countries have not fully embraced cryptocurrencies as legal tender, they are open to limited use cases and exploring their potential. cryptocurrencies are gaining relevance in developing countries where access to traditional financial services may be limited. they provide a way for individuals and businesses to overcome barriers and engage in financial transactions. the decentralized nature of cryptocurrencies also offers greater financial inclusivity and empowers individuals with control over their own finances. the increasing interest in using cryptocurrencies by legal entities and individuals can be attributed to several factors. firstly, cryptocurrencies provide opportunities for income generation. with the volatile nature of these digital assets, there is potential to make substantial profits through trading or investing. secondly, cryptocurrencies offer a means of risk hedging. in uncertain economic environments, some individuals and businesses seek alternatives to traditional assets like stocks, bonds, or fiat currencies. cryptocurrencies provide an additional avenue for diversifying investment portfolios and mitigating risk. lastly, the growing popularity of cryptocurrencies is fueled by the desire for portfolio diversification. (saleh, fahad 2020.) many investors are looking for ways to diversify their holdings beyond traditional assets. cryptocurrencies offer an alternative asset class that operates independently of traditional financial markets, allowing investors to spread their risk across various sectors. overall, the attractiveness of using cryptocurrencies for investing funds lies in the potential for income generation, risk hedging, and portfolio diversification. while different countries have varying levels of acceptance and regulation around cryptocurrencies, the global interest in these digital assets continues to grow. table 2. the main advantages and disadvantages of investing in cryptocurrency advantages shortcomings high profitability high volatility, high potential losses diversification positive correlation with equities and gold limited number of objects in some cryptosystems low retention of value, poorly regulated in terms of legislation protection against currency depreciation and inflation low retention of value growing acceptance and usage susceptible to hacker attacks source: compiled by the author nigar ashurbayli – huseynova, ali yusifov 15 discussion in summary, cryptocurrencies are considered a non-traditional investment option at the moment. access to the relevant infrastructure is difficult to restrict, making it an alternative investment channel. however, investors should carefully consider the advantages and disadvantages discussed in this article, assess the degree of risk, and define their goals before investing in cryptocurrencies. cryptocurrencies are seen as a high-yield and high-risk investment that often falls short of expectations. it is not recommended for inexperienced investors to enter the cryptocurrency market with substantial financial resources. the decision to include cryptocurrencies in a portfolio should be based on an individual assessment of the balance between advantages and disadvantages. (cong, lin william, zhiguo he, and jiasun li 2020.) key findings and implications 1. potential for diversification and high returns: research suggests that cryptocurrency has historically exhibited low to negative correlations with traditional asset classes, such as stocks and bonds. this potentially makes it a valuable tool for portfolio diversification. however, it's crucial to note that past performance is not indicative of future results. 2. increased adoption and institutional interest: growing adoption by individuals, businesses, and financial institutions is adding legitimacy to the cryptocurrency market. institutional investors are increasingly allocating funds to cryptocurrency, indicating a potential shift in mainstream acceptance. 3. regulatory uncertainty and challenges: the lack of clear and consistent global regulations surrounding cryptocurrency poses challenges for investors and businesses. regulatory developments can significantly impact cryptocurrency prices and adoption rates. 4. technological advancements and security concerns: ongoing advancements in blockchain technology, such as scalability and privacy solutions, could enhance the use cases and appeal of cryptocurrency. however, security breaches and hacks remain a concern for investors and developers. 5. volatility and risk management: the inherent volatility of cryptocurrency prices underscores the importance of risk management strategies, such as: diversification across multiple cryptocurrencies and asset classes, setting appropriate investment goals and risk tolerance levels, employing stop-loss orders to limit potential losses future research directions: exploration of factors influencing cryptocurrency price volatility and its correlation with traditional asset classes. evaluation of the impact of regulation on cryptocurrency adoption and market dynamics. development of robust risk management frameworks for cryptocurrency investing. assessment of the potential for cryptocurrency to disrupt traditional financial systems. examination of the ethical and social implications of cryptocurrency adoption. references 1. heideman, m., johnson, d., & burrus, c. (1984). gauss and the history of the fast fourier transform. ieee assp magazine, 1, 14–21. doi:10.1109/massp.1984.1162257 2. härdle, w. k., & trimborn, s. (2015). crix or evaluating blockchain-based currencies. oberwolfach report, 42(2015). oberwolfach research institute for mathematics. doi:10.2139/ssrn.2892594. investing in cryptocurrency as an alternative way of financial investments 16 3. masters, b. (2023). blackrock delves deeper into crypto with push for bitcoin etf. financial times. url: https://www.ft.com/content/49963916-572b-4591-8bb6-7efd06ec0961 4. nasekin, s., & chen, c. (2020). deep learning-based cryptocurrency sentiment construction. digital finance, 2, 39–67. doi:10.1007/s42521-020-00018-y. 5. petukhina, a. a., reule, r. c. g., & härdle, w. k. (2021). rise of the machines? intraday highfrequency trading patterns of cryptocurrencies. the european journal of finance, 27, 8–30. doi:10.1080/1351847x.2020.1789684. 6. trimborn, s., & härdle, w. k. (2018). crix an index for cryptocurrencies. journal of empirical finance, 49, 107–122. doi:10.1016/j.jempfin.2018.08.004. 7. huang, x., zhang, w., tang, x., zhang, m., surbiryala, j., iosifidis, v., liu, z., zhang, j. (2021). lstm based sentiment analysis for cryptocurrency prediction. in: international conference on database systems for advanced applications, springer, pp. 617–621. doi:10.1007/978-3-030-73200-4_47. 8. cortez, k., rodríguez-garcía, m.d.p., & mongrut, s. (2021). exchange market liquidity prediction with the k-nearest neighbor approach: crypto vs. fiat currencies. mathematics, 9. url: https://www.mdpi.com/2227-7390/9/1/56, doi:10.3390/math9010056. 9. saleh, f. (2020). blockchain without waste: proof-of-stake. in: the review of financial studies, 34(3), 1156–1190. 10. cong, l. w., he, z., & li, j. (2020). decentralized mining in centralized pools. in: the review of financial studies, 34(3), 1191–1235. 12 agora international journal of economical sciences, aijes, issn 2067-3310, e issn 2067 – 7669, vol. 16 (2022) value added tax on home purchases by individuals cornel silviu chiriac1, 1faculty of economic sciences, agora university of oradea, oradea, romania e-mail silviu.chiriac@emantes.ro abstract starting from next year, the current system regarding value added tax for home purchases made by individuals will change. the change is made on the value ceilings of the transactions as well as on the number of transactions that can be carried out with the reduced vat rate. the work aims to highlight the changes brought by the government emergency ordinance no. 16 from 2022. keywords: purchasing houses, value added tax, reduced vat rate. 1. introduction ever since 2008, when the vat rate of 5% was introduced for the first time for homes delivered as part of the social policy, vat was one of the instruments used to encourage the real estate sector. the impact of investments in real estate developments is generally recognized as having a positive effect on the economy (and implicitly on budget revenues), but also on living conditions. as shown by the data published by eurostat at the end of last year, although an overwhelming number of romanians own privately owned homes, things do not look as good when we talk about the quality of living conditions, romania being the leader in the statistics on housing congestion and in last place in the eu when it comes to the size of the home. although the reduced vat rate for social housing has already been implemented for more than 14 years, the application criteria are in a continuous dynamic. the price ceiling of homes that can benefit from the 5% vat rate, as well as the number of purchases that can be made by one person have changed over time, currently there are even two such ceilings and the possibility of purchasing one or more houses depending on their price. 2. current provisions of the fiscal code in 2022, according to art. 291 para. 3 letter c) point 3 of the fiscal code as amended by geo no. 13/2021, the reduced vat rate of 5% is applied to the tax base for the following supplies of goods and services: the delivery of homes that have a useful surface of a maximum of 120 sqm., excluding household annexes, the value of which, including the land on which they are built, does not exceed the amount of 450,000 lei, excluding vat, purchased by individuals. the usable area of the house is defined by law no. 114/1996, republished, with subsequent amendments and additions. household annexes are those defined by law no. 50/1991 regarding the authorization of the execution of construction works, republished, with subsequent amendments and additions. the reduced rate applies only to homes that, at the time of sale, can be lived in as such; the delivery of homes that have a useful surface of a maximum of 120 sqm., excluding household annexes, the value of which, including the land on which they are built, exceeds the amount of 450,000 lei, but does not exceed the amount of 700,000 lei, excluding vat, purchased by persons individually or jointly with another person/s. the usable area of the house is defined by law no. 114/1996, republished, with subsequent amendments and additions. mailto:silviu 13 household annexes are those defined by law no. 50/1991, republished, with subsequent amendments and additions. the reduced rate applies only to homes that, at the time of delivery, can be lived in as such. any individual can purchase, starting from january 1., 2022, individually or jointly with another person/other persons, a single house whose value exceeds the amount of 450,000 lei, but does not exceed the amount of 700,000 lei, exclusively vat, with a reduced rate of 5%. the legislator's intention is to narrow the scope of the reduced rate of 5% to vat, lowering the upper price limit and imposing, generically, the purchase of a single house at a reduced price. taking into account the constant concern of the tax authorities, to maintain the social character of the reduced rate of 5% to vat, we can think that the existence of a higher ceiling, of 700,000 lei, for the purchase of a single house, as well as the possibility of purchasing more homes below 450,000 lei, are criteria that could favor investments in some cases and were not necessarily characteristic of the social policy in certain cases, on which the introduction of the reduced quota is based. the qualification of homes for the reduced rate of vat has been a topic of interest for both property developers and people interested in a new home over the years. thus, on the one hand, there is the signal of an increase in credit prices sent by the national bank of romania, by increasing the monetary policy interest rate above expectations, which could have the effect of tempering demand, and widening the scope of the reduced vat rate for the purchase of housing, which should lead to lower prices, at least in the segment targeted by this measure. on the other hand, inflationary pressures, tensions in the labor market, but also high demand call into question the direction of prices on this market in the coming period. returning to the increase in the ceiling for the application of the 5% vat rate, from 450,000 lei to 700,000 lei, it should be noted that the measure is applicable for a single purchase. in other words, any person, individually or in co-ownership with another person, can buy a single home with a 5% vat rate, if the purchase price is between 450,000 lei and 700,000 lei, excluding vat. it is not relevant if the mentioned person also bought housing with a reduced share in previous years, when the maximum ceiling was 450,000 lei. in order to keep track of these transactions, the authors of the law provided for the establishment of the register of housing purchases with a 5% vat rate, and its model was officially published at the beginning of february 2022. the register is completed and verified by public notaries on the date of authentication of salespurchase contracts that have as their object the transfer of property rights for homes with a reduced vat rate. it is completed both for homes with a value of less than 450,000 lei, without vat (in which case the number of purchases made is not relevant), and for those with a value between 450,000 lei and 700,000 lei, without vat (where the limitation applies on a single purchase). the tax relief offered in this price segment has the potential to boost purchases, both as a personal home and for investment purposes. here, however, the effect of the increase in the price of loans comes into play, which could affect demand, given that, in this price segment, mortgage financing is more present. but romania's case is not unique, similar situations can be found in most of the world's economies, in the real estate sector. on the other hand, in romania, the demand for housing has been on an upward trend for several years, and the supply is undersized, so it remains to be seen how the market will evolve in the next period. not infrequently in practice, buyers as well as sellers of residential real estate find themselves in the situation of having to obtain clarifications regarding the obligation to pay vat when purchasing or selling a home. 14 the situation can become quite complicated, especially in the case of future real estate transactions, when, as a rule, a preliminary contract is concluded between the parties, with the payment of the sale price in installments, in a foreign currency. although at the time of making the agreement of will regarding the bilateral promise of sale and purchase, the parties have in mind the legal provisions in fiscal matters regarding vat in force at the time of signing, often the numerous legislative changes that have occurred at short intervals in this field, the fluctuation of the currency exchange rate as well as the superficially drafted contractual clauses, create at the time of the actual sale, significant legal problems that can lead to the cancellation of commitments with the consequence of significant financial losses on both sides. therefore, it is good to know what risks we are subject to when we express our intention to buy or sell under conditions of vat taxation. a first condition that emerges from the fiscal regulation in question is that the person who buys a property that meets all the other conditions for the application of the reduced vat rate must be an individual. a second condition is for a buyer to purchase a single house at a price of more than 450,000 lei but less than 700,000 lei, and any price below 450,000 lei. the buyers will declare in front of the notaries that they meet the condition for buying the house with the 5% vat rate, and the declarations thus given will be kept by the sellers. the purchased home can be bought in exclusive ownership or in co-ownership. according to the legal provisions, sales of residential real estate are subject to taxation in the form of vat at a reduced rate. the notion of home is defined by art. 2 of law no. 114/1996 and consists of that construction made up of one or more living rooms, with the necessary dependencies, facilities and utilities, which satisfy the living requirements of a person or family. therefore, the sale of land without construction is not subject to the 5% vat rate. however, under the conditions provided by the fiscal code, these transactions may generate the obligation to pay the standard 19% vat rate. also, neither the sales of buildings with a destination other than housing, as defined in law no. 114/1996, does not benefit from the reduced vat rate. pursuant to art. 269 of the fiscal code, vat will be applied at the rate of 5%, to the sale of homes that have a useful surface of a maximum of 120 sqm., excluding household annexes. the law establishes that household annexes are those defined by law no. 50/1991 regarding the authorization of the execution of construction works, republished, with subsequent amendments and additions. the usable area referred to by the fiscal code is determined according to the housing law which establishes that it is represented by the sum of all the places (in a home) that can be used, furnished and arranged, regardless of whether it is a single plan or several. concretely, this includes: rooms (living room and bedrooms), bathrooms (with or without bathtub or shower), kitchen, all closed or open storage spaces and all transit areas – respectively hallways. the calculation of the useful surface does not include: the surface of loggias and/or balconies, door thresholds, niches where radiators are located, nor the surfaces occupied by stoves and bathroom boilers, if they are in the home. in the case of homes that have an internal staircase, this is not included in the calculation of the total usable area. the total useful area is not defined in any legal text, but it is frequently used by real estate developers, being considered the sum of the useful area, as described by law, to which is added the area of loggias and balconies related to the building or apartment in question. concerning the condition regarding the surface limit, problems of legal interpretation may arise for the inclusion of the legal operation of the transfer of ownership in the reduced rate or in the standard rate of vat, in the situation where the parties agree to sell and respectively buy a 15 future immovable property , regarding which a sale-purchase promise is concluded from the project phase of the future construction that will be purchased. first of all, for the establishment of the vat rate, it is important to analyze, according to the documentation attached to the preliminary sale-purchase contract (project, construction permit, plans, cadastral sketches) or the sales contract (cadastral documentation), the usable area and not of the built one. especially in the situation of the intention to purchase a future building, it is important to check according to the clauses of the pre-contract, the margin of difference between the areas of the building resulting from the cadastral sketches and those specified in the pre-contract because if, according to the estimates of the construction project, the usable area is close to size limit of 120 sqm., it is possible that the useful surface resulting after the completion of the construction will exceed the legal limit, the price of the property will increase significantly by changing the vat rate from 5% to 19%. on the other hand, the tax legislation establishes that when measuring the total usable area of the building, the area of the household annexes will not be taken into account. law no. 50/1991 classifies the notion of household annexes as the constructions of a definitive or temporary nature, intended to house specific activities, complementary to the housing function, which, by being located in the vicinity of the home, make up together with it a distinct functional unit. in the category of household annexes, as a rule in the countryside, are included: summer kitchens, stables for large animals, barns, warehouses, warehouses and the like. similarly, garages, conservatories, swimming pools and the like are assimilated to the notion of outbuildings. however, the household annexes as well as the land on which the constructions are located will be taken into account when meeting the value threshold condition of the transaction, under certain conditions. according to the relevant legal provisions in this area, for the applicability of the reduced vat rate, the transfer of ownership must concern a building that, at the time of sale, can be lived in as such. the phrase used by the legislator, "habited as such" does not benefit from a definition of the term, leaving room for interpretations that can generate problems regarding the classification of the transaction in one or another vat rate. thus, in a generalized interpretation, the fiscal body considers that a building can be inhabited as such by reference to the provisions of art. 2 lit. b) from law no. 114/1996 of housing, which defines the phrase "convenient housing", namely a "housing that, by the degree of satisfaction of the relationship between the user's requirement and the characteristics of the housing, at a given moment, covers the essential needs of rest, food preparation, education and hygiene, ensuring the minimum requirements presented in annex no. 1 to law no. 114/1996". appendix no. 1 to law 114/1996 includes a list of minimum requirements for convenient housing, such as free individual access to the living space, without disturbing the possession and exclusive use of the space owned by another person or family, space for rest, space for food preparation , sanitary group, access to electricity and drinking water, controlled disposal of waste water and household waste, etc. 3. provisions of the fiscal code starting january 1, 2023 but let's see concretely what are the news. thus, from january 1, 2023, the fiscal code underwent changes by o.u.g. 16 /2022, thus the 5% vat rate will be applied to the purchase of a single house with a price of no more than 600,000 lei, exclusive of vat. compared to the current rules (two existing caps, one with an unlimited number of purchases and another applicable for only one possible purchase), the new rules seem simpler: only one price ceiling and only one possible purchase. 16 if we take into account the recent changes made to the taxation of rental income for individuals, namely the elimination of the flat rate, which attracts a higher rent tax, as well as the limitation of access to a single dwelling subject to the reduced vat rate and within the limit of a reduced ceiling, a tendency can be observed that can discourage such investments among natural persons. it remains to be seen whether this will have the effect of a migration of this type of investment to companies, in which case they can apply reverse taxation to vat as well as certain expense deductions. on the other hand, the previous increase in the ceiling had the purpose of aligning this limit with the current price of housing, given the evolution of the real estate market. here is that, despite the maintenance of high prices on the market, the maximum ceiling under which you can buy a property with reduced vat will decrease by 100,000 lei, which will, however, limit the population's access to properties with a 5% vat rate. in addition to uncertainties in the planning of the development activity, due to frequent changes regarding vat in the current context of challenges related to inflation, price increases for construction materials, increases in labor costs, real estate developers will find themselves between the need to ensure an offer adequate to the new ceiling and to maintain the profit margin. good news would be, however, maintaining the 5% vat rate for buildings delivered in 2023, but which fall within the conditions applicable in 2022 and for which advances were paid in 2022. thus, from the transitional provisions, it is possible understands that real estate with a value below 700,000 lei will still be able to be purchased with reduced vat, if advances have been paid for them in 2022. a contrary interpretation would directly affect individuals who contract such real estate in 2022, for which the percentage increase might not be financially sustainable, from own sources or from lending. moreover, in such a situation we could see a blockage on the real estate market, which is not desirable under the current conditions. according to the same transitional provisions, deliveries made starting from 2023 for buildings with a price below 450,000 lei, for which preliminary contracts were concluded and advances received in 2022, would not be taken into account when calculating the limit of a building subject to the 5% quota to vat, for each individual. thus, the buildings purchased starting from 2023, according to the new rules, will be registered in a new register ("register of housing purchases with a reduced vat rate of 5%, starting from january 1, 2023"). this seems to indicate that, from january 1., 2023, a new chapter begins in terms of vat in the real estate market, and transactions contracted prior to this date remain on the rules of 2022. regarding the acquisition of real estate by individuals individually or jointly with another individual or individuals, a series of implications may arise in practice. thus, a first question would be related to the meaning of this phrase if it refers to persons with degrees of kinship or any form of co-ownership. in addition, there is the question of what happens if the purchase is made by two spouses who later decide to divorce. can they still purchase another property for which they can benefit from the reduced vat rate? basically, no. also, what happens if the two spouses purchased a property with a 5% vat rate during the marriage under the property separation regime? will the other spouse still be able to purchase a property with a 5% vat rate? certainly, a series of questions remain, which should be clarified in the coming period, as real estate developers have the task of applying the correct vat rate for the deliveries made. 4. conclusions in the case of the vat rate for the purchase of housing, the provisions of the fiscal code bring a simplification starting from january 1., 2023. there will be a single value ceiling, namely 17 600,000 lei and a small number of purchases to which a 5% vat rate can be applied, namely only one. the transitional provisions, regarding transactions for which an advance was paid in 2022, bring a clear and fair provision for individuals in this situation. changes brought to the taxation of rental income, in the case of individuals, namely the elimination of the flat rate, will attract a higher rent tax, as well as the limitation of access to a single dwelling subject to the reduced rate of vat and within the limit of a reduced ceiling, show a trend that can discourage such investments among individuals. the future will show us if there is an impact in the migration of this type of investment to companies, a situation in which they can apply reverse taxation to vat as well as apply certain expense deductions. it could be considered that one of the reasons for the expected change is the increase in revenues to the state budget and, perhaps, the tempering of the appetite of individuals to invest in more "social" housing with a reduced vat rate. references [1] law 227/2015 on the fiscal code [2] ordinance 13/2021 [3] ordinance 16/2022 [4] law no. 114/1996, republished, with subsequent amendments and additions [5] law no. 50/1991 the european funds and their economical effects in romania agora international journal of economical sciences, aijes, issn 2067-3310, e issn 2067 – 7669, vol 10 (2016) 21 the european funds and their economical effects in romania liliana marcela durgheu 1 , rica ivan 2 abstract: the absorption of the communitarian funds constitutes an objective on its own in the post-adherence strategy, taking into consideration the huge contribution that these funds will have in the recovery of the gap between our country and the other european union member states. using the european policy of cohesion, the access to these financial resources represents one of the main economical benefits. key words: european funds, european union, pnd, operational programs introduction: nowadays, the european union is going through a period of identity redefinition and of its internal cohesion, in the context of the necessity of acknowledging itself as a competitive and dynamic actor in a continuously globalizing world, having as a background the “digestion” of the fifth wave of extension, started in 2004 with ten states and ended with romania’s and bulgaria’s adherence on the 1 st of january 2007. the union goes through a process of reconnection with its own citizens and of regaining their sustaining for the european political project based on their preoccupations, at the beginning of the 21 st century, perceived differently in comparison with the ones in the previous century. the union has to face the challenge of permanently adapting to the changes generated by a series of factors, internal ones (the integration’s deepening parallel with the extension, the aging and the decrease of the population number, the necessity of adapting to the european unions’ institutions, the efficiency, the transparency and the decision’s legitimacy at a communitarian level, the communication with its own citizens) as well as external ones (the world crises of the natural resources and of the raw materials, the competition coming from the other poles of power, but not only, the terrorist threat, threats regarding the environment, such as: climate changes, natural disasters, diseases, etc ). 1 chamber of accounts, bihor address: chamber of accounts, str. roman ciorogariu, no.65, oradea, romania, e-mail: ldurgheu@yahoo.com 2 faculty of electrical engineering and information technology, head of control systems engineering and management department university of oradea university of oradea, oradea, romania correspondence: rica ivan, university of oradea, postal address (1, university street, oradea, romania) e-mail: rika_ivan 2005@yahoo.com 22 in conclusion, the european union is a continuously moving construction in an internationa context characterized by a profound dynamics. thus, romania’s profile takes into consideration the existent opportunities, having as a goal the decrease of the typical vulnerability of a new member state of the european union a coherent policy’s accession of a coherent policy resulting in the development of the romanian citizens’ wealth. after a decade of structural, legal and institutional reforms, as well as economical and social ones, for preparing the moment of adherence to the european union, romania must face a significantly changed context, having an increased level of interdependent member states, that need a rational and efficient strategic behavior. first of all, the adherence to the european union represents the opportunity and the means of increasing the standard of living of the romanian citizens along with the european ones. the fact that, romania, at the moment of adhering to the european union, was a member state having a gnp a lot smaller than the european average, underlines the necessity of efficient use of the national resources and of the communitarian funds, as well as the active encouragement of the domestic and foreign investments. thus, romania needs to maintain the rapid, balanced and durable economical increase, on a long term, and it also needs strong and efficient institutions, a coherent legislative system and a predictable fiscal system. from the convergence point of view, the macro-economical frame has the role to sustain the durability of the economical growth, including the financing of physical infrastructure development and of the human capital. the assurance of a permanent macro-economical frame for the period between 2007-2013 has represented a fundamental objective, characterized by the enhancement of the correlation process of the existent policies with the new policies, the continuation of the fiscal consolidation, of the inflation lowering and of the budget deficit level, according to the european union’s requirements. the monetary, budgetary and fiscal policies, as well as the preparation for the adherence to the euro zone will be thus subject to the logics of the multi-annual budgetary programming, that allocates the necessary sums to the key sectors (including the public-private partnerships’ development) and to rationalize the expenses, taking into account the principle of tributaries. . . in order to become a direct beneficiary of the communitarian funds, romania has to assure a high level of absorption of these. the funds that romania will get from the european union are potential, while the contribution to the communitarian budget is certain and it represents an assumed absorption as a member state. complementary to the communitarian funds, the budgetary resources of the state and the ones extracted from the private sector are engaged in priority directions of development. 1. the european context of the structural funds’ entry and development the european union is an economical and political union, developed in europe, being composed of 28 states. the origins of the european union go back to the european community of coal and steel (ceco) and to the european economical community (cee), formed of six member states in 1958.during the following years, the european union has been expanded by the adherence of new member states and has strengthened its powers by adding new economical, social and political domains in its abilities. the treaty from maastricht has put the basis of the european union under the present name in 1993. the last 23 constitution amendments of the european union have been represented by the treaty from lisbon that came into force on the 1st of december 1009. (source wickipedia). this union of states having different levels of development has imposed, in time, through the adherence of new state and the deepening of the economical and social disparities, a convergence policy whose goal has been to reduce the differences between the development levels of different regions. in this context, the economical and social policy of cohesion (pces) finds its place. thus, the pces represents the fundamental policy of the european union having as a goal the decrease of the economical and social development disparities between the member states or regions of the european union; the improvement of the unique market’s functioning; the promotion of a permanent and durable development of the european union. 1/3 from the european union’s budget is allocated to this politics. the pces’s intervention objectives are the following:  convergence for the regions where the gnp/citizen is under 75% of the european union’s average;  regional competitiveness and labor force – for the regions which are not eligible for the convergence objective;  the european territorial cooperation – for the regions, counties and cross border zones; (regulation ce 1083/2006, art.3). the financial means by which the pces is implemented are called structural instruments and contain: structural funds (the european fund of regional development and the european social fund) and the cohesion fund. these three funds are known under the generic name of structural funds and funds of cohesion (fsc). structural funds and funds of cohesion contribute, each of them, to the fulfillment of the three objectives, thus:  the convergence objective is financed by the european fund for regional development (fedr), the european social fund (fse) and the cohesion fund (fc);  the objective of regional competitiveness and employment is financed out of the european fund for regional development (fedr) and of the cohesion fund (fc);  the objective of the european territorial cooperation is financed out of the european fund of regional development (fedr). the european fund for regional development (fedr) sustains a durable economical development at a regional and local level by levying the local capacities and by varying the economical structures in fields such as technological development and research, innovation and entrepreneurship, informational society, small and medium size companies, environment protection, tourism, and energy. the european social fund (fse) contributes to the increase of the adaptability of the labour force and enterprises, the increase of the access on the labor force market, unemployment prevention, the prolonging of the active life and of the women’s and immigrants’ attendance level on the labor market, the advocacy of social embedded ness of the disadvantaged persons and the fight against discrimination. the cohesion fund (fc) finances projects in the field of the environment protection and of transport across the european union, projects in the field of durable development as well as projects on the improvement of air and road traffic, the updating of the urban transport, the development and updating of the multimodal transport. because of the fact that the basic objectives, more exactly the objectives regarding the convergence, the competition and the european territorial cooperation cannot be sufficiently fulfilled, in better conditions, taking into consideration the disparities’ size and the limited financial tools that the member states have, in order to fulfill the convergence objective, they can be achieved in better conditions by means of a multi annual guarantee of the communitarian funding that permit the focus of the cohesion policy on the community’s priorities. this desideratum can be achieved by means of subventions. according to the ce regulation no. 1605/2002 these represent direct financial contributions, given as donations from the budget to finance: 24 either an action destined to promote the fulfillment of an objective that is part of the european union’s policy; either the functioning of an organism that has as an objective a general european interest or an objective that is part of the european union’s policy. the subventions form the object of a written agreement and are part of an annual program published at the beginning of the year. this is brought into force by an invitation to make suggestions, except for the cases of exceptional urgencies. all the subventions given during this financial exercise are published annually, following the confidentiality and safety demands. the subvention’s grant is subject to the principles of transparency and equal treatment. the subventions cannot be cumulative, they cannot be given retroactively and they suppose co-financing. moreover, these cannot have as a target or result the idea of producing profit on the beneficiary’s behalf. one action can get only one subvention allocated from the budget in favor of the same beneficiary. a subvention cannot be given for an action that has already been started unless the applicant can prove the necessity of starting a business before the signing of the agreement. in such cases, the eligible expenses for financing cannot date back before subvention request’s handing in. retroactive subventions cannot be given for actions that have already been finished. eligible requests of subventions are the ones presented in writing by the juridical persons who, on behalf of the beneficiary, when being in the situation of attribution, certify the fact that they are not in one of the situations presented in art.93 (debts at budgets, bankruptcy, convicted for fraud, corruption) and art.94 (conflict of interests, false declarations). the criteria of selection must permit the evaluation of the applicant’s capacity to fulfill the action or the proposed working program. the attribution’s criteria previously announced in the invitation must permit the evaluation of the applications’ quality, from point of view of fixed objectives and priorities. the applications are evaluated, on the previously announced criteria of selection and graduation, by an evaluation committee, in order to establish the applications that can be financed. afterwards, being based on the evaluation, the main competent credit release authority shortlists the approved beneficiaries and the amounts. he is the one who informs the applicants in writing upon the decision regarding their request. in case of the application’s rejection, the institution presents the reasons of rejection, especially regarding the previously announced selection criteria. 2. the european funds and their economical effects in order to evaluate in detail the economical effects of the structural financings we begin from the objectives and the priorities declared between 2007 and 2013. the main objectives have been connected to convergence as well as competitiveness through effects on the labor market. for instance, among the priorities we mention: equal easing to labor access, more productive and innovative methods of work, the increase of employees’ level of qualification and engagement, institutions’ modernization on the work market, active measures of work market’s support, integration of under-privileged categories on the work market, educational reform, etc. it is well known that the european financings taking place between 2007 and 203 had a series of objectives connected to the increase of the european union’s convergence and competitiveness at an international level. that’s why, the majority of these refer to the work market, by increasing the equality of the chances and qualification of the work force. in the analysis of the convergence level, the used indicators are the gnp/citizen and the human development indicator. 25 the national strategic frame of reference 2007-2013 (csnr, 2006) represents the ”world strategy for application” (the govern of romania, 2012) the european funds in romania. there have been seven operational programs established by means of this: 1. the regional operational program (por), 2. the sector operational program for increasing the economical competitiveness (poscce), 3. the medium sector operational program (pos medium), 4. the transport sector operational program (pos transport), 5. the sector operational program on human resources development (posdru), 6. the operational program on management capacity development (podca), 7. the operational program on technical assistance. thus, csnr is implemented by means of the operational programs which are part of the convergence and european territorial cooperation objectives. an operational program represents a document presented by a member state and adopted by the committee, defining a development strategy according to a coherent and complete set of priorities, for whose fulfillment there is a need of a certain fund. each of these programs has been divided into priority lines and major directions of intervention (dmi). the most important information for each type of operational program that has been developed in our country in the”convergence” objective, mostly its structure and objectives, are presented in the following lines. the details regarding the implementation strategy of the programs financed out of european funds are found, as it has already been said, in the national reference strategic frame 2007-2013. being elaborated in 2006 when romania was in its economical ascension, the declared goal was ”the decrease of the disparities in the economical and social development between romania and the european union’s member states by generating an auxiliary increase of 15-20% of the gnp until 2015 ”. (csnr, 2006). the forecasts have been exaggerated and rootless, as it has been proved afterwards. they have been built on a background of a continuous economical development. romania’s economical development lasted until the year 2008. from a real rate of an increasing 7,3% gnp in 2008, there has been registered a dramatic decrease in the following year, the value being of 6,6%, thus having an almost double decrease in value. during the entire period of the financial program, between 2007 and 2013, romania’s economy had fluctuant evolutions. along with the first signs of crisis, the strategy of using the structural funds in our country has been changed. the goal has been the increase in the degree of the absorption and usage of the european funds for countervailing the effects of the international financial crisis. moreover, the last one has had different effects in using the financings out of european funds in the member states (healy&bristow, 2013). but, in the majority of the cases, these have represented the help given in economy, despite the technical and institutional problems that have been met along the process of accessing the respective sums. the decisions taken by the romanian authorities have been to improve the absorption process. however, in the middle of 2012, the total rate of the european funds’ absorption was of 9,17% for romania (the govern of romania, 2012), the lowest in the european union. unfortunately, this position has been kept during the years, but the number of the absorbed funds has significantly increased, becoming more than 26 20%in 2013. out of the seven operational programs, the most performing ones have been por, pos medium, posdru and podca. posce, pos transport and poat have registered lower contracting levels. the interesting thing is that exactly the last ones have “benefited” out of the international financial crises. thus, the strategy’s restructuring for adapting to the new economical conditions have ended in the reallocation of the money, as follows: 60% for infrastructure, 20% invested in the human capital and 15% for increasing the competitiveness on a long term. regarding the economical impact of the decision of relocating the funds, the opinions are divided and an evaluation of its fairness is requested. as previous analyses done on a older reveal the structural funds cannot fulfill their initial goal just because of the fact that the investments in the infrastructure do not have a significant impact on the long run (rodriguez-pose & fratesi, 2004; dall’erba & le gallo, 2003). the annual implementation rapports present succinctly the development of the implementation process on every type of program, out of the 7 existent ones in romania. but, as the existent specialty literature shows ((litan et al, 2013), the information given to the general public are incomplete. the european union has an institutional frame that regards the promotion of its values, the fulfillment of its objectives, the support of its interests, of its citizens and of the member states, as well as, assuring its coherence, effectiveness and continuity of its policy and actions. the european union’s institutions are the following: the european parliament; the european council; the council; the european committee; the european union’s court of justice; the european central bank; the court of accounts. according to the european union’s cohesion policy, romania’s social-economical development’s orientation is made of a strategic plan document and multi-annual financial programming, authorized by the govern and elaborated in a large partnership. it is about the national development plan (pnd), which is a characteristic concept of the european policy of economical and social cohesion (cohesion policy), designed to offer a coherent and permanent conception regarding the development of the european union’s member states, transposed in development priorities, development, programs, projects, according to the principle of structural funds’ programming principle. in the context of romania’s adherence to the european union in 2007, pnd has a major role of aligning the national development policy to the communitarian development priorities, by promoting the measures considered to be incentives of durable social-economical development at a european level. regarding the coherence policy, pnd represents a tool of establishing the priority of the public investments for development, mainly oriented on the priorities and objectives compatible with the intervention domains of the structural and cohesion funds. in this context, the underlining of the pnd’s 2007-2013 specific character is necessary, which does not substitute the national strategy of the economical development, but it represents one of its major components. among other things, pnd 2007 27 2013 fundaments the priorities and the objectives of the development’s strategy that will be negotiated with the european committee for financing out of structural and cohesion funds between 2007 and 2013. the elaboration of the pnd 2007-2013 has been fulfilled according to h.g.no.1115/2004 regarding the elaboration, in partnerships, of the national development plan, which establishes the methodological principles, the institutional frame of work and the consulting mechanisms of partnership. thus, the national development plan between 2007 and 2013 has as a target “the fast decrease of the social-economical disparities between romania and the european union’s member states”. at the elaboration of pnd, it has been estimated that, between 2007 and 2013, romania gained 10%points out of the existent development gap, the pnd strategy being financed out of multiple sources: internal ones (state budget, local budgets, etc) and external ones (structural tools of the european union, the european union’s funds of structural type for rural development and fishing, external credits, etc). for the programming period between 2007 and 2013, pnd has been elaborated in accordance with the orderliness of the specific programs’ principles established in the council’s regulation (ce)no.1260/1999 21 st of june 1999 regarding the general dispositions for structural funds (art.8 – the complimentary and the partnership, art.11 – the appurtenance, art.15,16 – development plans, art.41 – evaluation, art.46 – informing and publicity), as well as other demands resulted out of the european committee’s recommendation regarding the programming and the management of the structural tools. for the programming period between 2007 and 2013, the national development plan fundaments romania’s access to the structural instruments, representing the basic document on which the fostering communitarian frame has been negotiated with the european committee. in this context, the priorities and the objectives of the pnd 2007 -2013 are concentrated on the fields which are eligible for structural interventions (structural funds and cohesion fund). pnd 2007-2013 fundaments the financial aid given by the european union to approximately 4% of the gnp, yearly, at a commitment level, to which the national co financing is added. the pnd development priorities are the following: the increase of the economical competitiveness and of the economical development based on knowledge, the development and updating of the shipping infrastructure, the protection and the improvement in the environment’s quality, human resources development, the occupation promotion and the social inclusion and the strengthening of the managerial capacity, the development of the rural economy and the productivity’s improvement in the agricultural sector, 28 the decrease of the development disparities between different regions of the country. the financial programming of the pnd aimed at fulfilling a realistic general frame of the finance resources’ development that should be used between 2007 and 2013 in order to increase the growth of convergence with the european union, concluding with a global estimated sum of approximately 58,7 billion euro, allocated on six pnd national priorities of development. financial world programming pnd 2007-2013 mil. euro – pnd priorities 2007 2008 2009 2010 2011 2012 2013 total p1. competitiveness 651,4 8 620,72 793,14 882,76 842,95 761,25 682,12 5.234,43 p2. transport infrastructure 2.094, 99 2.517,4 8 2.465,2 5 2.071,2 9 1.819,8 4 1.832,2 0 1.853,7 5 14.654,7 9 p3. environment 753,1 8 898,70 1.099,1 1 1.160,4 5 1.069,5 4 810,78 806,23 6.597,98 p4. human resources 711,6 5 912,51 1.297,0 8 1.317,5 9 1.313,2 2 1.115,8 5 940,72 7.608,60 p5. rural development 1.585, 56 1.757,7 2 2.200,9 6 2.335,4 9 2.395,0 8 2.445,1 5 2.517,3 7 15.237,3 2 p6. regional development 1.294, 79 1.280,9 9 1.397,9 6 1.336,3 7 1.342,3 5 1.344,5 5 1.342,9 7 9.339,98 total 7.091, 65 7.988,1 2 9.253,5 0 9.103,9 5 8.782,9 8 8.309,7 8 8.143,1 6 58.673,1 0 and, the pnd structure of the financing resources between 2007 and 2013 are presented as follows: communitarian funds -43% national public sources (central and local, including ifi credits) – 48% private sources (private co financing associated with the communitarian funds) -9% the implementation of the 2007-2013 pnd provisions, according to the established strategy and under the conditions of efficiency, accuracy, transparency and financial correctness, implies significant efforts coming from the public institutions and of the beneficiaries. the pnd represents the document on whose basis the national reference strategic frame 2007-2013 as well as the operational programs out of which these funds will be implemented, have been created. in this respect, the pnd’s elaboration has developed in parallel with the one of the operational programs for implementing the structural funds and the cohesion funds, thus assuring the coherence between these documents. 3.conclusions the european funds have been created in order to help the member states to reduce the disparities between them. an evaluation of the structural funds’ effects and their economical implications is extremely important as the structural funds must be taken into consideration together with the declared objectives of these programs. it is important to see if these objectives have been fulfilled and the degree of their fulfillment. 29 bibliography 1.dall'erba, s., & le gallo, j., regional convergence and the impact of european structural funds over 1989–1999: a spatial econometric analysis. papers in regional science, 87(2), 2008, 219-244 2. dogar c., mare c., a”what if” analysis for sound financial management decisions in romanian european social fund grants evaluation, elsevier 2nd world conference on business, economics and management, wcbem-2013, 25-28 april, antalya, turcia, 2013 3.gherghinescu o., rinderu p., econometric model for analysing the structural funds absorption at regional – case study sw region, timisoara journal of economics, vol. 4, no. 3, p. 161 – 174, 2011 (http://ideas.repec.org/a/wun/journl/tjev04y2011i3%2815%29a05.html) 4.haţegan camelia-daniela, study regarding the financial auditing for verification of the european projects in romania în „ audit financiar”, anul xi, nr. 102-6/2013 5.healy adrian and gillian bristow, economic crisis and the structural funds, espon applied research project ecr2 – economic crisis: resilience of regions, espon 2013 programme/article, luxembourg, september 2013 6.ienciu alin-ionel, bonaci carmen-giorgiana, the external public audit in the projects having european source of finance, ed. eikon, 2013 6. romania’s govern, the national strategic report 2012 regarding the implementation of the structural and cohesion funds, 2013 7.litan cristian marius, mare codruța, popa irimie, a brief perspective on the regional distribution of sophrd financing in romania, revista de studii şi cercetări economice virgil madgearu / review of economic studies and research virgil madgearu , an vi, nr. 2 – nr. 2/2013, p 81-98 8.rodríguez-pose a. si fratesi u., between development and social policies: the impact of european structural funds in objective 1 regions, regional studies , vol 38, nr 1, p. 97–113, 2004 9.***, the strategic frame of national reference 2007 – 2013 10.***, informative guide regarding the prevention of the irregularities at the level of the beneficiaries, 2009 11.***,the guide of the european committee for exercising the compliance’s evaluation 12.***, guide – accounting procedures associated with the projects financed out of structural and cohesion european funds ccid, 2011 13.***, isa 315 the understanding of the entity and of its environment and risk evaluation of significant deformation 14.***, isa 320 significance level in audit. 15.***, isa 330 the auditor’s procedures 16.***, isa 530 sampling in audit and other procedures of selective testing http://ideas.repec.org/a/wun/journl/tjev04y2011i3%2815%29a05.html agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 no. 1 (2023), pp. 14-23 14 intelligent packaging as a marketing tool. are digital technologies re-shaping packaging? i. gigauri, m. palazzo iza gigauri,¹ maria palazzo² ¹ st. andrew the first-called georgian university, georgia (orcid.org/0000-0001-6394-6416) e-mail: i.gigauri@sangu.edu.ge ² university of salerno & universitas mercatorum, italy (orcid.org/0000-0002-8710-9054) e-mail: maria.palazzo@unimercatorum.it abstract. rapid technological advancements, digitalization trends, changes in consumer behavior, and call to achieve sustainable development goals induce transformations in the packaging industry. digital technologies are enabling the packaging to move from its core passive functions to more enhanced features such as prolonged preservation, traceability, communication, sustainable supply chain, life-cycle evaluation, and extended shelf-life of a product. intelligent packaging can provide information about the conditions inside and outside of the packaging preventing contamination of the product. monitoring of food products allows consumers, producers, and retailers to avert potential spoilage and unnecessary waste. consumer behavior determines the success of intelligent packaging. their acceptance of new technologies, environmental concerns, attitude towards sustainability issues, as well as safety and quality preferences define customers’ buying behavior. the innovative features of packaging have not yet attracted much attention from academics and practitioners. in addition, the design and development of such packaging are associated with high prices, which encourages manufacturers to avoid it. therefore, a comprehensive understanding of current packaging trends can shed light on the benefits and potential barriers to its use. this paper provides a literature review of intelligent packaging and explains its functions. it defines the role of packaging in marketing in the current digital era. the paper discusses the definitions of smart, active, and intelligent packaging and suggests how intelligent packaging can serve as a marketing tool while achieving marketing strategies. keywords: packaging, intelligent packaging, marketing, digital technologies, communication, sustainability introduction the unprecedented advancements in digital technologies in the past few years have empowered companies to reshape marketing tools and strategies. the emergence of artificial intelligence, virtual reality, big data analytics, mobile internet, internet of things, blockchains, automation, and robotization enabled marketers to respond to consumers’ needs in an effective and efficient way. the advent of the digital economy along with the new normal caused by the recent pandemic has altered social systems and business models toward innovative solutions (skala, 2019; gigauri, 2021). technological progress and accelerated digitalization influenced packaging and created new opportunities for the packaging industry. mailto:i.gigauri@sangu.edu.ge mailto:maria.palazzo@unimercatorum.it iza gigauri, maria palazzo 15 consumer requirements towards packaging are changing in line with digitalization trends. changed lifestyles and the current digital age imply consumers’ decisions on more convenient packaging, especially for food and drink products (jinkarn & suwannaporn, 2015). packaging makes impression on buyers as they first come into contact with the packaging before the product. therefore, the visual effects of packaging including shape, size, and color are significant marketing elements. the positive feelings and emotions evoked by the packaging can lead to a purchase decision. for this reason, packaging as a marketing tool has become attractive for researchers and marketers, who have more and more improved packaging systems. as a result, intelligent packaging emerged combining digital, innovation, and marketing tools. the importance of packaging is not only represented for supply chain management but also for improving packaging sustainability. demand for traceability features is growing and the need for the safety and quality of products is increasing. intelligent packaging provides information about the conditions inside and outside of the packaging enabling timely decision-making. its potential to prevent waste aligns with sustainable development goals. in this vein, packaging has become essential not only from the marketing perspective but also for the implementation of sustainable business strategies. this review paper addresses the role of intelligent packaging from a marketing perspective. to achieve its aims, the paper provides definitions of active, intelligent, smart, and sustainable packaging and discusses the functions and benefits of intelligent packaging for marketing strategies. i. about the definition of intelligent packaging and related terms the advancements in the intelligent packaging system resulted from the current technological progress, changes in consumer preferences, and sustainability trends (palazzo et al., 2023). the term is related to smart, active, interactive, responsive, intelligent, and sustainable packages (figure 1). figure 1. relationship of packaging systems source: authors’ elaboration based on the discussion of definitions. intelligent packaging as a marketing tool. are digital technologies reshaping packaging? 16 smart packaging offers improved functions utilizing new technologies (kerry & butler, 2008). incorporated sensor technology enables smart packaging systems to monitor products such as food and pharmaceuticals aiming to transmit information about their quality, safety, and freshness (schaefer & cheung, 2018). smart packaging contains characteristics of intelligent packaging and active packaging (vanderroost et al., 2014). in this regard, schaefer and cheung (2018, p. 1023) summarize the smart packaging notion in the following way: “smart packaging allows to track and trace a product throughout its lifecycle and to analyze and control the environment inside or outside the package to inform its manufacturer, retailer or consumer on the product’s condition at any given time”. active packaging includes additives to maintain the quality and shelf life of a food product (biji et al., 2015). it is mainly used for rapidly perishable products to reduce the number of active materials causing food damage and avoid bacteria from entering the product (schaefer & cheung, 2018). usually, active packaging systems contain oxygen scavengers, ethylene scavengers, flavor and odor absorbers/releasers, antimicrobial and antioxidant packaging technologies (prasad & kochhar, 2014). european food safety authority defines intelligent packaging as “materials and articles which monitor the condition of packaged food or the environment surrounding the food (regulation (ec) no 1935/2004 article 2.2.b and regulation (ec) no 450/2009 article 3.b)” (efsa, 2009, 4). intelligent packaging systems inspect food condition and transmit information about its quality during storage or transportation (biji et al., 2015). the system contains various indicators such as time-temperature, gas detectors, and freshness or ripening indicators (prasad & kochhar, 2014). intelligent packaging is a complex system embedded with intelligent functions to detect, record, track, and communicate information about the quality of a packaged product (yam et al., 2005). these functions are achieved through hardware components such as different indicators and sensor devices as well as radio frequency identification (rfid) systems (kerry, o’grady & hogan, 2006), which trace, record, and provide information about discovered alterations in a product and its environment inside packaging (realini & marcos, 2014). thereby, for example, changing oxygen or ph levels, the freshness of food, or temperature can be detected (yam et al., 2005). responsive packaging responds to specific stimuli in the food or surrounding environment, such as microorganisms, with the purpose of monitoring and enhancing food quality (brockgreitens & abbas, 2016). interactive packaging enables two-way communication between consumers and packaged goods through the incorporated technological systems (butler, 2013). the research conducted by lydekaityte and tambo (2020) found that smart interactive packaging improves the effectiveness of a product and increases consumers’ experiences as they can engage with it. active packaging systems react to the food environment to enhance the quality, safety, and shelf-life, while intelligent packaging aims to monitor the conditions of the product (drago et al., 2020). accordingly, intelligent packaging detects and shares information, whereas active and responsive packaging takes actions to improve the quality of food and environment (vanderroost et al., 2014). as a result, both types of packaging can cooperate under the concept of smart packaging (müller & schmid, 2019) to enhance product quality (figure 2). sustainable packaging refers to eco-friendly packaging that also considers social and iza gigauri, maria palazzo 17 economic aspects (boz, korhonen & koelsch sand, 2020). sustainable packaging is sourced from renewable and sustainable materials, it can reduce waste as well as resource and energy use. sustainable packaging is recyclable and reusable. figure 2. systems and properties of active and intelligent packaging source: authors’ elaboration based on drago et al., 2020. ii. functions and benefits of intelligent packaging for marketing strategies in general, packaging plays a significant role in the consumer market being an essential marketing element of marketing communication strategy (rundh, 2009). moreover, packaging design must suit to the working lifestyle of consumers taking into account urbanization. since customers’ expectations are constantly changing and their demands are never fully satisfied, companies are motivated to create consumer-oriented offers attracting purchasers to participate in the process (baruk & iwanicka, 2015). packaging functions involve not only the protection of a product but also represent marketing tools (robertson, 2013) as a communication trait is an integral part of packages. the communication strategy of marketing incorporates brand concept and product quality for influencing consumer decisions. customers first encounter packages when touching a product and get their first impression of a brand and product through packages. successful marketing communication through packaging covers not only information about the product but also packaging design, fonts and colors used as well as logos, illustrations, and symbols on it (koutsimanis et al., 2012; renn, 2007; van den berg-weitzel & van de laar, 2001). therefore, intelligent packaging as a marketing tool. are digital technologies reshaping packaging? 18 packaging involves an important task to promote and sell commodities by providing information about a product (rundh, 2005). in addition to the communication function, packaging has logistics, environmental, and marketing chain functions (prendergast & pitt, 1996; rundh, 2005). packages must protect products during shipment, distribution, storage, and transportation. furthermore, convenience features are the most demanded function of packages because of modern lifestyles. for consumers, packages of food, home care, or pharmaceutical products must be easy to open, re-close, unwrap, store, and carry, while for manufacturers, the packaging system should be convenient in order to pack and distribute goods (jinkarn & suwannaporn, 2015). therefore, packaging design including such convenience functionality is a significant marketing tool (silayoi & speece, 2004). intelligent packaging detects and conveys information about the condition of the product. however, it does not have a function to address the problem it detects but stimulates active packaging function to tackle the changed environment or alterations in the product. intelligent packaging aims to reveal the quality conditions of the product and therefore, improve its safety. for this reason, it includes several devices and detectors such as time-temperature indicators, freshness indicators, and tracking services to monitor the transportation and storage of perishable products. in addition to indicators, intelligent packaging contains data carriers to track product movement throughout the supply chain and chemical sensors to transform chemical information into a measurable signal (azeredo & correa, 2021). consumers have access to the information intelligent packaging is gathering. prior studies conducted through 600 interviews with consumers revealed that the most essential feature of food and drink packaging was the opening characteristics, which impact purchasing decisions, and consumers even were ready to pay more for convenient packaging including tamper-evident design (jinkarn & suwannaporn, 2015). moreover, baruk and iwanicka (2015) found that environmental aspects of dairy product packaging positively affect the consumer purchasing decision. blankenbach et al. (2018) developed smart packaging with bluetooth and smartphone application for pharmaceutical products to provide information to patients about medicine intake. through e-paper and sensors, it is possible to control the amount of liquid, number of tablets, and time to take tablets, equipped with alarm and reminder systems (blankenbach et al., 2018). logistically, it helps to monitor environment, temperature, and enables data transfer; it includes qr code and active tag for security, data exchange, and reordering purposes (blankenbach et al., 2018). the importance of packaging for marketing is increasing due to the following factors. first, consumer products require packages in order to bring them to market (baruk & iwanicka, 2015). second, increased competition, a large number of available, and continuously more new products offered force companies to find innovative ways for differentiation (wells et al., 2007). in this sense, packaging acts as an outstanding marketing tool to attract the attention of buyers. third, changes in the marketing environment such as cultural, social, economic, and technological factors influence buying decisions, and hence, the packaging is expected to meet the expectations (albino et al., 2009). fourth, self-service facilities on the market are growing, where packaging serves as a “silent salesman” (baruk & iwanicka, 2015; rettie & brewer, iza gigauri, maria palazzo 19 2000). in this regard, packaging can not only convey product information in a persuasive way but consumers also can feel and see the packaging before making a purchase decision. additionally, consumer awareness and demand for knowledge are growing. they want to know about the origin and composition of the product. interestingly, studies revealed that consumers’ age, gender, and education determine their expectations of packaging, which impacts their purchase decision (baruk & iwanicka, 2016). previous research performed through focus group interviews in sweden and used thematic analysis demonstrated that consumers concern about the ethical and environmental impact of packaging material suggesting that manufacturers should communicate favorable characteristics of packaging (fernqvist, olsson & spendrup, 2015). food product perishability can be avoided by appropriate packaging to increase their shelf life and hence, decrease food waste, which is a main problem in the food supply chain (li et al., 2020). since products have an environmental impact throughout their life cycle (williams & wikström, 2011), companies need to decrease waste caused by damaged products using the intelligent packaging. the quality of a product can be communicated by transparent packaging (fernqvist et al., 2015), which is made mainly of plastic. intelligent packaging, conversely, provides through technological devices. prior studies show that marketers can attract consumers through targeted packaging design and communication of product benefits based on consumers’ opinions on packaging (fernqvist et al., 2015). likewise, the research results indicate that consumers demand that fruit and vegetable packaging communicate the origin of products, cooking recipes, as well as product name, brand, and expiration date (fernqvist et al., 2015). thus, packaging reflecting food quality and brand value creates consumer satisfaction (coles, 2003) and helps achieve a competitive advantage. in addition, packaging impacts the returns in online shopping (wallenburg et al., 2021), as secondary and primary packages serve as a sensory experience for buyers (heller et al., 2019). it communicates about the seller and purchased items. especially, secondary packages are specifically designed by online retailers as a differentiation strategy to meet or even exceed customers’ expectations. packaging includes branding features to “create a premium esthetic appeal” (wallenburg et al., 2021). the recent study results by palazzo, vollero and siano (2023) performed a systematic literature review of 130 articles published between 1991-2021 and confirmed the growing interest of scholars and practitioners toward intelligent packaging, especially, with respect to sustainability and innovation. intelligent packaging can facilitate the transition to a circular economy and better waste management (palazzo et al., 2023). moreover, the research found that the food sector benefits more from advanced features of packaging due to the extended shelf-life and safety of food products (palazzo et al., 2023; vanderroost et al., 2014). conclusions marketing promotes the sale of products and is associated with the communication function of disseminating information about the brand and the quality or functionality of commodities to consumers. packaging is recognized as a vital part of a product through which consumers contact the brand, and consequently, the concept of packaging is considered one of the key aspects of marketing strategy. the aim of packaging systems is not only to protect the intelligent packaging as a marketing tool. are digital technologies reshaping packaging? 20 product but also to ensure its safety and quality as well as preserve it during distribution. additionally, packaging facilitates communication with customers by providing different types of information such as instructions, components, expiration dates, etc. it also sells a product through its attractiveness, as packaging functions and convenience for opening and storage are engaging marketing tools. in this context, intelligent packaging transmits information to stakeholders about the product and its surrounding environment remotely ensuring the satisfaction of consumers’ demands. technological progress and digitization have empowered packaging thanks to which advanced systems and properties are integrated into smart intelligent packaging. intelligent packaging can contribute to sustainability trends by reducing wastage and avoiding spoilage of products, especially, food, cosmetics, and pharmaceuticals. since sustainable development goals aim to improve lives worldwide, consumers’ behavior is altering adopting sustainable lifestyles, and demanding more responsibility from brands (gigauri, 2022; gigauri & vasilev, 2022). intelligent packaging responds to increasing demand for quality and safety and facilitates effective management of the supply chain. in addition, active and intelligent packaging has the potential to become transparent communication tool to consumers, retail and food industry for controlling the food production and supply chain. this paper contributes to the literature and practice by exploring intelligent packaging as a marketing tool in the light of digital technologies. it adds value on the discussions of new trends and perspectives of smart packaging. the paper distinguishes between various types of packaging contributing to the knowledge of scholars and managers and demonstrates the relationship of the innovative packaging types. it also sheds light on some benefits and advantages of smart, intelligent and active packaging while engaging in debates about its usability for different product categories. from the marketing perspective, consumer satisfaction through packaging can lead to shifting their behavior in favor of the company brand. practitioners can recognize that packaging influence consumer purchase decisions. furthermore, in the era of online shopping, packaging impacts consumer satisfaction and brand reputation. consequently, marketers should address this issue by creating appropriate packaging design based on research. moreover, smart packaging can contribute to sustainability goals by decreasing waste. consumers’ concern about the environment and their willingness to purchase products with eco-friendly packaging is increasing. thus, they are attracted by sustainable packaging. accordingly, marketers can impress consumers with targeted packaging design, which communicates product benefits based on consumers’ packaging demand. future studies should examine the features and characteristics of smart intelligent packaging for different products and survey consumers acceptance of various types of packaging. since the concept is complex, it can contain many variables requiring more in-depth analysis, especially from different countries and culture contexts. references 1. azeredo, h. m. c., & correa, d. s. (2021). smart choices: mechanisms of intelligent food packaging. current research in food science, 4, 932–936. https://doi.org/10.1016/j.crfs.2021.11.016 iza gigauri, maria palazzo 21 2. baruk, a. i., & iwanicka, a. (2015). polish final purchasers’ expectations towards the features of dairy product packaging in the context of buying decisions. british food journal, 117(1), 178-194. https://doi.org/10.1108/bfj-06-2014-0188 3. baruk, a. i., & iwanicka, a. (2016). the effect of age, gender and level of education on the consumer’s expectations towards dairy product packaging. british food journal, 118(1), 100-118. https://doi.org/10.1108/bfj-072015-0248 4. biji, k. b., ravishankar, c. n., mohan, c. o., & srinivasa gopal, t. k. (2015). smart packaging systems for food applications: a review. journal of food science and technology, 52, 6125-6135. https://doi.org/10.1007/s13197-015-1766-7 5. blankenbach, k., duchemin, p., rist, b., bogner, d., & krause, m. (2018). 22-2: smart pharmaceutical packaging with e-paper display for improved patient compliance. sid symposium digest of technical papers, 49(1), 271–274. https://doi.org/10.1002/sdtp.12521 6. boz, z., korhonen, v., & koelsch sand, c. (2020). consumer considerations for the implementation of sustainable packaging: a review. sustainability, 12(6), 2192. https://doi.org/10.3390/su12062192 7. brockgreitens, j., & abbas, a. (2016). responsive food packaging: recent progress and technological prospects. comprehensive reviews in food science and food safety, 15(1), 3-15. https://doi.org/10.1111/1541-4337.12174 8. butler, p. (2013). smart and interactive packaging developments for enhanced communication at the packaging/user interface. trends in packaging of food, beverages and other fast-moving consumer goods (fmcg), 261-287. https://doi.org/10.1533/9780857098979.261 9. coles, r. (2003). introduction. in coles, r., mcdowell, d. & kirwan, m.j. (eds), food packaging technology, blackwell publishing ltd, oxford, 1-31. 10. drago, e., campardelli, r., pettinato, m., & perego, p. (2020). innovations in smart packaging concepts for food: an extensive review. foods, 9(11), 1628. https://doi.org/10.3390/foods9111628 11. european food safety authority (efsa). (2009). guidelines on submission of a dossier for safety evaluation by the efsa of active or intelligent substances present in active and intelligent materials and articles intended to come into contact with food. efsa journal, 7(8), 1208. https://doi.org/10.2903/j.efsa.2009.1208 12. fernqvist, f., olsson, a., & spendrup, s. (2015). what’s in it for me? food packaging and consumer responses, a focus group study. british food journal, 117(3), 1122-1135. https://doi.org/10.1108/bfj-08-2013-0224 13. gigauri, i. (2021). new economic concepts shaping business models in postpandemic era. international journal of innovative technologies in economy, (1(33). https://doi.org/10.31435/rsglobal_ijite/30032021/7393 14. gigauri, i. (2022). the potential of universities to promote and facilitate sustainable development. in eastern european conference of management and economics–eecme 2022, p. 125. https://www.vspv.si/uploads/visoka_sola/eecme_4/2022_zbornik_verzija_koncna 2.pdf#page=133 intelligent packaging as a marketing tool. are digital technologies reshaping packaging? 22 15. gigauri, i. & vasilev, v. (2022). corporate social responsibility in the energy sector: towards sustainability. in: khan, s.a.r., panait, m., puime guillen, f., raimi, l. (eds) energy transition. industrial ecology. springer, singapore. https://doi.org/10.1007/978-981-19-3540-4_10 16. heller, j., chylinski, m., de ruyter, k., mahr, d., & keeling, d. i. (2019). touching the untouchable: exploring multi-sensory augmented reality in the context of online retailing. journal of retailing, 95(4), 219-234. https://doi.org/10.1016/j.jretai.2019.10.008 17. jinkarn, t., & suwannaporn, p. (2015). trade-off analysis of packaging attributes for foods and drinks. british food journal, 117(1), 139–156. https://doi.org/10.1108/bfj-08-2013-0231 18. kerry, j. p., o’grady, m. n., & hogan, s. a. (2006). past, current and potential utilisation of active and intelligent packaging systems for meat and muscle-based products: a review. meat science, 74(1), 113-130. https://doi.org/10.1016/j.meatsci.2006.04.024 19. kerry, j., & butler, p. (eds.). (2008). smart packaging technologies for fast moving consumer goods. john wiley & sons. 20. koutsimanis, g., getter, k., behe, b., harte, j., & almenar, e. (2012). influences of packaging attributes on consumer purchase decisions for fresh produce. appetite, 59(2), 270–280. https://doi.org/10.1016/j.appet.2012.05.012 21. li, y., chu, f., côté, j. f., coelho, l. c., & chu, c. (2020). the multi-plant perishable food production routing with packaging consideration. international journal of production economics, 221, 107472. https://doi.org/10.1016/j.ijpe.2019.08.007 22. lydekaityte, j., & tambo, t. (2020). smart packaging: definitions, models and packaging as an intermediator between digital and physical product management. the international review of retail, distribution and consumer research, 30(4), 377-410. https://doi.org/10.1080/09593969.2020.1724555 23. müller, p., & schmid, m. (2019). intelligent packaging in the food sector: a brief overview. foods, 8(1), 16. https://doi.org/10.3390/foods8010016 24. palazzo, m., vollero, a., & siano, a. (2023). intelligent packaging in the transition from linear to circular economy: driving research in practice. journal of cleaner production, 388, 135984. https://doi.org/10.1016/j.jclepro.2023.135984 25. prasad, p., & kochhar, a. (2014). active packaging in food industry: a review. journal of environmental science, toxicology and food technology, 8(5), 1-7. 26. prendergast, g., & pitt, l. (1996). packaging, marketing, logistics and the environment: are there trade-offs? international journal of physical distribution & logistics management, 26(6), 60–72. https://doi.org/10.1108/09600039610125206 27. realini, c. e., & marcos, b. (2014). active and intelligent packaging systems for a modern society. meat science, 98(3), 404-419. https://doi.org/10.1016/j.meatsci.2014.06.031 iza gigauri, maria palazzo 23 28. renn, o. (2007). risk perception and communication: lessons for the food and food packaging industry. 22(10), 1061–1071. https://doi.org/10.1080/02652030500227792 29. rettie, r., & brewer, c. (2000). the verbal and visual components of package design. journal of product & brand management, 9(1), 56–70. https://doi.org/10.1108/10610420010316339 30. robertson, g.l. (2013). food packaging: principles and practice. crc press, boca raton, fl. 31. rundh, b. (2005). the multi-faceted dimension of packaging: marketing logistic or marketing tool? british food journal, 107(9), 670–684. https://doi.org/10.1108/00070700510615053 32. schaefer, d., & cheung, w. m. (2018). smart packaging: opportunities and challenges. procedia cirp, 72, 1022-1027. https://doi.org/10.1016/j.procir.2018.03.240 33. silayoi, p., & speece, m. (2004). packaging and purchase decisions: an exploratory study on the impact of involvement level and time pressure. british food journal, 106(8), 607–628. https://doi.org/10.1108/00070700410553602 34. skala, a. (2019). digital startups in transition economies: challenges for management, entrepreneurship and education. palgrave pivot cham. https://doi.org/10.1007/978-3-030-01500-8 35. van den berg-weitzel, l., & van de laar, g. (2001). relation between culture and communication in packaging design. journal of brand management 2001 8:3, 8(3), 171–184. https://doi.org/10.1057/palgrave.bm.2540018 36. vanderroost, m., ragaert, p., devlieghere, f., & de meulenaer, b. (2014). intelligent food packaging: the next generation. trends in food science & technology, 39(1), 47-62. https://doi.org/10.1016/j.tifs.2014.06.009 37. wallenburg, c. m., einmahl, l., lee, k. b., & rao, s. (2021). on packaging and product returns in online retail—mailing boxes or sending signals?. journal of business logistics, 42(2), 291-308. https://doi.org/10.1111/jbl.12273 38. williams, h., & wikström, f. (2011). environmental impact of packaging and food losses in a life cycle perspective: a comparative analysis of five food items. journal of cleaner production, 19(1), 43–48. https://doi.org/10.1016/j.jclepro.2010.08.008 39. yam, k. l., takhistov, p. t., & miltz, j. (2005). intelligent packaging: concepts and applications. journal of food science, 70(1), r1-r10. https://doi.org/10.1111/j.1365-2621.2005.tb09052.x agora international journal of economical sciences, aijes, issn 2067-3310, e issn 2067 – 7669, vol. 12 (2018) natural resources: an incentive or an obstacle to economic growth? rica ivan1, călin tănase ladar2 1faculty of electrical engineering and information technology, university of oradea, str. universității, nr. 1, oradea, romania 2faculty of environment protection, university of oradea, str. universității, nr. 1, oradea, romania e-mails rika_ivan2005@yahoo.com, ladarcalin@yahoo.com abstract this paper refers to the consequences of the presence of natural resources for countries endowed with such resources and the impact of such resources on their economy. it briefly describes the experience of some of these countries, presenting the success of those who benefited from these resources and the monetary, fiscal and exchange rate related aspects thereof. the concept of annuity initially refers to the remuneration related to ownership rights upon a limited resource. the paper provides an overview of situations that can influence the relation between natural resources, economic growth and some of the related key factors. keywords: economic growth, natural resources, budget revenues, royalties, governance. 1. introduction natural resources are paramount for economic growth. looking at the global context, there is no economic activity that can be carried out in the absence of raw materials. thus, the question that raises is to what extent the depletion of natural resources will slow economic growth? there are situations where some economies endowed with natural resources have experienced a rapid development pace (the united states); on the other hand, other countries like japan have developed while lacking resources. there are also many economies that have experienced a deterioration of their economic situation, such as venezuela. in this latter case, the specialists in this area talk about a “curse of natural resources”. the term “dutch disease” refers to the curse determined by the discovery of natural resources by a national economy. thus, in 1959, a rich gas field was discovered in the province of groningen, in the northern part of the netherlands, to which other reserves have been added discovered later in the rest of the country and in the north sea. the expression “dutch disease” appeared in the ’70s and refers to the fact that the country's macroeconomic performance is low despite (or even due to) obtaining royalties from energy resources. following the world economic crisis of 1973, because of the oil shock, the performance of the dutch economy deteriorated. in fact, economic growth was slowing down and unemployment was rising. the increase in exports of primary products is associated with a growing trade surplus, which in turn determines an appreciation of the national currency in the real exchange rate. this appreciation of a currency exchange rate acts against the competitiveness of the rest of the national economy sectors, which may, in some circumstances, lead to a deterioration in the macroeconomic performance of the economy. according to the recent theory of economic growth, the interaction of several sources of development plays an important role in achieving economic growth by a national economy. thus, the transformation of capital provided by natural resources into social and human capital to stimulate economic growth implies the presence of some quality institutions and governance. among the many ways to promote the efficiency of economic and social development, one of the finest is the accumulation of human capital through quality education, training and health systems. mailto:rika_ivan2005@yahoo.com mailto:ladarcalin@yahoo.com 2 capital is present in many different aspects and shapes, some tangible and others not, but in all its forms it must gradually accumulate through painful investments that are detrimental to immediate consumption. creating a strong capital base, expressed in a strengthened national wealth, requires many investments based on fair and sustainable decisions made in different areas. it is important to distinguish between two concepts, namely the abundance of natural resources and dependence on these resources. abundance characterizes the amount of natural capital in a country: ores, oil, forests, arable land, etc. dependency means the degree to which a particular country depends on these natural resources to support its economic activities. some countries benefit from abundant natural resources such as australia, canada and the united states, but do not owe their exclusive economic growth to such resources. other countries, which have abundant resources, such as the opec countries, are almost entirely dependent on them. other countries like chad and mali, which have little resources, depend on the revenue from selling exporting these resources because they do not produce anything else. other countries, which have few natural resources, do not depend on them, as is the case with jordan and panama. 2. the economic problems faced by countries rich in natural resources there are several ways of dealing with the management of natural resources that countries rich in such resources may adopt, namely: fiscal policy; monetary, financial and foreign exchange policy, underlining the important role of institutions and governance; the need to diversify their economy to get rid of the excessive dependence on a few resources. in the case of a developing country, abundant resources can be an asset, but it may be difficult to implement an effective fiscal policy. the authorities of the resource-rich countries face several problems, such as: their resources are generally non-renewable but exhaustible (nonsustainable), and exports are influenced by this shortcoming; the prices of exported raw materials are fluctuating and thus the budget income and revenues on which the authorities rely are subject to high fluctuations; countries have a limited capacity to produce long-term income forecasts and to set and implement efficient public investment projects. it is difficult to estimate how long a country's natural resources can bring revenue to the expected level. this estimate may be difficult because new deposits may be discovered, and technical progress may change the market value of natural resources by facilitating extraction or by increasing the quota that can be exploited. however, it is important to estimate the useful life of resources (e.g. more than 30 years) as their exhaustion should be a key parameter for tax policy evolution (siddharth tiwari et al., 2012). although the issue of sustainability is a concern for all countries, adjusting fiscal policy in the absence of resources is a less imminent concern when the depletion of these resources is still far away. the main concern is to manage revenue volatility linked to fluctuations in resource prices on the market. this is the case of saudi arabia and russia, which are countries with immense oil reserves and where the horizon of resource depletion is not foreseeable in the near future. on the other hand, countries such as cameroon and yemen, where oil reserves are limited and therefore have a shorter time horizon, should pay attention to how they will replace the revenue obtained from these resources to finance their public spending at least at the same level as today. the primary purpose of fiscal policy should be to obtain sufficient revenue to minimize revenue fluctuations. when a country' revenues are diminishing, the simplest solution, but also the least effective and damaging to a country's economy, is inflation. another way to prevent a country's income from falling is to levy new taxes and duties, but which reduce the incomes of households and businesses. in the case of the application of customs duties in order to cover the decrease of the incomes of a country, the trade relations can be diminished and, implicitly, there is a medium and long term economic downturn perspective. 3 in the case of direct taxes, employment and goods production are discouraged. sales taxes in particular affect low-income households, which spend most of their income to meet their basic needs and while their savings are little. countries with significant amounts of natural resources could increase their public revenues by increasing taxes on resources exploitation, relying on the argument that it is easier to tax the land than mobile production factors. applying royalties by the public authorities of a country for the permission to manage a stateowned resource is a better solution for obtaining public revenues. these revenues should be used to finance social productivity or to reduce other less efficient sources of income that could be a burden on the shoulders of domestic households or businesses. a sound budget governance requires attention to be paid both to the cost-sharing efficiency and to the mobilization of the revenue needed to finance such costs. managing the fluctuation of natural resource prices must be the core objective of countries where resource depletion is near and which rely on income from these resources. the leaders and decision-makers can adopt rules that take into account the fluctuation of resource prices from one year to the next. these rules set out indicators to determine the maximum limits of annual expenditure by reference to the average income that can be obtained. estimates of structural revenues are based on both a pricing and a production planning formula, taking into account past, current and future prices. pricing patterns vary from one country to another (philip daniel et al., 2013). mongolia, for example, uses a moving average of mineral resource prices over a period of 16 years (the prices of the last twelve years and forecasts for the current year and the next three years). past prices are weighted, thus ensuring the stability of the forecasts, while allowing for the gradual incorporation of future prices. mexico uses a 10 years weighted average of oil prices (with a weight of 25%), short-term contracts (with a 50% share but multiplied by a "prudent factor") and the medium term contract prices (with a weight of 25%). thus, a prudent fiscal policy implies that, when resource revenue is greater than estimated, the surplus has to be saved and not spent (“windfall gains”). similarly, the government can resort to previous financial savings when budget revenues are lower than expected. the budgetary frameworks of norway, east timor and papua new guinea are based on this method, which allows governments to adjust their spending to fluctuations in world commodity prices. in order to keep the budgetary framework under control, there is the solution to put aside resource incomes and to spend only the earnings generated by these economies (so-called annuities). by this method in norway, the state budget increases annually by about 4%, an amount derived from the revenues from oil exploitation. this method has been successful in norway, but it is not necessarily suitable for developing countries that need multi-level development. apart from the annuity method, another development method is the use of oil revenues to build production capacities in other areas, to improve the health and education systems for the benefit of its citizens, that is, human capital. in countries where infrastructure is lacking and human capital needs are high, the rate of return on productive public spending is likely to be much higher than the rate of return on financial assets. if revenues from the exploitation of natural resources are used to implement quality public projects, the latter can support economic growth and can therefore lead to an increase of income other than from natural resources. instead, poorly targeted spending can lead to the loss of the country's wellbeing and the welfare of future generations, thus hindering the country overall development. the efficiency of public investment depends on the ability to select, implement and evaluate projects that is the institutional stakeholders activating within an economy. thus, it is important to have efficient public finance management mechanisms that provide the most accurate forecasts of natural resource revenues, and which can lead to the adequate development of medium-term budgets. these mechanisms must manage cash flows and debt, be transparent in 4 obtaining and using revenue from resources (economic accounting, reporting and control). this process involves indicators to monitor the use of natural resources related wealth. two of these indicators are the investments quota in total public expenditure and the share of public investment relative to income from natural resources. the main priority for a developing country rich in natural resources should be budget transparency and good governance. public authorities have at their disposal different tax instruments and leverage to obtain income from their natural resources, namely: establishment of royalties, levy of specific taxes on the exploitation of natural resources, the participation of the state in the ownership of some national companies established for the exploitation of resources etc. there are various factors within the reach of authorities, which can influence the amount of income from the exploitation of natural resources, such as: the date/timeframe the government wants to collect revenue; the decision to obtain a higher share of income if prices rise; the ability to enforce and manage the taxes, etc. situations may vary from one country to another, but a policy combining charging royalties and a specific tax on high profits (additional to the traditional corporate tax) is advantageous for a developing country. this combination creates the opportunity to receive revenue from the very beginning of operation and to obtain additional public revenue in case of increased profit due to higher prices and/or lower costs. as mentioned above, when revenues from the exploitation of natural resources are higher than estimated than expected, this additional revenue should be saved. these savings could fuel special funds, known as sovereign wealth funds or stabilization funds. these funds must operate in addition to the other taxes and duties and should be integrated into the national budget cycle to allow countries to allocate resources efficiently when they set their priorities for spending. therefore, resource funds should not be invested with independent spending power. countries rich in natural resources can increase their public spending based on increased income from natural resources, provided that such revenue is efficiently and transparently used, and without jeopardising macroeconomic stability. 3. financial, monetary and exchange rates policies the management of natural resources is a challenge for financial and monetary policy. the most important problem is probably the so-called “dutch disease” caused by the discovery of natural gas deposits in the north sea and which has raised concerns about the deindustrialisation of the netherlands. the disturbances created by the overvaluation of the currency as a consequence of the increase in exports of natural resources could lead to the development of an economic sector to the detriment of others. there is also the risk of underdevelopment of high technology sectors and an increase in the share of extractive industries based on low qualification of employees. over-valuation of the exchange rate hit in export-oriented industries and stimulate increasing imports. the “dutch disease” can be determined by a massive flow of foreign direct investment into an economy. in the case of a developing country, the mass influx of foreign capital results in an appreciation or depreciation of the local currency, depending on the use of this new capital to funding or accumulating capital in certain economic sectors. a solution for healthy economic growth is diversification. diversification stimulates economic growth by focusing not only on economic activity linked to primary production, but also on secondary and tertiary production activities, thus facilitating the transfer of labour from lowpaid and low-skilled jobs in agriculture or mining, to better paid jobs which requiring more qualified staff. among the oil-exporting countries that have succeeded in diversifying their economies we mention malaysia, indonesia, chile and the united arab emirates. on the other hand, among the countries that failed to apply diversification there is nigeria, which should be envied in terms of oil resources in comparison with other oil producing countries, being the first oil producer in sub-saharan africa and the fifth opec producer after saudi arabia, 5 venezuela, iran and the united arab emirates. petrodollars account for 83% of federal revenue and over 95% of export earnings (imf, 2015). at present, this country’s economic structure is not diversified and it is largely dependent on the oil sector. venezuela is another country suffering from “dutch disease”, being the country with the largest proven oil reserves in the world. despite the wealth of oil deposits, the country does not have its own refinery and imports its fuel. a 96% of revenue comes from this resource, and more than 70% of consumer goods are imported, mainly food. mixed modern economies rely on a wide range of industries, businesses and services to provide citizens with a steady increase in their living standards. therefore, these economies must find ways to diversify at the expense of dominant agriculture or extractive industries that tend to hinder or delay the development of modern industries and services. another possibility is to invest part of the royalty earned from the extraction of natural resources on the international financial markets. the goal is not to increase too much the demand in the short term through voluntary sterilization, especially if the absorption capacity of the economy is limited even if the need for public investment is high (marie-pierre arzelier, 2016). this accumulation of savings in sovereign wealth funds is a widely used technique by countries such as saudi arabia, norway and kuwait. public authorities need a lot of will to resist the temptation to let the currency appreciate beyond the appropriate level, taking into account the popular political benefits of a strong exchange rate of their currency for households and businesses that depend on imported products. this is a powerful reason for the existence of independent but responsible central banks, protected by law from political pressures. there are oil producing countries that have succeeded in implementing an economic diversification strategy, using the establishment of a free trade area to promote foreign trade activities. an example of this is the experience in the united arab emirates. free trade areas offer many benefits to existing companies, including repatriation of capital and profits; exemption from corporation tax; elimination of customs duties on imported equipment. there are international institutions who have been involved in policy making for resource-rich developing countries i.e. the world bank has adopted a “value-chain approach” for natural resources management (nrm), with the main goal of prescribing an integrated strategy, to set-up feasible policies in order to convert the income from the exploitation of natural resources into results leading to sustainable development. the value chain includes a number of key factors of the nrm, namely: (1) sector organization and the award of contracts and licenses; (2) regulation and monitoring of operations; (3) collection of taxes and royalties; (4) revenue distribution and public investment management; and (5) implementation of a sustainable development policy system (naazneen h. barma et al., 2012). 4. state of play of natural resources management in romania according to a study conducted by deloitte (2018), the average royalty rate in romania in the oil and gas sector reached 17.4% in 2016 and dropped to 13.9% due to the tax on construction, while the average in the european states plummet to 8.8%. higher levels of royalties than in romania were recorded only in the netherlands, austria and hungary. from 2018 in romania, the formula to be used in the calculation of gross natural gas extraction will take into account the average price of the previous month. there are draft laws currently under debate on differentiating the tax regime applicable to onshore and offshore activities. worldwide there are three main types of agreements on the exploitation of hydrocarbon resources, namely: technical agreements, oil production sharing agreements and concession contracts. the conclusion of concession contracts applies in europe, including romania. concessions in romania last for a long time i.e. up to 30 years, with the possibility of extending up to 15 years. the beneficiary of the concession has full rights over oil and gas from the 6 deposits. in the energy sector romania needs a massive level of investment and technological upgrading. for romania, the fastest way to finance the energy sector is to create and maintain a favourable fiscal framework, based on a balanced return on investment and government tax collection. romania has certain strengths amid the change of the petroleum tax regime (mariana papatulică, 2014): the recently discovered offshore reserves at the black sea and the potential reserves of shale gas; the gradual liberalization of the domestic gas price; the presence of institutional framework and legislation adapted to resources management requirements at european level; completing interconnections through pipelines with western europe and neighbouring countries in the near future. romania has some weak points, such as: lack of national capital for investment; lack of consultation in the field of exploitation projects and negotiations conducted in this area; the fact that the tax regime concerning the renegotiation of hydrocarbons is in place at a time when there is no clear information about the actual amount of gas discovered either in the black sea or in the shale deposits. conclusions many developing countries rich in natural resources have failed in the adoption of a diversification policy and remain totally dependent on their extractive industry. on the other hand, other countries such as indonesia, malaysia, and the united arab emirates have managed to escape the trap of having rich natural resource by diversifying the structures of their economies and implementing funds that are key to achieving economic growth and development of these countries. natural resources cannot per se be a curse for the countries they own, and it is only the management policy of these resources and related revenues that can influence positively or negatively their economy. the impact of natural resources varies according to the country’s regulatory bodies and institutional arrangements, the way the capital thus obtained is used, and the adoption of healthy not predatory economic behaviours. references [1] boschini d., pettersson j., roine j. (2003). resource curse or not: a question of appropriability. sse/efi working paper series in economics and finance, no 534. [2] torvik r. (2009). why do some resource-abundant countries succeed while others do not? oxford review of economic policy, volume 25, number 2, 2009, pp.241-256. [3] melhum h., moene k., torvik r. (2005), cursed by resources or institutions? world economy, aug.2005 [4] thorvaldur gylfason (2010) la possession de ressources naturelles est-ellevraiment un privilège? ressources naturelles, finances et développement, banque centrale d’algérie, nov. 2010 [5] siddharth tiwari, carlo cottarelli, olivier blanchard, antoinette m. sayeh, and josé viñals (2012) macroeconomic policy frameworks for resource-rich developing countries—background paper 1, august 24, 2012, imf [6] naazneen h. barma, kai kaiser, tuan minh le, lorena viñuela (2012), rents to riches? the political economy of natural resource–led development, the world bank [7] philip daniel, sanjeev gupta, todd mattina et alex segura-ubiergo (2013), la rente des ressources naturelles, finances & développement septembre 2013, imf [8] mariana papatulică (2014), international petroleum fiscal regimes: trends in tax-royalty worldwide and in romania, institute for world economy of the romanian academy, vol. 2(1), pages 129-140, may 2014. [9] aggab nadia, ait elhadj fatima (2015), ressources naturelles et risque d’un syndrome hollandais : cas de l’économie algérienne, mémoire de master en sciences économiques du université abderrahmane mira de bejaia [10] marie-pierre arzelier (2016), les modèles de syndrome hollandais. analyse et perspectives de recherché, université de lorraine, iae de metz, presses de l’ifpo, 2016 [11] cepa (2016), romania’s energy crossroads. strategic options for improving energy security, march 2016, center for european policy analysis, washington, dc [12] delloite (2018), o imagine de ansamblu asupra redevențelor și impozitelor similare, aprilie 2018 https://www2.deloitte.com/ro https://www2.deloitte.com/ro agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 no. 1 (2023), pp. 83-92 83 economic recovery mechanisms in wartime a. mazaraki, g. duginets anatolii mazaraki¹, ganna duginets² state university of trade and economics, ukraine ¹ orcid.org/ 0000-0003-1817-0510, e-mail: rektor@knute.edu.ua ² orcid.org/0000-0003-3708-3666, e-mail: g.duginets@knute.edu.ua abstract. restoring national competitiveness requires a lot of time, effort, and financial investment, and, in particular, involves a structural sectoral transformation, reorientation, and rethinking of target orientations and levers of the economy. analysis and systematization of the experience gained by other countries that were in a situation similar to the unjustified russian invasion of ukraine on february 24, 2022, working out ways to solve problems will become a road map for recovery after the victory and in the process of rebuilding the country. the purpose of the article is to determine the key economic recovery mechanisms in wartime on the study of similar recovery experience in world system. as a result of the study, the main drivers and levers of economic recovery are determined, which will help to restore the national economy step by step, and alternative methods are proposed, which are based on a combination of the experience of different countries. keywords: economic recovery, main areas of development, post-war recovery experience, economic potential, economic policy. today, the concept of war is more multifaceted than in the past. nowadays, war is not only about an armed conflict between states or a bloc of states, which is limited to crisis processes in the socio-economic systems of the warring parties. in the context of the rapid acceleration of globalization at the end of the twentieth century and the creation of an extremely interdependent system of international relations, an open war between developed economies causes the emergence of a "perfect storm" for the entire world economic system. the situation is further complicated by the fact that russia has launched its full-scale invasion against ukraine when the global economy had not yet recovered from the effects of the coronavirus crisis, especially in the healthcare sector, and the emergence of geopolitical tensions, economic nationalism and populism. this ultimately leads to the realization that global society needs to immediately and promptly find ways to mitigate and overcome the growing crisis. but the problem is, the full consequences of war are best understood only by those societies that experience it themselves. in view of the above, the relevance of this study is confirmed by the importance of highlighting the economic and social consequences of russia's full-scale invasion of ukraine. the theoretical and methodological basis for this study is the scientific work devoted to determining the peculiarities of the restoration of states that have had a similar experience of invasion of their territory by other countries. thus, the work of political scientists and scholars who paid attention to the nature of military conflicts and the search for political mailto:rektor@knute.edu.ua mailto:g.duginets@knute.edu.ua 84 solutions to them (von clausewitz, 2005; yamazawa, 1990); scholars who studied the ways and means of rebuilding countries after armed conflicts and full-out war, studied their background, assessed their consequences and the available resources for reconstruction (see, for example, (barakat & kapisazovic, 2003; tzifakis & tsardanidis, 2006; lemay‐hébert & murshed, 2016). there is also potential for development in analyzing conceptual frameworks and practical cases to understand possible tools for post-war reconstruction (aboushala & haj ismail, 2022) or technological cooperation in the defense industry as a factor of sustainable development (holtström, 2022; callado-muñoz et al., 2022; duginets & nizheiko, 2022). however, while paying tribute to the existing scientific developments of domestic and foreign researchers on this issue, it should be noted that the scientific community has not yet developed a holistic vision of the recovery process and has not assessed its complexity and impact on various sectors of the economy of the whole country. also, the existing modern scientific and practical developments studied by ukrainian scientists since the beginning of the invasion reflect some of the issues in recovery and have not yet been systematically and practically applied (mazaraki & melnyk, 2022; irtyshcheva et al., 2022; zveryakov, 2022; humeniuk, 2022). therefore, the existing global experience of post-war reconstruction requires further in-depth study and systematization for further adaptation in ukraine, which can be successfully used in the post-war recovery of the national economy. the purpose of the article is to study the theoretical and practical developments available in the world science on the formation of strategies for economic recovery of states in the context of war in order to determine the possibility of adapting their experience in the context of ukraine’s economic recovery. to achieve the research goal, the author used a set of complementary methods of scientific knowledge of economic processes and phenomena: historical, logical and systemic-structural methods, comparative and statistical analysis; information, process and institutional methods. the information base of the study includes statistical and analytical materials of the state statistics service of ukraine, the world trade organization, the organization for economic cooperation and development, the world bank group, the international monetary fund, and the official statistics office of the european union; information and analytical collections, bulletins and reviews; factual information of public authorities, domestic and foreign scientific works, results of own research, analytical and information materials from open sources. in addition to the two world wars, more than 350 regional wars and military conflicts took place in the twentieth century. while only 36 regional wars or military conflicts were recorded before the first world war, there were 80 between the world wars, and more than 250 after the second world war: since 1945, more than 12 million military personnel from about 100 countries have participated in military operations, and the number of deaths has exceeded 35 million (10 million in the first world war and 54 million in the second world war) (today’s armed conflicts, n.d.). it should be noted that it was after the second world war that the geneva conventions of 1949 began to use the terms "international armed conflict" (article 2) and "non-international armed conflict" (article 3) along with the term "war" anatolii mazaraki, ganna duginets 85 (ohchr, n.d.). and since the 1950s, the term "armed conflict" has been used more often than the term "war". this substitution is mainly explained by political and ideological considerations, attempts to shift the emphasis in these concepts and the prohibition of war as a means of resolving international disputes. armed conflicts have an impact not only on the national economies of the countries involved, but also on the global economy as a whole. for example, in early 2022, the world bank published its forecasts for global economic growth, predicting 4.1% growth globally and 3.2% in ukraine compared to 2021 (world bank group, 2023). with the beginning of russia's full-scale invasion of ukraine, the world bank's forecasts for global economic growth have been reduced to 2.9% (world bank group, 2022). the data is expected to fluctuate as the war in ukraine started by russia has disrupted investment activity and trade, which is one of the main factors for the formation of a sustainable economy. the drought in europe, covid-19, climate change, and the crisis in global energy markets have also had an additional impact on this forecast. it should be noted that the full-scale armed aggression of the russian federation has disrupted economic relations in the country and caused crises in most areas of socio-economic life. the main problem is the demographic crisis due to the forced migration of the population: the countries of the european union, canada, the united states, the united kingdom, etc. according to the un, more than 18 million people have fled their homes because of russian aggression, which is 42% of ukraine's population. approximately 11 million ukrainians have become internally displaced, some of whom had to leave their homes for the second time. as of october 25, 2022, almost 8 million people have left the territory of ukraine. the majority of them went to the european union and received temporary protection, some reunited with their families or stayed in the eu countries in accordance with the conditions of the schengen zone (unhcr, 2022). speaking about the structure of the population that left the territory of ukraine, it can be classified according to several criteria: age, gender and level of education. in the age structure of refugees, 47% were women, 39% were children, and 14% were men (unhcr, 2023); ukrainians fleeing the war were divided by their gender in the ratio 86/14, 86% were female, 14% were male (unhcr, 2022). this ratio is not surprising, as on february 24, president of ukraine volodymyr zelenskyy signed a decree restricting border crossings to men aged 18 to 60; 46% of refugees had higher education, 29% had completed vocational training courses, and 21% had only a complete secondary education (unhcr,2022). another problem is the destruction of infrastructure. today, the issue of electricity and water supply is relevant, because every day russia launches missile strikes on the country's critical infrastructure. for example, as of october 19, about 40% of ukraine's energy system was seriously damaged. restricting the implementation of international agreements by blocking ports in the black sea. currently, 4 ports in ukraine are temporarily occupied, namely in mariupol, berdiansk, skadovsk, and kherson. as a result of the blockade of ports, a food crisis has begun in the world, which has resulted in a sharp increase in grain prices not only in europe but also in the countries of the african continent and the middle east. for example, in 2020, ukrainian imports to egypt amounted to 3.13%. more specifically, 23.5% and 62.1% of all grain was 86 supplied by ukraine and russia, respectively (wrld bank group, 2023). that is, in general, egypt imported 85.6% of grain from countries that are currently at war. on july 22, the black sea initiative was signed in istanbul, an agreement between the un, ukraine, turkey and russia to establish a corridor to export grain from three ukrainian ports: chornomorsk, odesa, and pivdenne. the agreement was supposed to be in effect for 120 days, i.e. until november 19, with the possibility of extension. on october 29, 2022, russia once again violated international treaties by announcing its withdrawal from the grain deal, after an alleged attack on the black sea fleet in the sevastopol bay. as of the end of 2022, the black sea grain initiative made it possible to export 9,521,645 tons of ukrainian grain and agricultural products to the global market. the primary destinations were the horn of africa, yemen, and afghanistan (world bank group, 2023). loss of jobs, namely 5 million idps lost their jobs, and another 3 million working-age people remain abroad [situation ukraine]. this poses a problem for both the future of ukraine and the current situation for employers in europe. it is worth noting that before the full-scale war, approximately 5% of the population of poland and 2.8% of the population of the czech republic were ukrainians working abroad, i.e. mostly men. today, the share of ukrainians in the population of these countries has doubled. despite the huge amount of potential labor, the governments of the countries faced certain problems, as some male migrants returned to ukraine, freeing up "male" vacancies. a large proportion of people lost their families, jobs, and homes because of the war, meaning that they have to start their lives in a foreign country from scratch (grossi & vakulenko, 2022). the vast majority are women and children of primary and secondary school age. and it is the absence of the latter that poses the greatest threat to the implementation of any recovery strategy for ukraine: the world practice shows that sustainable economic development is based on the accumulation of personalized human capital, which is carried out in a special segment of the education system. therefore, this segment should occupy one of the key places in any version of ukraine's recovery strategy. since russia's recognition of its russian controlled administrations in the donetsk and luhanst regions of ukraine, the european union has been pursuing a sanctions policy that has had a significant impact on the russian economy. to date, the eu has introduced 8 sanction packages, the latest of which was approved on october 6, due to the illegal annexation of four regions of ukraine: donetsk, luhansk, zaporizhzhia and kherson. the eighth sanctions package included the following items: restrictions on imports of steel products, certain types of plastics and chemicals a ban on the use of european crypto wallets european companies are not allowed to provide it and legal services to russians export of civilian weapons, military transport and goods used in the aviation industry to russia is prohibited limiting the price of oil (european commission, 2022). if we highlight the most stringent sanctions against the russian federation that have been imposed over the 9 months of the full-scale invasion, the following items can be included in this list: disconnection from swift of sberbank, moscow credit bank, rosselkhozbank and the belarusian bank for reconstruction and development (6th package of sanctions) anatolii mazaraki, ganna duginets 87 a ban on the purchase, import and transfer of crude oil from russia (6th package of sanctions) partial embargo on oil and gas (4th package of sanctions) a ban on russian ships entering eu ports (5th package of sanctions) blocking of the reserves of the central bank of the russian federation, which are in the banks of the g7 countries, amounting to 50% of all reserves (3rd package of sanctions) it should be noted that the sanctions are taking effect, and, according to the world bank's analysis, russia's gdp will fall by 8.9% by the end of 2022. in turn, the international monetary fund predicts a 6% decline in gdp, and the organization for economic cooperation and development by 5.5% compared to 2021 (european council, 2023). of course, the gdp decline was the result of a decline in trade, as a sustainable positive foreign trade balance is the key to a strong economy. according to the imf forecast, exports from russia will decline by 17.2% and imports by 25.4% by the end of 2022 compared to 2021. (european council, 2023). additionally, the maximum inflation rate is projected to reach 22%, according to the world bank. at the same time, the international monetary fund predicts an increase in the inflation rate by 21.3%, and the organization for economic cooperation and development gives 13.9%. (european council, 2023) ukraine needs to overcome not only the difficult path to victory, which we will definitely do, but also the long road to rebuilding post-war ukraine, as thousands of homes, civilian and critical infrastructure have been destroyed. even now, during the war, we are planning how ukraine will be rebuilt. the first global presentation of the reconstruction project took place on july 4-5 in lugano, switzerland. the plan is designed for 10 years, divided into three stages and includes 15 areas (ukraine recovery plan, n.d.). on october 25, the second conference on ukraine's recovery was held. it was announced that in 2023, ukraine needs at least $38 billion to cover the state budget, and another $17 billion is needed to urgently restore the country's social, energy, and transportation infrastructure. the european union has assured that it will help ukraine to the end, because this is a war not only between russia and ukraine, but also against the entire civilized world (federal government, 2022). meanwhile, to substantiate the strategy of recovery under martial law, it is necessary to analyze the existing world practice the most famous experience of post-war recovery is the so-called post-war economic boom (the golden age of capitalism) that began after the end of the war in 1945 and lasted until the late 1970s. the post-war boom was marked by sustained high economic growth and almost full employment in european and east asian countries, especially in war-torn japan (the japanese economic miracle), west germany (the economic miracle), france (the glorious thirties), italy (the italian economic miracle), and greece (the greek economic miracle). the experience of rapid economic growth during this period is particularly interesting for ukraine, which needs to compensate for the losses from russia's aggression caused by the occupation of crimea, southern and eastern regions, and to quickly and effectively restore the country's economy, including infrastructure destroyed during the war throughout the country. the economy as a whole also needs a new concept of reconstruction that is appropriate to the current situation. among the well-known modern wars are the korean war, the vietnam war, the war in afghanistan, and the war in syria. typical military conflicts include: the cyprus conflict, the 88 georgian-russian crisis, and the armed conflict in eastern ukraine. compared to world wars, regional conflicts are characterized by fewer countries involved, a smaller spatial scale of hostilities, and are usually fought for limited political and military objectives, using traditional military forces and means. in some cases, there is no organized front. most localized wars have been undeclared and began with provocations or border incidents that escalated into large-scale military conflicts. the attacker concentrates his forces and attacks suddenly at the beginning of hostilities, trying to inflict a decisive defeat before the enemy forces complete their deployment and the economy is put on martial law. military conflicts had even more limited political goals and even smaller spatial and temporal scales. these are usually armed uprisings, rebellions, border armed conflicts and incidents. whereas local wars result in a qualitative change in the social condition of the victorious state, military conflicts do not involve a fundamental reorganization of state structures, i.e., mobilization of troops or the transfer of the economy to martial law. in order to end a war and armed conflict as soon as possible, it is necessary to clearly understand the purpose of the conflict. this understanding allows for a compromise acceptable to the parties. the objectives of war were best formulated by b.h. liddell hart in his "strategy of indirect action" (1954) (hart, 2008). he believed that the purpose of war is to create a better world than the one that existed before the war. based on the concept of a "better world", wars can be divided into "just wars", which lead to the development of human society as a whole, and "unjust wars", which lead to its destruction or simplification. countries go to war not for the sake of war itself, but to achieve political goals. therefore, "victory" is a political, not a military concept. military objectives are only a means to a specific political goal, which is determined by the country itself. military actions are only the basis for making a political decision, not for conquest, but for coercion. the goal of wars waged by empires is to control as many resources as possible and reform the "world order" in their interests. from an economic point of view, the difference between war and armed conflict lies in the scale of economic changes and losses. for example, war leads to qualitative changes in the nature of society, as state institutions begin to perform specific functions caused by war. as a result, the life and economy of the society as a whole is rebuilt, which allows it to achieve victory over its enemies. during an armed conflict, political goals are more limited than during a war. it does not involve a radical transformation of the entire state system into a military system. there are significant differences between war and a set of measures to restore the economy after an armed conflict. post-war reconstruction was initially understood as the physical restoration of destroyed industrial enterprises, social facilities and devastated agriculture. then, the concept was gradually deepened: in the 1940s and 1950s, the criterion of recovery was used as the achievement of pre-war gross production in monetary terms. later (1970-1980), reconstruction began to be understood as a complex economic, social, and demographic phenomenon. but in its most general form, economic recovery can be interpreted as a series of measures in various spheres of economic activity based on innovative approaches and technologies aimed at restoring the country's competitiveness, establishing production, improving living standards and increasing domestic and foreign demand. anatolii mazaraki, ganna duginets 89 economic recovery should be based on the development of special programs to "resuscitate" the country's economic activity, and all efforts should be directed to restoring the industrial and agricultural sectors. economic recovery after full-scale military invasion also requires the development of measures necessary to restore and further develop the economy of specific regions, ensure the return of the population and decent living conditions, address various social problems caused by the conflict, restore infrastructure and integrate it with the rest of the country, and develop mechanisms to ensure sources of recovery. first and foremost, recovery is preceded by political decisions based on geopolitical expediency and national patriotism, which determine the development model. based on the results of the analysis of several armed conflicts that took place in the second half of the 20th and early 21st centuries, we can draw conclusions that would allow us to avoid the miscalculations and mistakes of others or to offset them: develop and implement a modern concept of economic restructuring based on innovative development, taking into account the real geopolitical situation. implementation of the strategy for the restoration and development of the east of the country and the return of crimea, developed by domestic scientists and the government. identification of key (priority) development sectors to ensure high competitiveness of goods and services in foreign markets and state support for these sectors. adoption of appropriate legislation on full employment, fair wages, labor productivity and price stability. develop mechanisms for the use and management of borrowed funds. adoption of appropriate legislation to eliminate and prevent excessive concentration of production and capital and to prevent the formation of monopolies. adopt effective economic mechanisms to prevent and combat corruption. developing an effective social policy, i.e. a policy aimed at increasing the income and consumption of the population. create special economic zones and science parks, or recovery areas. for ukraine to rebuild, it is not enough to receive financial support from international investors and partner countries, which is certainly extremely important. first and foremost, the government must rebuild housing for its citizens and put them to work, which will create new jobs and incentives to return to ukraine. in addition, it is crucial to build sustainable institutions that will give international investors confidence in their investments in ukraine. in turn, ukrainians must realize that the state is primarily for and about the people who live in the country, working for the common good and future of the nation. accordingly, on the instructions of the president of ukraine, work has begun on the formation of the funds for the restoration of ukraine in connection with the armed aggression of the russian federation, which will be used to address a number of problems in ukraine depending on their group of specialization (kmu, 2022a). possible sources of financial support for these funds include seized and confiscated assets of the russian federation, international assistance, direct contributions from partner countries, contributions from international organizations, investors, private donors potential strategic investors, ngos, business representatives and citizens, and the state budget of ukraine. in order to strengthen the institutional capacity of the state in implementing the state policy of economic recovery, the national council for the recovery of ukraine from the consequences of war was also established (kmu, 2022b). 90 conclusions in the globalized world of the 21st century, the concepts of national security and economic growth are inseparable, as any armed conflict in a country’s territory sets back its development for years, destroying critical infrastructure, factories, homes and schools, etc. today, the fact of war is felt in most countries of the world, as well-established supply chains are disrupted, which affects prices in countries and, in the worst case, leads to a food crisis. the russian-ukrainian war is the largest milirary conflict in europe since the end of world war ii. identification of the impact of the russian-ukrainian war on the socio-economic situation in the country allows us to determine that the return of people to their homeland should be an extremely important point in the post-war period, since the population of the country is the main resource for further economic development. given that most of the working-age population that left ukraine in search of a safer place to live is already working abroad, this will not be easy. undoubtedly, some will return home through family ties, or men who cannot travel abroad due to restrictions on crossing the border will go to their wives and children when the borders open, further complicating the situation. that is why the government of ukraine should already be developing a clear plan for how people will be returned home. for example, it could be a housing reconstruction program for families whose homes were destroyed by the russian occupiers. if ukrainians are involved in the reconstruction process, it will create new jobs that will be an incentive to return to ukraine. young people who are currently studying at universities will be actively involved in the process of rebuilding ukraine. the country needs specialists who will have a full understanding of how to stimulate the economy to develop, how to build and maintain effective and transparent institutions. that is why further research should analyze the experience of other countries that have been victims of illegal and unjustified military invasions in order to substantiate recommendations for restoring and strengthening the country's economic potential and improving the living standards of ukrainian citizens. in order to substantiate specific consistent tools for ukraine's economic recovery in the long term, further research should include generalization, systematization and comparison of the effectiveness of economic recovery mechanisms in place in the world and domestic practice, development of universal strategic and tactical tools for implementing the chosen strategy, development and evaluation of the predicted/possible results of the model. a key aspect of the elaboration of the strategies is the integration of methods developed by scientists and public services into a single mechanism of functioning to ensure maximum effect of the proposed reforms. 1. aboushala, m., & haj ismail, s. (2022). post-war rural resilience as a development strategy in theory and practice. trc journal of humanitarian action, 1(1), 19-29. https://doi.org/10.55280/trcjha.2022.1.1.0003 2. barakat, s., & kapisazovic, z. (2003). being lokalci: evaluating the impact of international aid agencies on local human resources: the case of post-war sarajevo, bosnia and herzegovina. the european journal of development research, 15, 55-72. https://doi.org/10.55280/trcjha.2022.1.1.0003 anatolii mazaraki, ganna duginets 91 3. callado-muñoz, f. j., fernández-olmos, m., ramírez-alesón, m., & utrero-gonzález, n. (2022). characterisation of technological collaborations and evolution in the spanish defence industry. defence and peace economics, 33(2), 219-238. 4. duginets g., & nizheiko к. (2022). international technical support in ukraine’s postwar reconstruction. ·scientia·fructuosa, 143(3), 36–49. https://doi.org/10.31617/visnik.knute.2022(143)02 5. european commission (2022) ukraine: eu agrees on eighth package of sanctions against russia. url: https://ec.europa.eu/commission/presscorner/detail/en/ip_22_5989 6. european council (2023) infographic impact of sanctions on the russian economy. home consilium. url: https://www.consilium.europa.eu/en/infographics/impact-sanctions-russian-economy/ 7. federal government (2022, october 24) donor platform to help rebuild ukraine. url: https://www.bundesregierung.de/breg-en/news/ukraine-recovery-conference-2129426 8. grossi g., & vakulenko v. (2022). new development: accounting for human-made disasters-comparative analysis of the support to ukraine in times of war, public money & management. https://doi.org/10.1080/09540962.2022.2061694 9. hart, b. l. (2008). strategy: the indirect approach. in strategic studies (pp. 92-95). routledge. 10. holtström, j. (2022). business model innovation under strategic transformation. technology analysis & strategic management, 34(5), 550-562. 11. humeniuk v. (2022). ukrainian economy during the military aggression of the russian federation and in the period of post-war recovery. ekon ukr. 2022 (8): 34–54. https://doi.org/10.15407/economyukr.2022.08.034 12. kmu (2022a). recovery funds of ukraine. url: https://www.kmu.gov.ua/gromadskosti/fondi-vidnovlennya-ukrayini 13. kmu (2022b). about the national council for the recovery of ukraine from the war. url: https://www.kmu.gov.ua/en/national-council-recovery-ukraine-war/about-nationalcouncil-recovery-ukraine-war 14. lemay‐hébert, n., & murshed, s. m. (2016). rentier statebuilding in a post‐conflict economy: the case of kosovo. development and change, 47(3), 517-541. 15. mazaraki а., & melnyk т. (2022). the world economy: the challenges of the russianukrainian war. ·scientia·fructuosa, 143(3), 4–35. https://doi.org/10.31617/visnik.knute.2022(143)01 16. ohchr. (n.d.). geneva convention relative to the protection of civilian persons in time of war (2nd part) url: https://www.ohchr.org/en/instruments-mechanisms/instruments/geneva-convention-relative-protection-civilian-persons-timewar#:~:text=in%20all%20circumstances.-article%202,recognized%20by%20one%20of%20them. 17. irtyshcheva, i., kramarenko, i., & sirenko, i. (2022). the economy of war and postwar economic development: world and ukrainian realities. baltic journal of economic studies, 8(2), 78-82. https://doi.org/10.30525/2256-0742/2022-8-2-78-82 18. today’s armed conflicts. (n.d.). url: https://geneva-academy.ch/galleries/today-sarmed-conflicts https://doi.org/10.31617/visnik.knute.2022(143)02 https://ec.europa.eu/commission/presscorner/detail/en/ip_22_5989 https://www.consilium.europa.eu/en/infographics/impact-sanctions-russian-economy/ https://www.consilium.europa.eu/en/infographics/impact-sanctions-russian-economy/ https://www.bundesregierung.de/breg-en/news/ukraine-recovery-conference-2129426 https://doi.org/10.1080/09540962.2022.2061694 https://doi.org/10.15407/economyukr.2022.08.034 https://www.kmu.gov.ua/gromadskosti/fondi-vidnovlennya-ukrayini https://www.kmu.gov.ua/gromadskosti/fondi-vidnovlennya-ukrayini https://www.kmu.gov.ua/en/national-council-recovery-ukraine-war/about-national-council-recovery-ukraine-war https://www.kmu.gov.ua/en/national-council-recovery-ukraine-war/about-national-council-recovery-ukraine-war https://doi.org/10.31617/visnik.knute.2022(143)01 https://www.ohchr.org/en/instruments-mechanisms/instruments/geneva-convention-relative-protection-civilian-persons-time-war#:~:text=in%20all%20circumstances.-article%202,recognized%20by%20one%20of%20them https://www.ohchr.org/en/instruments-mechanisms/instruments/geneva-convention-relative-protection-civilian-persons-time-war#:~:text=in%20all%20circumstances.-article%202,recognized%20by%20one%20of%20them https://www.ohchr.org/en/instruments-mechanisms/instruments/geneva-convention-relative-protection-civilian-persons-time-war#:~:text=in%20all%20circumstances.-article%202,recognized%20by%20one%20of%20them https://www.ohchr.org/en/instruments-mechanisms/instruments/geneva-convention-relative-protection-civilian-persons-time-war#:~:text=in%20all%20circumstances.-article%202,recognized%20by%20one%20of%20them https://doi.org/10.30525/2256-0742/2022-8-2-78-82 https://geneva-academy.ch/galleries/today-s-armed-conflicts https://geneva-academy.ch/galleries/today-s-armed-conflicts 92 19. tzifakis, n., & tsardanidis, c. (2006). economic reconstruction of bosnia and herzegovina: the lost decade. ethnopolitics, 5(1), 67-84. 20. ukraine recovery plan. (n.d.). url: https://recovery.gov.ua/en 21. unhcr (2022) ukraine situation: recalibration regional refugee response plan. global focus. url: https://reporting.unhcr.org/document/3472 22. unhcr (2023) situation ukraine refugee situation. unhcr. url: https://data.unhcr.org/en/situations/ukraine 23. von clausewitz, c. (2005). on the nature of war. penguin uk. 24. world bank group (2022). global economic prospects june 2022. world bank. url: https://www.worldbank.org/uk/news/press-release/2022/06/07/stagflationrisk-rises-amidsharp-slowdown-in-growth-energy-markets 25. world bank group (2023). global growth to slow through 2023, adding to risk of ‘hard landing’ in developing economies. world bank url: https://www.worldbank.org/en/news/press-release/2022/01/11/global-recoveryeconomics-debt-commodity-inequality?cid=ecr_tt_worldbank_en_ext 26. yamazawa, i. (1990). economic development and international trade: the japanese model. url: https://scholarspace.manoa.hawaii.edu/server/api/core/bitstreams/e56304a8-bba0-489c-9973-a98668890d73/content 27. zveryakov m. (2022). ukrainian economy during the military aggression of the russian federation and in the period of post-war recovery. ekon ukr. 2 (8): 3–19 https://doi.org/10.15407/economyukr.2022.08.003 https://recovery.gov.ua/en http://www.worldbank.org/uk/news/press-release/2022/06/07/stagflationhttp://www.worldbank.org/en/news/press-release/2022/01/11/global-recoveryhttps://scholarspace.manoa.hawaii.edu/server/api/core/bitstreams/e56304a8-bba0-489c-9973-a98668890d73/content https://scholarspace.manoa.hawaii.edu/server/api/core/bitstreams/e56304a8-bba0-489c-9973-a98668890d73/content https://doi.org/10.15407/economyukr.2022.08.003 agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 no. 1 (2023), pp. 56-69 56 towards sustainable event planning: current state of play, best practices, and challenges creating sustainable events n. lazar nuša lazar ljubljana school of business, slovenia https://orcid.org/0000-0002-5898-4968 e-mail: nusa.lazar@dekorina.si abstract. the topic of sustainability has gained widespread acceptance in many areas of society, with significant claims for the benefits of adopting the principles of sustainability in business and management. according to the united nations, a sustainable event is one designed and organized to meet two main objectives: to minimize all potential negative impacts on the environment and leave a beneficial legacy for the host community and all involved. in the last few years, the concept of sustainable event planning has been incorporated also into the event industry, turning the attention of event management to issues of environment, social, and governance (esg) as well as diversity, equity, and inclusion (dei). the author will elaborate on the current state of sustainable event planning, outline some best practices in this sector, and deriving from the results of different studies make recommendations as to how the industry can and should make sustainability core to activities in event management. keywords: sustainable events, event management, sustainable event planning, events industry introduction sustainable, ecological, green, eco-friendly, etc. are terms used in our everyday lives, practically on a daily basis. these terms are all synonyms of each other. sustainability is often referred to as “sustainable development” (ec, 2022), which means meeting our own needs without compromising the ability of future generations to meet their own needs. it includes three pillars: economic, environmental, and social. sustainability more in detail implies a link towards environmental impacts; in other words, the consumption of natural resources and the deliberation of pollution and energy use, the concern of economic themes of growth and durability, additionally connected to social inclusion and distribution of wealth (musgrave and raj, 2009). to achieve sustainability, the following contemporaneous achievements are necessary (holmes et al., 2015):  environmental sustainability refers to the conservation and responsible management of natural resources (primarily non-renewable as well as vital for the maintenance of life, such as air, water, and land) where it is important to minimize pollution and protect the environment.  economic sustainability refers to creating prosperity at different levels of society, through the long-term sustainability of enterprises and other related economic activities. https://orcid.org/0000-0002-5898-4968 mailto:nusa.lazar@dekorina.si nuša lazar 57  social sustainability implies an equitable distribution of benefits, as well as respecting human rights and maintaining and strengthening local communities. the term sustainability is used in the media, by consumers and companies, in politics, etc. sustainability has gained a lot of interest among people and even earned the title of “megatrend” of our time (mittelstaedt et al., 2014). since sustainability is present in all aspects of life, sustainability has also found its way to the event industry. sustainability for events means acting towards preserving our natural environment, as well as promoting a healthy, inclusive society and in addition supporting a thriving economy. according to the united nations (unep, 2012), a sustainable event is one designed and organized to meet two main objectives: to minimize all potential negative impacts on the environment and leave a beneficial legacy for the host community and all involved. in 2015, world leaders agreed on agenda 2030, which includes a set of 17 sustainable development goals and 169 targets proposed by the united nations (ec, 2022). based on these 17 sustainable development goals also four principles of event sustainability were designed by eventcouncil (2022):  event organizers and suppliers share responsibility for implementing and communicating sustainable practices to their stakeholders.  environmental practices include the conservation of resources (including water, energy, and natural resources), waste management, carbon emissions reduction and management, supply chain management and responsible purchasing, and biodiversity preservation.  social considerations include universal human rights, community impacts, labor practices, respect for culture, safety and security, and health and well-being.  economic practices are included through collaboration and partnerships, local support (including small and medium enterprises), stakeholder participation, equitable economic impact, transparency, and responsible governance. as mentioned, the principles for sustainable events address all 17 of the united nations sustainable development goals, where the connection to each of the goals to the mentioned principles is shown in figure 1 below. figure 1. the principles for sustainable events addressing the united nations sustainable development goals. environmental practice social practice economic practice source: adapted from eventscouncil, 2022. towards sustainable event planning: current state of play, best practices, and challenges creating sustainable events 58 i. the development of sustainable event management theories events can model examples of a harmonious balance between human activity, resource use, and environmental impact, instead of being seen as hedonistic, resource-gulping, and garbage-producing happenings. events have the power to leave a lasting and positive legacy and social outcomes, by inspiring supply chain and attendees to action (jones, 2018). the concepts of sustainability in the event sector are not new, but in recent years more and more attention has been paid to it, and research, analysis, and comparative studies are often carried out and presented to the public. as musgrave and raj (2009) state, sustainable event management has evolved over several years. it is not just a concept born out of government strategies or academic posturing. for example, in february 1994, lillehammer, norway presented the first so-called green games in the history of the olympics. the sustainable exhibition industry project (sexi) was set in 2002 in the uk to reduce waste as a first step towards sustainable development within the exhibitions sector of events. it has led to a commitment to action and the adoption of new standards and practices that drive waste out of the exhibition industry in the future (sexi, 2002). applying the notions of sustainability in the event sector is a necessity for a responsible events profession operating within the 21st century (musgrave and raj, 2009). hediger (2000) proposes that a component of sustainable principles is to induce cultural change within society, and thus within the events sector. in connection with this thought, foley, mcgillivray, and mcpherson (2009) state that events must be used to engage and empower community groups to contribute to community building long after the event itself has moved on. looking at the wider picture, practitioners and supporters of sustainable practice are aware of the need to pay attention to the triple bottom line of economy, society, and environment, but in practice, this is a difficult balancing act (griffin 2009). smith-christensen (2009) argues that the concept of sustainable events does not necessarily indicate a clear reference to the management of an event or its ability to contribute to sustainable development. that is why she proposed different definitions of this concept. here are 2 most often applied (smith-christensen, 2009): 1. “sustainable events are events managed as an autonomous cyclical process through the interaction between event management, host community, and event-goers, providing human resources, infrastructure, and funds.” 2. “sustainable events: events efficiently utilizing available resources (human resources, infrastructure, and funds), thereby being self-sustaining without, or, in the case of externalities, with a minimum of, public sector support.” also addressing the topic of culture to sustainable development is relevant to the event industry, as mair and smith (2021) view, since events play a crucial role in cultural activity, not only encouraging cultural development, but visibilising cultural forms and enabling a wider range of people to participate. as such, cultural festivals and cultural events are regarded as ways of making places more inclusive. i.1. benefits of sustainable events managing sustainable events not only reduce their environmental impact but can also benefit the main actors involved. concrete benefits are (ec, 2018; meetinghand, 2016): 1. environmental benefits and financial savings by saving energy, going paperless, and cutting down on unnecessary resources, you nuša lazar 59 can cut down on unnecessary expenditures simply consuming less can eventually save money and reap environmental benefits. one example is online events, which help to reduce carbon emissions as it reduces the need for participants to travel and additionally save costs as you do not have to spend on venue rental. applying sustainability principles will in the long term reduce costs (e.g. less printed material, less waste to be collected) and, most importantly, help reduce our collective carbon/climate footprint. on the other hand, increasing demand for more sustainable products can bring down prices and stimulate the market for more sustainability. 2. reputation and public image organizing a sustainable event, it will help to raise awareness about this issue to the audience. you can encourage the target audience to make decisions that will be beneficial to the environment and society since conference participants and the public are becoming increasingly aware of environmental issues. 3. multiplier effect and triggering innovation organizing sustainable events can inspire others to follow and further promote innovative green techniques and serving seasonal (and/or organic) food and drinks. with sustainable events, you drive the demand. requesting more sustainable products will trigger as well as promote the development of innovative technologies and techniques, leading to more efficient use of resources and the improvement of the delegate experience. 4. social benefits an event can provide benefits to the region by creating jobs, encouraging local investment, involving regional small and medium enterprises (smes), and can promote better working conditions and social inclusion as well as having a huge impact on tourism. it can also act as a catalyst for encouraging environmental and sustainable best practices across the region. festa, metallo, and cuomo (2009) state, that there is a close link between events, brand image, and reputation, in an interdependent vision of reciprocal influence. this means that the modality of event proceedings has a significant influence on the participating brand image and, on corporate reputation. but this also works the opposite way: corporate reputation and brand image can determine the value of the event and its sustainability. i.2. the current state of play in their paper already in 2009, musgrave and raj presented some sustainable event guides and principles, like defra sustainable events guide, sexi: the sustainable exhibition industry project, hannover principles, uk sport, the sustainable music festival – a strategic guide. based on an analysis of existing models and other sustainable guides, musgrave and raj presented a framework below that introduces the fundamentals of sustainability, coherence, and integration within the events industry. by their definition, a sustainable event policy must respect all ten elements of the framework as stated below: 1. organizational structure (defining roles and procedures that foster positive attitude). 2. design for duality (new technologies and search for innovative approaches). 3. avoidance (plan to reduce damage to surrounding ecological systems, disruption to surrounding communities, and economic disparity). 4. engagement (create local partnerships and alliances, increase participation and access towards sustainable event planning: current state of play, best practices, and challenges creating sustainable events 60 for all). 5. no trace (elimination of waste, reduction of energy consumption). 6. legacy, longevity, and transparency (measure, evaluate and inform all stakeholders of performance and future investment). 7. incentivize (strategic alliances to offer savings for compliance towards sustainability principles from all stakeholders). 8. strategic management (creating critical path and value chain analysis). 9. education (educating participants, suppliers, employees, and the surrounding community about the purpose and principles of sustainability). 10. location, location, location (deciding on a venue that provides accessibility, convenience, flexibility, and/or compliance with sustainability principles). based on the dit-achiev model (which is an environmentally integrated destination management model) griffin (2009) proposed that it could be employed in an event's context. herby, the major issue confronting the selection of indicators is the poor availability of many data sets. however, the model with its content can be used as a guideline or framework, which event managers have to consider while managing sustainable events. figure 2. the dit-achiev model is employed in an event context. source: griffin (2009). by jones (2018) the key operational areas an event focuses on when identifying its sustainability issues are:  site and/or venue  local environmental impacts  supply chain  waste  energy  transport  water and sanitation nuša lazar 61  workforce conditions  engagement and communications it is important to incorporate these issues in the event management phases (initiation, planning, execution, monitoring, and closure). jones (2018) introduces a practical, step-by-step guide covering all the key aspects of how to identify, evaluate and manage event sustainability issues. also, different event management companies, leading event managers as well as event organizers give advice on their websites and blog posts about how successfully manage or more specifically how to plan a sustainable event. all the above-mentioned academics and scholars, as well as experts from the event industry, cover the topic by giving guidelines and explaining the concept, which results in the multiplier effect and inspires others to learn and follow this in the execution of innovative, sustainable events. even the united nations published sustainable events guide with the aim of enabling others to adopt its good practices. the guide includes information on how to keep large-scale meetings as green as they can be and is a great tool for those responsible for the planning and conduct of large-scale conferences and other events (unep, 2012). in 2018 the eu commission published guidelines on organizing sustainable meetings and events at the commission to offer advice to ec staff on how to organize more sustainable meetings and events and seek to reduce the environmental impact. the purpose of the guidelines is to maximize the positive environmental impacts and minimize the potential negative ones while planning and delivering meetings and events (ec, 2018). the following steps and actions can be summarized according to the mentioned guidelines:  step 0: is a physical event necessary? it is important to reconsider if we need to hold a physical event or if can it be organized online.  step 1: is the venue sustainable enough? the decision of a venue should be considered factors like easy access by public transport, bike, or walking, as well as the availability of secure bike parking facilities; the energy efficiency of the building, and the waste collection/recycling systems.  step 2: is the printed and promotional material sustainable? we should consider using online promotional tools (e.g. online registration, online communication material, and resources, apps). also, the printed promotional material should be limited (e.g. eco-friendly design & printing) and it is important to avoid or limit the distribution of promotional gadgets and gifts.  step 3: are the 3rs applied? (reduce, recycle, and reuse) this includes minimizing waste (e.g. reducing printed material and gadgets, packaging, single-use items, and food waste) as well as recycling waste via an appropriate system of waste sorting, collection, and recycling.  step 4: is the catering sustainable? while planning the catering it is important to choose seasonal (and/or organic) food and drinks, to offer a larger choice of plant-based food options, and most importantly prevent food waste. also, avoiding single-use items is important (e.g. towards sustainable event planning: current state of play, best practices, and challenges creating sustainable events 62 use reusable cutlery and crockery, drinking water in jugs).  step 5: are the accommodation and transport environmentally friendly? when planning the event and inviting participants, it is crucial to think also about the accommodation and recommend accommodation close to the venue and easily accessible by public transport, walking, and cycling. for the participants also the information on sustainable commuting should be provided (e.g. maps, timetables).  step 6: have social aspects been considered? while organizing and sustainable event the organizer should require companies to apply eco-friendly procedures when performing the contract or to employ staff in a socially conscious manner.  step 7: are you sharing environmental awareness? it is important to communicate the sustainability of your event (e.g. involve participants and stakeholders, follow-up communication should emphasize the positive, sustainable effects of your event). following these simple steps, or better said “the checklist”, can significantly contribute to improving the environmental performance and deliver significant benefits of an event. in the following chapter, we will present some examples of sustainable event management and events considering all or some of the above-mentioned steps toward managing a sustainable event. ii. methodology throughout the first chapters of the article, we looked at the development of the sustainable event management theory, to the benefits of sustainable events and discussed the current state of sustainable event management and planning. these are all references prior to our research in the field and show how academics and event industry experts situated the methodology in established practices, mostly with case study research, record keeping, and qualitative observations. in this chapter, we discuss the qualitative research of our article, involving collecting non-numerical data, observations, and case study research. based on the beforementioned content analysis and thematic analysis of the field of sustainable event management, we analyzed several different events with the note "sustainable or green" which are described and presented online (enhancentertainment., n.d., city of melbourne, n.d., event academy, 2018, the adriatic, 2022) and based on the expert experience as well as firsthand experience of the author, who is also working in the field of event management and attended as well as organized several sustainable events. together we looked at 22 different events, which have an emphasis on sustainability, and used the methodology of sustainability in event management in practice. based on that we decided to present the following 5 events (describing the preparation of samples for analysis): 1. we chose the example of the world-famous event expo 2020 dubai, which was organized in a middle eastern country where there is not so much emphasis on sustainable development and sustainable event management to show that even where there is not much interest in this topic, one can achieve excellent, top-notch performance results. the event itself was promoted as sustainable and is one of the largest events in the world (both in terms of the number of visitors, the size of the venue, and the duration). also, the author attended the event and has firsthand experience. nuša lazar 63 2. presentation of excellent practices of sustainable event management in the case of an international sports event was chosen (example of wimbledon) to demonstrate in a practical example, the possibility of applying sustainable principles not only in events at the european, or governmental level, supported by eu funds but also at a commercially, international, large sports event, such as wimbledon is. 3. urbact city festival 2022 is an event that the author attended and was able to observe and research first-hand. at the same time, this event is organized under the auspices of the eu, which in its long-term goals emphasizes sustainable development and circular economy. as already presented, the eu commission has its guidelines for organizing sustainable events and meetings and the mentioned event is so suitable for analyses, examining if the eu is “leading by example” in the field of sustainable event management. 4. if we hierarchically move from the european level to the national or the local level, specifically to the level of municipalities, it is important to show an example of sustainable event management also at that level. we can encourage the sustainable management and planning of events at the municipal level with examples of sustainable public procurement for purchasing materials for events (such as the example of the municipality the haag). 5. the fact that even small business entities and institutions can work sustainable and manage and organize events in such a manner is demonstrated by the example of the event the local street food festival 2023 in maribor, organized by the regional development agency for podravje maribor (rra podravje maribor), which organized a sustainable event at the local level, in a small town (maribor, slovenia) and was extremely successful doing it. again, the author attended the event and has firsthand experience. iii. results best practices of sustainable event management in this chapter, we will look at some examples of events that integrate sustainability concepts and strategies to save the planet. iii.1. expo 2020 dubai expo 2020’s delivered one of the most sustainable world expos in history align with national and international drivers. the key sustainable objectives of the event were: (1) leaving a legacy of sustainable infrastructure and future-oriented sustainable practices, (2) catalyzing sustainability efforts in dubai and the uae, (3) increasing public awareness by engaging society on sustainability principles and sustainable living, (4) developing sustainability solutions that are scalable, extending their benefits to the wider economy. below are listed all the activities that the organizes run that lead to a great organized sustainable event (expo 2020 dubai, 2020):  encourage the use of sustainable, low-carbon transport by providing alternative transport options, i.e. dubai metro and the expo rider bus service.  ensure efficient energy use and sustainable energy production across expo 2020 by applying (1) passive design solutions and appropriate “active” industry-standard solutions and (2) innovative technological solutions and renewable energy systems. towards sustainable event planning: current state of play, best practices, and challenges creating sustainable events 64  with respect to the public realm people-centric, comfortable, and walkable spaces (with shading).  enhance the ecological value of the site, protecting and promoting biodiversity and local species.  reduce the demand for potable water systems by applying a water efficiency hierarchy, followed by the substitution of potable water with non-potable supplies (for example recycled water was used for 100% of non-potable applications (e.g. irrigation, cooling); 95% of condensate water recovered from buildings was collected and reused).  expo 2020 dubai’s sustainable materials guidelines and the rise guidelines for sustainable operations provide guidance on the selection of appropriate materials.  minimize the amount of waste produced throughout all stages of design, construction, and operation; minimize the amount of waste that goes to landfill by incorporating a circular economy approach; reduce the use of single-use products and packaging; and plan for a sustainable legacy transition.  demonstrate global leadership, innovation, environmental stewardship, and social responsibility by achieving high levels of third-party green building and site certification.  communicate sustainability progress and achievements in a transparent and stakeholder-responsive way.  ensure carbon emissions at expo 2020 are accurately measured and minimized, with unavoidable emissions managed in a responsible manner through appropriate offsetting programs. expo is an excellent example of how versatile, detailed, and careful event management and the integration of sustainability concepts lead to an excellent implementation of a sustainable event, which is considered an example of good practice and a learning example for future similar events. iii.2. wimbledon wimbledon is the oldest tennis tournament in the world and is widely regarded as the most prestigious. wimbledon is a signatory to the un sport for climate action framework and works alongside the un, sport, and our partners in achieving positive environmental impacts. they are ensuring positive impacts by pursuing the set goals (wimbledon, 2023):  reducing emissions from our operations to “net zero” by 2030. they are buying renewable electricity to power operations, measure, and report operational emissions, have embarked on a program of lighting upgrades installing high efficiency led lights around the estate, use electric lawnmowers and horticulture equipment around the grounds, have 20 electric ipace vehicles in the vehicle fleet during the championships, … these are just a few of the measures they made.  being a resource-efficient organization by 2030. following this goal, none of day-to-day business or championships waste goes to landfill, recyclable materials are separated from general waste which generates nuša lazar 65 electricity for the national grid, food waste is collected for anaerobic digestion producing high-quality fertilizer for agriculture and horticulture purposes, … these are only a few of the activities done in that segment.  contributing to a “net gain” in biodiversity by 2030. this is accomplished through different tasks, like prioritizing planting and horticulture across the site, showcasing “heritage” varieties in the food and drink offering, and donating plants to local community groups, … etc.  using influence to inspire wider action. wimbledon is using its influence to reach beyond its boundaries through partnership, leadership, and collaboration with other major events and bodies in the sports industry and beyond. wimbledon is committed to playing its part in embracing the opportunities for regeneration and innovation, together with its partners, players, members, guests, and fans. this sports event is a great model for other sports events on how to successfully manage a sustainable sports event. iii.3. urbact city festival 2022 urbact promotes integrated development to support cities implement horizontal and vertical policy integration. inspired by european cities’ actions for climate and sustainable integrated urban development, the festival in 2022 was the first carbon-neutral urbact program-level event. the mentioned event was in a live format from 14 to 16 june 2022 in pantin / greater paris, under the label of the french presidency in the council of the european union. in practice, the city festival’s carbon-neutral approach involved (urbact, 2022):  decision on an eco-friendly venue powered by renewable energy (la cité fertile), with recycling bins and composting systems.  serving vegetarian and vegan dishes made from fresh, local, and seasonal produce, dishes from fresh and seasonal products. there was a great collaboration with catering companies with a sustainable approach as well as using non-disposable plates and encouraging all the participants to bring personal lunchboxes (if possible). preventing significant food surplus and offering the possibility of composting meal leftovers. also offering tap water throughout the event and reusable cups.  proposing a list of more eco-responsible accommodations in the area for the participants of the event.  working with suppliers who are committed to sustainability.  reusing existing furniture and materials for venue branding.  using primarily digital communication (mobile festival website). there were no prints or goodies at the festival.  encouraging the participants to choose more sustainable means of travel to the festival, and during the festival use public transportation and rent bikes.  a carbon simulator was prepared. the goal was to collect data from the different carbon emission categories to enable the calculation of the whole carbon footprint of the urbact city festival 2022 and to assess the impact and know which number of emissions needed to compensate for. towards sustainable event planning: current state of play, best practices, and challenges creating sustainable events 66 the events sector contributes significantly to carbon emissions and has a responsibility to address that and contribute to the climate neutrality goals. all the different components of event preparation and delivery (from catering, accommodation, venue, and participant travel, to transport of goods and waste) account for hundreds or even thousands of tons of carbon emissions over a short period of time. that is why the urbact city festival 2022 is a great example of how a large event, with more than 450 participants, can make a great impact on reducing carbon emissions if well managed from the point of sustainable event management. iii.4. purchasing materials for events in a sustainable way by the municipality of hague the city of the hague, netherlands is working towards becoming a climate-neutral municipality by 2030. in compliance with its policies, the city imposed sustainability requirements in the purchase of materials for events and related services as part of the tenders the municipality is having for materials for events. in practice this means tenderers had to describe their role in achieving sustainability and innovation, covering at least the topics listed below (gpp good practice, 2022):  the choice of materials and products when purchasing new materials.  emission-free transport.  handling of the materials at the end of the depreciation period.  materials used for disposable items.  how the tenderer would ensure a sustainable and innovative approach to the implementation of the contract. the most difficult part of the procurement process based on the city’s experience was verifying bidders’ claims about social and environmental criteria. they put emphasis on the hard evidence rather than on what tenderers would plan to do (requirement to show experience and to illustrate what they did in previous contracts). this is also a good example and a suitable basis for other cities when following the hague's lead in imposing sustainability requirements in the purchase of materials for events. iii.5. the local street food festival 2023 in maribor the local street food festival 2023 in maribor, slovenia took place under the framework of the european food wave project, which aims to improve the quality of life for the world's population through circular economy projects and addresses the issue of economic sustainability. the festival connected local food producers and culinary lovers. sustainability concepts were achieved through the following aspects (rra podravje maribor, 2023):  the food was prepared exclusively from locally grown food and products.  a huge emphasis was on reducing waste: deposit for glasses and only glass materials for glasses were used, as well as reducing food waste due to real-time food preparation (according to the needs and the demand of the participants of the event).  eco-friendly materials were used: paper and wood utensils (spoons, forks, plates).  also, the reduce on-site water use was addressed: together with maribor water supply company water dispensers were put on the event location. the event also had a social aspect: upon entering the local street festival, visitors purchased coupons at a symbolic price, with which they then paid for prepared food and drinks. nuša lazar 67 this was donated to the zveza prijateljev mladine (the friends of youth association) for the education of children from socially disadvantaged families. this event shows that even small, local events can fulfill the sustainability in event management through environmental sustainability, economic sustainability, and social sustainability. discussion and conclusion sustainability as a mega trend occurs also in the event industry. organizations that hold or manage meetings, or different events (from conferences, business meetings, concerts, fairs, to any other large get-together) need to consider the impact these events have on the environment, society, and economy and have to be using an effective sustainable event management strategy. sustainable events not only reduce their environmental impact but can also have some benefits, like (1) environmental benefits and financial savings, since saving energy, going paperless, and cutting down on unnecessary resources can cut down on unnecessary expenditures; (2) positive impact on reputation and public image, since conference participants and the public are becoming increasingly aware of environmental issues; (3) multiplier effect as well as triggering innovation, from promoting the development of innovative technologies and techniques, leading to more efficient use of resources and inspiring others to follow and further promote innovative green techniques and serving seasonal food and drinks; not to forget are also (4) social benefits, since sustainable event management promotes better working conditions and social inclusion; additionally (5) modality of event proceedings has a significant influence on the participating brand image and, on corporate reputation. sustainable concepts and issues should be incorporated in all event management phases (from initiation, planning, execution, monitoring, and closure). there are several step-by-step guides covering all the key aspects of how to identify, evaluate and manage event sustainability issues. it starts with the simple question "is a physical event even necessary", since we need first to consider, whether should we need to hold a physical event or can it be organized online. while managing a sustainable event furthermore we need to think about the venue (from the energy efficiency of the building to accessibility by public transport, bike, or walking distance) and if the printed and promotional material is sustainable (including eco-friendly criteria) or if can we use online promotional tools. while managing a sustainable event all the time we have to ask ourselves are the 3r applied (reduce, recycle, reuse). moreover, the catering has to be sustainable (from locally grown and plant-based food options to preventing food waste). furthermore, the accommodation options need to be close to the venue and easily accessible by public transport, walking, or cycling. in managing sustainable events social aspects need to be considered (from eco-friendly procedures applied by employed companies and employing staff in a socially-conscious manner) as well as sharing and rising environmental awareness. with the paper we want to advance the understanding of sustainable event management, the way events research has advanced with this specific topic. it is important to think about how events contribute to sustainable development, rather than thinking about how to make individual events less damaging to the environment. we presented also examples of sustainable events (some good practices: from very big events like the expo to small local events). however, there is some empirical and data research missing in this field as well as the challenge of measuring the sustainability of an event, which is a good starting point for further research. towards sustainable event planning: current state of play, best practices, and challenges creating sustainable events 68 references 1. city of melbourne. (n.d.). sustainable event case studies. retrieved on 06.05.2023 at https://www.melbourne.vic.gov.au/business/sustainable-business/sustainable-eventguide/pages/sustainable-event-case-studies.aspx 2. enhancentertainment. (n.d.). sustainability in action: 6 of the world’s most sustainable events. retrieved on 06.05.2023 at https://enhancentertainment.com.au/blog/sustainability-in-action-6-of-the-worlds-mostsustainable-events/ 3. european commission (ec). directorate-general. human resources and security. (2018). guidelines on organising sustainable meetings and events at the commission. brussels: ec. retrieved on 28.04.2023 at https://ec.europa.eu/environment/emas/pdf/other/ec_guide_sustainable_meetings_and_ events.pdf 4. european commission (ec). (2022). sustainable development. retrieved on 14.04.2023 at https://policy.trade.ec.europa.eu/development-and-sustainability/sustainabledevelopment_en 5. event academy. (2018). the world’s most eco-friendly events. retrieved on 06.05.2023 at https://eventacademy.com/events/the-worlds-most-eco-friendly-events/ 6. eventscouncil. (2022). principles for sustainable events. retrieved on 14.04.2023 at https://www.eventscouncil.org/sustainability/sustainability-pledge 7. expo 2020 dubai. (2020). expo 2020 dubai: sustainability report 2020 (connecting minds, creating the future). retrieved on 10.05.2023 at https://www.expo2020dubai.com//media/expo2020/sustainability/expo-designed-report-digital-version-v12.pdf 8. festa, g., metallo, g. and cuomo, m.t. (2009). financial feasibility of sustainable events. in r. raj and j. musgrave (eds.), event management and sustainability (p. 249257). oxfordshire: cab international. 9. foley, m., mcgillivray, d. and mcpherson, g. (2009). policy, politics and sustainable events. in r. raj and j. musgrave (eds.), event management and sustainability (p. 1320). oxfordshire: cab international. 10. gpp good practice. (2022). purchasing materials for events in a sustainable way municipality of the hague, the netherlands. retrieved on 10.05.2023 at https://ec.europa.eu/environment/gpp/pdf/news_alert/issue112newsalertcasestudythe hague_1544664397.pdf 11. griffin. k.a. (2009). indicators and tools for sustainable event management. in r. raj and j. musgrave (eds.), event management and sustainability (p. 43-55). oxfordshire: cab international. 12. hediger, w. (2000). sustainable development and social welfare. ecological economics, 32(3) (p. 481–492). 13. holmes, k., hughes, m., mair, j., carlsen, j. (2015). events and sustainability. london: routledge. retrieved on 13.04.2023 at https://www.book2look.com/embed/9781317800262 14. jones, m. (2018). sustainable event management: a practical guide. london: routledge. 15. mair, j. and smith, a. (2021). events and sustainability: why making events more https://www.melbourne.vic.gov.au/business/sustainable-business/sustainable-event-guide/pages/sustainable-event-case-studies.aspx https://www.melbourne.vic.gov.au/business/sustainable-business/sustainable-event-guide/pages/sustainable-event-case-studies.aspx https://enhancentertainment.com.au/blog/sustainability-in-action-6-of-the-worlds-most-sustainable-events/ https://enhancentertainment.com.au/blog/sustainability-in-action-6-of-the-worlds-most-sustainable-events/ https://ec.europa.eu/environment/emas/pdf/other/ec_guide_sustainable_meetings_and_events.pdf https://ec.europa.eu/environment/emas/pdf/other/ec_guide_sustainable_meetings_and_events.pdf https://policy.trade.ec.europa.eu/development-and-sustainability/sustainable-development_en https://policy.trade.ec.europa.eu/development-and-sustainability/sustainable-development_en https://eventacademy.com/events/the-worlds-most-eco-friendly-events/ https://www.eventscouncil.org/sustainability/sustainability-pledge https://www.expo2020dubai.com/-/media/expo2020/sustainability/expo-designed-report-digital-version-v12.pdf https://www.expo2020dubai.com/-/media/expo2020/sustainability/expo-designed-report-digital-version-v12.pdf https://ec.europa.eu/environment/gpp/pdf/news_alert/issue112newsalertcasestudythehague_1544664397.pdf https://ec.europa.eu/environment/gpp/pdf/news_alert/issue112newsalertcasestudythehague_1544664397.pdf https://www.book2look.com/embed/9781317800262 nuša lazar 69 sustainable is not enough, journal of sustainable tourism, 29:11-12 (p. 1739-1755). 16. meetinghand (2016). advantages & management principles of sustainable events. retrieved on 10.05.2023 at https://meetinghand.com/blog/advantages-managementprinciples-of-sustainable-events 17. mittelstaedt, j. d., shultz, c. j., kilbourne, w. e., and peterson, m. (2014). sustainability as megatrend: two schools of macromarketing thought. journal of macromarketing, 34(3), (p. 253–264). 18. musgrave, j. and raj, r. (2009). introduction to a conceptual framework for sustainable events. in r. raj and j. musgrave (eds.), event management and sustainability (p. 1-11). oxfordshire: cab international. 19. rra podravje maribor. (2023). food wave local food street festival 2023. retrieved on 10.05.2023 at https://rra-podravje.si/novice/2023/food-wave-ulicni-festival-lokalnehrane-2023 20. smith-christensen, c. (2009). sustainability as a concept within events. in r. raj and j. musgrave (eds.), event management and sustainability (p. 22-30). oxfordshire: cab international. 21. sexi (2002). the sustainable exhibition industry project. retrieved on 14.04.2023 at http://www.ebc-info.co.uk/website_files/sexi_q4_riv4.pdf 22. the adriatic. (2022). a guide to sustainable event management – some examples, and how to make your event more environmentally sustainable. retrieved on 06.05.2023 at https://theadriatic.si/sustainability/a-guide-to-sustainable-event-management/ 23. united nations environment programme (unep) (2012). sustainable events guide: give your large event a small footprint. retrieved on 23.04.2023 at https://www.oneplanetnetwork.org/knowledge-centre/resources/sustainable-eventsguide-give-your-large-event-small-footprint 24. urbact (2022). urbact city festival 2022. retrieved on 10.05.2023 at https://2022cityfestival.urbact.eu/ 25. wimbledon. (2023). sustainability our commitment to protecting the environment. retrieved on 10.05.2023 at https://www.wimbledon.com/en_gb/atoz/sustainability.html https://meetinghand.com/blog/advantages-management-principles-of-sustainable-events https://meetinghand.com/blog/advantages-management-principles-of-sustainable-events https://rra-podravje.si/novice/2023/food-wave-ulicni-festival-lokalne-hrane-2023 https://rra-podravje.si/novice/2023/food-wave-ulicni-festival-lokalne-hrane-2023 http://www.ebc-info.co.uk/website_files/sexi_q4_riv4.pdf https://theadriatic.si/sustainability/a-guide-to-sustainable-event-management/ https://www.oneplanetnetwork.org/knowledge-centre/resources/sustainable-events-guide-give-your-large-event-small-footprint https://www.oneplanetnetwork.org/knowledge-centre/resources/sustainable-events-guide-give-your-large-event-small-footprint https://2022cityfestival.urbact.eu/ https://www.wimbledon.com/en_gb/atoz/sustainability.html agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 18, no. 1 (2024), pp. 132-143 132 adapting to change in the modern world: skills development in higher education for economic and sustainability issues a. mustafazada ayshan mustafazada azerbaijan university of languages, azerbaijan https://orcid.org/0009-0004-6687-7400, e-mail: ayshan.mustafazada@adu.edu.az abstract: the capacity to adapt to change is critical for both individual achievement and societal growth in the quickly changing global scene of today. this study investigates how higher education can provide students with the tools they need to successfully handle difficulties related to sustainability and the economy. utilizing multidisciplinary viewpoints from the fields of education, economics and environmental studies, this research delves into the tactics and methods used by universities to cultivate flexibility and fortitude in their students. this research attempts to uncover critical competencies and pedagogical strategies that support skill development for solving complex economic and sustainability concerns by looking at case studies and best practices from different educational environments. this research also examines the relationship between environmental sustainability and economic growth, highlighting the value of holistic methods in the creation of curricula for higher education. in the end, this study adds to the continuing conversation about the role of higher education in equipping students to prosper in a changing, globally interconnected world where sustainability and adaptation are essential to long-term success and the welfare of society. additionally, this article emphasizes the significance of acquiring 21st-century skills for success in the contemporary workforce, including as critical thinking, creativity, cooperation, communication, and technological literacy. in order to successfully solve economic and environmental concerns, the research ends with recommendations for enhancing programmes for skill development, funding faculty development, encouraging multidisciplinary collaboration, and interacting with stakeholders. keywords: higher education, sustainability, economic growth, pedagogical strategies introduction rapid technology breakthroughs, economic transformations, and environmental issues require higher education to take a proactive approach to skill development in light of the everchanging modern world. formerly focused only on academic information acquisition, the traditional model of higher education today has to provide students with the adaptable skill sets needed to deal with changing economic and sustainability issues. this introduction explores the vital role that higher education institutions play in helping students develop resilience and flexibility so they are ready to flourish in a world where change is a constant. https://orcid.org/0009-0004-6687-7400 mailto:ayshan.mustafazada@adu.edu.az ayshan mustafazada 133 the economic landscape has changed dramatically as a result of globalisation, automation, and the creation of new industries. this has brought about both opportunities and challenges. higher education establishments must therefore place a significant priority on developing abilities like critical thinking, problem-solving, entrepreneurship, and adaptability. in addition to making graduates more employable, these abilities enable them to spur economic growth, foster innovation, and negotiate the uncertainties of a labour market that is changing quickly. stronger ties between academia and business are clearly advantageous to both parties, unless it takes up time that a professor should be using to assist students. while working with businesses is “the third task” for universities in the nordic region, many of these institutions do not charge tuition; yet government financing for these institutions ranges from 20% to 35% (bridgestock, 2021). the government of japan separated heis into multiple groups and gave the instructions on how to locate their own revenue streams (destination guides, 2021). in many nations, heis are becoming increasingly distinct from one another as a result of their uneven success in these endeavours. furthermore, a number of knowledgeable obsevers assert that even with better didactics, the declining quality of instruction cannot be entirely offset. another difficulty facing heis is how to integrate the sustainable development goals (sdgs) into their institutional, scientific, and pedagogical processes on a worldwide scale. the majority of the world’s top institutions compete in times higher education the’s impact ranking (impact rankings, 2021), which indicates how closely they adhere to the sdgs, which were endorsed by all un members in 2015. a total of 767 institutions from 86 countries took part in the 2019 the ranking; nevertheless, 82% of them are located in high-income nations. these changes suggest that higher education is becoming increasingly cognizant of the consequences of contemporary, post-industrial society in academia. the 21st century demands a completely distinct knowledge base abs skill set due to its intensity and complexity, which includes understanding the sociopsychological characteristics of young people who are preparing to enter the workforce. a university cannot meet the highest scientific standards on its own. regardless of the precise responsibilities they will play in society or the economy, they are now expected to be able and motivated to instil in young people the ideals of sustainable development and a feeling of social responsibility. regretfully, not many governments recognise the need for constant assistance and sufficient financing for this. in conclusion, the necessity of developing new abilities in higher education is highlighted by the need to adjust to change in the current world. institutions may empower students to flourish in a fast-changing global world by providing them with the varied skills necessary to address sustainability and economic challenges. this investigation will focus on different approaches and top techniques for incorporating skill development into curricula in higher education, with the ultimate goal of producing a new breed of knowledgeable, flexible and conscious leaders. higher education and sustainability higher education establishments play a pivotal role in propelling social and economic advancement by moulding the cognizance, competencies, and principles of forthcoming generations. the relationship between sustainability and higher education has gained more adapting to change in the modern world: skills development in higher education for economic and sustainability issues 134 attention in recent years. more and more people are calling for higher education to take the lead in tackling urgent global concerns including social injustice, resource depletion, and climate change. academic institutions have a pivotal function in advancing sustainability via many approaches such as curriculum development, campus management, research endeavours, and community involvement.  curriculum integration: a lot of colleges include sustainability concepts in all areas of their curricula. regardless of their major, this integration guarantees that students are exposed to ideas like social responsibility, renewable energy, sustainable development, and environmental science. higher education institutions teach students to become environmentally conscious professionals prepared to face sustainability concerns in their particular industries by offering courses, minors, or majors focused on sustainability.  research and innovation: universities carry out research to expand understanding and provide novel approaches to sustainability problems. numerous academic fields are covered by this research, including engineering, economics, sociology, environmental science, and public policy. universities frequently create sustainability-focused research centres or institutes to promote multidisciplinary collaboration and provide funding for significant studies that tackle urgent environmental issues.  campus sustainability initiatives: a lot of colleges integrate sustainability practices into their internal infrastructure and operations. energy-efficient building designs, renewable energy installations, trash reduction and recycling programmes, water conservation techniques, environmentally friendly transportation alternatives, and sustainable procurement methods are a few examples of these activities. higher education institutions show their dedication to environmental stewardship and give students real-world examples of sustainability in action by implementing sustainable practices on campus.  outreach & community engagement: in order to enhance sustainability and solve regional environmental issues, higher education institutions interact with the communities in which they operate. in order to design and carry out sustainability projects, initiatives, and outreach programmes, this involvement may entail collaborations with regional administrations, companies, nonprofits, and community organisations. universities can help create more resilient and sustainable communities while giving students chances for hands-on learning and civic participation through community involvement.  accountability for sustainability: to monitor and disseminate their progress towards environmental, social, and economic sustainability objectives, several colleges provide sustainability reports. data on energy use, greenhouse gas emissions, waste production and diversion, water use, sustainable transportation choices, sustainable procurement methods, and social responsibility programmes are usually included in these reports. higher education institutions show their stakeholders that they are accountable to them ayshan mustafazada 135 and work to continuously improve their sustainability practices by being open and honest about their sustainability performance. higher education institutions, in general, are essential to the advancement of sustainability because they train the next generation of leaders, carry out research, adopt sustainable practices on campus, interact with the community, and encourage responsibility and openness in sustainability initiatives. by means of these diverse channels, academic institutions aid in moulding a future that is both egalitarian and environmentally friendly. higher education and twenty-first century skills companies' contributions to society need to shift fundamentally and permanently as a result of the post-covid and climate change reality. in order to effectively address the need for action on a sustainable, human-centric, and resilient european industry, leaders must possess the abilities to consider, comprehend, and act in the company's and society's long-term best interests as well as to fit within the current but also the foreseeable eu policy frameworks (cooke, 2012). the skills and abilities required by the current labour market heavily dominate themes covered later in school, and the reasons for this include the rising pace and breadth of change. it is widely acknowledged that compared to many other countries, the nordic countries have embraced this issue earlier and more easily. employers pay graduates based on jobs, which are essentially determined by the sort of formal degree, and students are driven to get formal degrees even if they do not always indicate a set of abilities and skills. this is the primary issue that most european nations face. while this serves a very different social purpose—that of training the future elite in a society where the majority of people lack literacy—it is related to the idea of a traditional university. a large portion of the workforce in higher education still operates under the outdated belief that they can only truly succeed as long as they impart to their students the greatest knowledge possible in their field. they pay little attention to the competencies and skills that employers will need in the labour market of the future. the majority of european nations continue to face serious challenges as a result of these discrepancies between the labour market needs and the actual competences of graduates (not so much in scandinavia, in the us, and numerous asian countries). far too many university instructors are not receiving the help and encouragement they need to modernise their teaching methods. this is seen as their duty, which aligns with another antiquated method of treating every topic rigorously independently and providing little room for interdisciplinary and intersubject viewpoints and actions. the majority of institutions' curriculum and programmes on certain subjects serve as excellent examples of this. the oecd (oecd future of education, 2021) has created a global skills strategy, refocusing its attention from traditional higher education tracks to lifelong learning and skills retained throughout the lifetime. this is due to the organization's recognition of the intricacy of skills policies as well as the possibility for peer learning. let us emphasise that the leadership of universities and their departments, as well as the relevant authorities, are involved in this issue. the first stage is to assess what the appropriate government agencies and their policies should be doing, as well as what colleges and academics themselves ought to be doing. adapting to change in the modern world: skills development in higher education for economic and sustainability issues 136 nothing in the extensive education literature refers to, say, the «20th-century skills» because of the greater changes that have occurred in the 21st century as opposed to previous centuries. what are the 21st-century abilities that are necessary in today's technologically and socially advanced world and that must be gained through both lifelong learning and formal education, including university education? after reading a plethora of relevant material, we may choose to use stauffer's (stauffer,2021) summary, which consists of the twelve abilities and competences listed below, divided into three categories: learning skills: critical thinking, creativity, collaboration, communication. literacy skills: information literacy, media literacy, technology literacy. life skills: flexibility, leadership, initiative, productivity, social skills. none of these abilities are brand-new, with the exception of digital literacy, but they have never been deemed necessary elements of a high-quality education. in the field of education science, they are now acknowledged as being very necessary for persons who wish to succeed in the modern workforce. how will instructors help their pupils gain all these skills? is another important topic. to begin with, it is important to note that the professor or instructor was formerly highly esteemed based only on their position and academic standing. this is no longer the case; instead, students now need to sense the quality of their teachers and their desire to be welcomed due to their capacity to interact with them both in person and virtually. the instructor must demonstrate a commensurate degree of proficiency in using digital tools to communicate with students online and search and share knowledge online in order to gain the respect and acceptance of the students. in the new technology era, students will consider their professors as senior partners, therefore only on this basis can a proper relationship be anticipated to grow. without it, pupils will view teachers as learned individuals from a bygone era. this can lead to a big hole that would make it difficult to develop modern teaching methods or experiences. here are some beneficial proposals by a digital native, professor t. palmer, listing the significant characteristics of a high-quality 21st-century educator (palmer,2021): learnercentered classroom and personalized instruction, students as producers, learning new technologies, going global, smartly use of smartphones, blog, go digital, collaborate, use twitter chats, connect, project-based learning, build your positive digital footprint, code, innovate, keep learning. creating and managing future scenarios and corporate foresight are generally not included in heis' curriculum or set as required courses for professional development pertaining to sustainable practices in organisations. concurrently, corporate foresight has started to shift in recent years from being a tool for top management to a more inclusive stakeholder-driven approach. great levels of involvement, interaction, and immersion in hybrid techniques have demonstrated a great potential for increasing the number of stakeholders on board and advancing ownership of the deliverables. the economic and social roles of higher education ayshan mustafazada 137 competencies and skills are also essential in the continuous transition to a more sustainable economy. they are also necessary to foresee and address unforeseen outcomes of innovation. in order to create mid-range visions that serve as guidelines for cooperation, sustainability foresight competences necessitate the combination of empirical research skills with hermeneutic skills for the interpretation, contextualization, and evaluation of individual results. rarely are these competences and skills taught in european heis (with a few notable exceptions in finland, germany, and france, for instance), (adams, 2016). strategic sustainability foresight is a competence that is lacking in many european companies. strategic foresight is a prerequisite for organisational integration, general strategic decision-making, and leadership and product/service level visioning. businesses and students alike struggle to understand how to approach the task of working methodically with desirable and realistic green future possibilities (adams, 2016). employers must implement significant and long-lasting reforms in response to the postcovid and climate change reality. here, skills and competences are essential to the continuous transition to a digital economy that is more robust, sustainable, and sustainable. they are also necessary to foresee and address unexpected repercussions of innovation (which is crucial for innovation focused on sustainability). the current state of education in the majority of european nations falls short in the following areas: * methods to promote sustainability foresight independent of the specific area of interest; a step-by-step hybrid learning approach; and product/service design schools. * content and materials available for higher education establishments. * appropriate individuals to impart the knowledge. the use of cutting-edge approaches in digital, hybrid, and human-centered education to facilitate involvement led by stakeholders or students (adams, 2016). it won't be enough to address social issues, neighbourhood projects, and measures aimed at lessening environmental damage and social unrest. in order to achieve shared value, developing innovative goods, services, and business strategies is insufficient (adams, 2016) to have the net beneficial effect that business may have. rather, this calls for creating a valuesbased organisational culture and managing innovation through procedures and approaches that blend action, foresight, and direction. let me emphasize that a value-based strategy is essential to achieving sustainable development goals since shared values guarantee dedication and perseverance in achieving desired results. in keeping with the above justifications, heis may help create the ideal future by carrying out the following actions:  establishing a group of exceptional professionals with crowdsourcing and sustainability vision to identify obstacles and best practices.  compile and evaluate complementary information, abilities, and techniques; identify important obstacles in the areas of innovation, sustainability, and local and national industry.  involve experts and practitioners in jointly developing specialised solutions to deal with the aforementioned problems. adapting to change in the modern world: skills development in higher education for economic and sustainability issues 138  create prototype solutions, which have to be tested and improved upon iteratively in collaboration with representatives of the industry partners who offer criticism and recommendations. within the existing eu frameworks, such as horizon europe, inter reg, and other financing schemes, there are plenty of opportunity to develop new industrial solutions. these arguments support the claim that, in order to ensure sustainable development and produce innovative skill sets, higher education needs to change to a multidisciplinary partnership with employers (industry) and policy communities at all levels. this shift is necessary in light of current economic and social trends. this claim may be used to inform recommendations for future studies on the trends and difficulties in higher education if the data from the current research are consistent with it. we conducted many bibliometric evaluations of the corpus of existing information to examine if the research patterns over the previous five years reflect our hypothesised path of higher education development in order to support such a notion and provide guidance for future empirical research. the analysis's foundation is:  assessment of research trends, made possible by elsevier scival, a scientometric tool that allows for the evaluation and benchmarking of research trends and performance based on elsevier scopus data;  a thorough examination of bibliometric data pertaining to publications indexed by the elsevier scopus and clarivate web of science (wos), identified using the terms suggested, that describe the research trends in the body of existing literature about 21stcentury skills, sustainability, and higher education. methodology a high-level evaluation of research articles that may be related to 21st-century skills and the sustainability of higher education forms the foundation of empirical analysis. in this empirical investigation, we analysed an entire corpus of publications indexed by elsevier scopus that were related to the pertinent sustainable development goals (sdgs) using the elsevier scival scientometric tool. the prior five-year period, from 2016 to 2020, was the subject of the research. we initially determined pertinent search phrases and keywords pertaining to sustainability, higher education, and 21st-century skills before conducting our research. various concepts like "sustainability education," "21st-century skills," and "higher education" were among these keywords. next, we searched the elsevier scopus database for publications published between 2016 and 2020 using these keywords. only peer-reviewed publications that directly related to the goals of the study were included in the search results. this required evaluating each article's title, abstract, and keywords to ascertain how relevant they were to the subjects of interest. the analysis did not include any articles that did not fit the criteria. we performed a scientometric analysis of the corpus using the elsevier scival tool after identifying the initial set of articles. this included analysing a range of measures and indicators to obtain insights into the state of research on sustainability and 21st-century skills in higher ayshan mustafazada 139 education, including authorship patterns, publishing trends, and keyword co-occurrence networks. finding important topics, patterns, and trends within the corpus of articles was the main goal of the study. this involved figuring out which articles were the most often referenced, whose authors were the most productive, what the most popular study topics were, and whether there were any new areas of interest or disagreement in the field. all things considered, the technique used a methodical strategy to locate and examine a large collection of research articles associated with the goals of the study. through the use of the elsevier scival tool, we were able to get important information on the current status of research concerning sustainability and 21st-century skills in higher education throughout the designated period. results and discussion our empirical strategy is doing a high-level examination of academic papers from the five years prior (i.e., the 2016–2020 timeframe), which have been identified as pertinent to our study proposal and linked to the pertinent sdgs. sdg 4 (quality education), sdg 6 (clean water and sanitation), sdg 7 (affordable and clean energy), sdg 11 (sustainable cities and communities), sdg 12 (responsible consumption and production), and sdg 13 (climate action) are the broad topics of sustainability and the value of higher education for employers that we have mapped to. figures 1a–f, which also include the total number of published research items cited by elsevier scopus, demonstrate a rise in research interest in the chosen sdgs from 2016 to 2020. the fields of sustainable energy (figure 1c), clean water (figure 1b), climate change (figure 1f), quality education (figure 1a), sustainable consumption and production (figure 1e), and sustainable cities and communities (figure 1d) have the highest level of research interest among the pertinent sdgs. figure 1 (a) research output pertaining to sdg4 (210,989 total papers) from 2016 to 2020. adapting to change in the modern world: skills development in higher education for economic and sustainability issues 140 figure 2 (b) research output pertaining to sdg4 (210,989 total papers) from 2016 to 2020 (a). research output pertaining to sdg4 (210,989 total papers) from 2016 to 2020. (b). research output connected to sdg 6 from 2016 to 2020 (a total of 264,807 papers). (c). research output pertaining to sdg7 from 2016 to 2020 (731,457 total papers). (d). research output pertaining to sdg11 from 2016 to 2020 (336,506 total papers). (e). research output pertaining to sdg 12 from 2016 to 2020 (198,075 total papers). (f). research output pertaining to sdg13 from 2016 to 2020 (221,759 total papers). source: elsevier scival. multidisciplinarity is the most noteworthy aspect of the results, as it aligns with the frequently discussed role of higher education in tackling the "wicked problems of the 21st century," such as sustainable development, innovation, and human capital production for the modern economy and society (hensley,2021, keep, 2014). to address these issues facing contemporary society, a multidisciplinary approach to research and transboundary education is necessary (ramley,2014). this is particularly helpful in times of crisis, like the one the eu has experienced over the past five years, with the large influx of migrants [41], the economic difficulties brought on by covid-19 (zigman,2021), and other pertinent concerns. table 2 provides an illustration of the multidisciplinarity of the examined study fields. ayshan mustafazada 141 table 2 lists the top 25 wos fields of study that are related to the study subject. conclusions ensuring sustainability remains a significant task of higher education and its institutions, which can be concluded based on the previously reported empirical results related to the extant literature, referred by wos and scopus indexing databases. however, a vast body of knowledge related to sustainability, its implementation, and the role of the higher education sector in ensuring sustainable development has put the empirical analysis of the 21st-century skills to be supplied by higher education institutions to the background. nevertheless, this topic still deserves the full attention of scholars and policymakers alike. as reported by the world economic forum, for the next four years, growth of 13.5% in emerging professions is expected—parallel to the decreasing fall of redundant jobs. workers will have to acquire even 40%–50% of new skills during the next five years. employers expect to offer reskilling and upskilling to 70% of their employees. this is creating an unprecedented challenge for everyone, including university teachers, who can contribute a lot but are often not sufficiently aware of the situation’s urgency. the same can be said for the respective government departments, which is also applicable to students and the general public. moreover, various university rankings do not provide an objective insight into whether a country has developed an optimal university system. excellence is certainly most welcome adapting to change in the modern world: skills development in higher education for economic and sustainability issues 142 and adds to the international prestige of the countries concerned. however, improving the general level of university teaching (i.e., its relevance and quality) is even more critical. this is reflected by the education policy of nordic and some baltic governments, not only on the higher education level which could further serve as a benchmark and inspiration to other european regions. this is why the awareness among policy and the educational communities, the professional and general public, and the media of the critical importance of 21st-century skills to be developed during the entire education cycle, including higher education. this notion is confirmed by the bibliometric analysis, which we performed, to support the theoretical identification of the relevant trends in higher education. it confirms that the extant body of knowledge views the integration of the relevant business skills for the 21st century with the outlook and competencies of ensuring sustainable (industrial) development as a key to the further development of european society and the economy. some specific recommendations, which could be extended, both to the higher education administrators as well as to the education policy community, include:  promoting multidisciplinary education and research through finance and human resource management strategies rather than merely declaring a multidisciplinary approach.  putting a focus on stakeholder communication and promoting collaborative research across academic, business, and policy players.  interacting with students and getting their feedback on suggested changes and policies for higher education. this also requires adequate and stable funding of higher education institutions, wherever it may come from. while 100% public funding might not be realistic in all european countries, governments and universities should cooperate in creating a system that secures the conditions for quality in teaching and research. many countries have not yet found a reasonable university funding scheme to develop, encourage, and provide the best possible learning outcomes for the highest possible percentage of students to complete their studies and stimulate individual universities to achieve these goals without compromising the strict quality criteria. our proposition and recommendations to researchers, policymakers, and higher education administrations might help achieve such a goal. in summary, this study has advanced our knowledge of how higher education may adjust to the changing needs of the contemporary world by giving priority to the development of skills related to sustainability and economic challenges. higher education institutions may realize their role of equipping students to flourish in a dynamic and interconnected global world by embracing this necessity and cooperating towards common goals. references 1. adams, r.; jeanrenaud, s.; bessant, j.; denyer, d.; overy, p. sustainability-oriented innovation: a systematic review. int. j. manag. rev. 2016, 18, 180–205. ayshan mustafazada 143 2. bridgestock, l. why study at a scandinavian university? top universities, 19 april 2021. available online: https://www.topuniversities.com/student-info/choosing-university/whystudy-scandinavian-university (accessed on 1 july 2021) 3. cooke, p.; de propris, l. for a resilient, sustainable and creative european economy, in what ways is the eu important? in innovation, global change and territorial resilience; cooke, p., parrilli, m.d., curbelo, j.l. eds.; edward elgar publishing: cheltenham, uk; 2012. 4. destination guides. why study in japan? top universities. available online: https://www.topuniversities.com/where-tostudy/asia/japan/guide (accessed on 1 july 2021). 5. impact rankings 2021. available online: https://www.timeshighereducation.com/rankings/impact/2021/overall#!/page/0/length/25/so rt_by/rank/sort_order/asc/cols/undefined (accessed on 18 july 2021). 6. oecd future of education and skills 2030. conceptual learning framework. 2021. available online: https://www.oecd.org/education/2030-project/teaching-andlearning/learning/skills/skills_for_2030.pdf (accessed on 2 august 2021). 7. palmer, t. fifteen characteristics of a 21st-century teacher. available online: https://www.edutopia.org/discussion/15-characteristics-21st-century-teacher (accessed on 10 july 2021). 8. ramley, j.a. the changing role of higher education: learning to deal with wicked problems. j. high. educ. outreach engagem. 2014, 18, 7–22. 9. stauffer, b. what are 21st century skills? 2020. available online: https://www.aeseducation.com/blog/what-are-21st-centuryskills (accessed on 10 july 2021). agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 18, no. 1 (2024), pp. 182-190 182 the role of education and training in fostering workplace diversity and inclusion in digitally oriented organizations j. lukić nikolić, p. labus jelena lukić nikolić¹, pero labus² ¹ modern business school, serbia https://orcid.org/0000-0003-0632-8974, e-mail: jelena.lukic@mbs.edu.rs ² hotel ambasador; retoi d.o.o., split, croatia https://orcid.org/0000-0001-8098-7711, peterlabus@hotmail.com abstract: the aim of this paper is to emphasize the role and importance of employee education and training in digitally oriented organizations so that they can recognize, comprehend, and accept diversity and inclusion in the workplace. digitally oriented organizations have the advantage of remote work and flexible working hours, which allow for the inclusion of individuals who may not meet the requirements of traditional work environments, involving physical presence for eight hours a day. conducted desk research shows that education and training on diversity and inclusion in digitally oriented organizations have an important role in raising awareness, promoting understanding, and supporting positive behaviors within all employees. the main advantages of workplace diversity and inclusion are a more diversified and high-quality pool of candidates, a better organizational reputation among employees, increased innovation, and higher profitability. to fully realize these benefits, it is essential that all employees wholeheartedly embrace and foster diversity and inclusion. this paper's theoretical implications include a systematic review and analysis of existing literature on the topic, while practical implication is in providing key recommendations to leaders and managers for achieving high levels of diversity and inclusion in the workplace through education and training. keywords: workplace diversity, workplace inclusion, digitally oriented organizations, education. introduction digitally oriented organizations that embrace remote work and flexible employment are increasingly adopting diversity and inclusion as core principles of their functioning and business. this shift offers opportunities to individuals who may face challenges securing employment in the traditional, office-bound model that requires physical presence for eight hours a day. in digitally oriented organizations, diversity and inclusion policies are not merely optional; they are deemed essential for survival, growth, and development (garg & sangwan, 2021). in recent years, the european commission has been actively encouraging companies to implement diversity and inclusion practices to meet the requirements of the un sustainable development goals and the paris agreement (confetto et al., 2023). a diverse workforce is of https://orcid.org/0000-0003-0632-8974 mailto:jelena.lukic@mbs.edu.rs https://orcid.org/0000-0001-8098-7711 mailto:peterlabus@hotmail.com jelena lukić nikolić, pero labus 183 great importance for the organization’s progress and development (o’donovan, 2018). diversity encompasses not only factors such as ethnicity, race, sexual orientation, and gender but also considerations like age, physical and mental abilities, social status, marital status, parental status, place of residence, and work experience (loden & rosener, 1991; champoux, 2011). diversity, in essence, pertains to any characteristic that distinguishes one individual from others. within the realm of human resource management, diversity and inclusion have become increasingly prominent and represent pivotal concepts in contemporary business. the way these concepts are approached can greatly influence a company’s success. human resource management involves diversity management, which is defined as harnessing differences to create business advantages, realizing the potential of all employees, promoting equality, and providing equal opportunities (greif, 2015). diversity encompasses the collective mix of differences and similarities, including individual and organizational characteristics, values, beliefs, experiences, backgrounds, preferences, and behaviours. inclusion, on the other hand, signifies the creation of a work environment where all individuals are treated fairly and respectfully, have equitable access to opportunities and resources, and can contribute fully to the company’s success (talent intelligence, 2014). inclusion entails empowering each employee to make their maximum contribution, irrespective of their unique individual attributes. therefore, inclusion is linked to how employees perceive their importance within the organization, including participation in the decision-making process, involvement in group tasks, and access to information and resources (mor barak, 2008). nowadays, in a digitally oriented world of work, it is of significant importance to offer students and graduates crucial knowledge regarding diversity and inclusion as important aspects of organizational success in the long run (aškerc zadravec, 2023). furthermore, all employees face the challenge of upgrading their existing knowledge and skills, as well as obtaining completely new knowledge and skills suited for the requirements of the digital age (gigauri, 2020). the ongoing digital transformation involves the adoption of new technologies, which leads to completely new work possibilities in all industries and sectors (ciderova, rutkay & sirotka, 2023). this paper points out the role and importance of training and education of employees in order to promote and foster diversity and inclusion in digitally oriented organizations. the paper is organized as follows. following the introduction, an applied desk research method was presented and discussed. the following title focuses on research results and discussion of research findings. finally, the important findings, implications for the academic community and practice, limitations, and recommendations for future research were discussed. methods the key goals of the research are: (1) to identify the key benefits of diversity and inclusion in digitally oriented organizations; (2) to assess the current state of diversity and inclusion, and (3) to emphasize the importance of employee education and training in promoting and nurturing diversity and inclusion. to accomplish the imposed research goals, this paper used desk research of published secondary data to provide a broad and more comprehensive perspective on the topic while also confirming existing theoretical foundations and research findings. the topic was examined and the role of education and training in fostering workplace diversity and inclusion in digitally oriented organizations 184 evaluated through analyzing existing literature such as books, journals, articles, conference proceedings, business and research reports. the major goal was to highlight the results of prior study findings addressing the relevance and value of education and training in promoting workplace diversity and inclusion, particularly in digitally oriented organizations. research results and discussion the benefits of diversity and inclusion in digitally oriented organizations there are numerous advantages for digitally oriented organizations in embracing diversity and inclusion, which contribute to business success and desirable outcomes. upon reviewing literature, some of the key benefits identified include (chaudhry, ymbong paquibut & nawaz tunio, 2021; hofhuis, van der rijt & vlug, 2016; stevens, plaut & sanchez-burks, 2008): more diverse and talented candidates: digitally oriented organizations that adopt remote work access significantly more diverse candidates from any part of the world. consequently, these companies can focus on candidates with the best competencies. furthermore, in the digital era, an increasing number of candidates are seeking employment in organizations that promote diversity and inclusion. a glassdoor survey revealed that 57% of employees and 67% of job seekers regard diversity and inclusion as important elements of the work environment, influencing the recruitment process and employee retention. the survey also found that 72% of women, compared to 62% of men, consider diversity important (glassdoor, 2014). improved reputation of the organization among employees: a deloitte australia study in 2013 showed that up to 80% of employees feel they work in a highly successful organization when it is committed to diversity and inclusion. this perception among employees positively impacts overall performance and the attraction of a higher-quality workforce. employees satisfied with their organization tend to promote a positive image of its culture and values, leading to an enhanced reputation and attracting a wider range of job candidates. in digitally oriented organizations, employees often share their positive experiences and opinions about the work atmosphere and organizational culture on various social and professional networks, thereby positively influencing the organization’s reputation and image. greater degree of innovation: research published in the harvard business review investigated the effects of diversity on innovation. the study involved surveying 1,800 professionals, conducting 40 case studies, and numerous focus groups and interviews. it explored two types of diversity: innate and acquired. the former includes traits such as gender, ethnic origin, and sexual orientation, while the latter encompasses traits acquired through experience, like working in a different country or with diverse groups. companies with leaders possessing at least three innate and three acquired diversity traits, termed two-dimensional diversity, were found to outperform others in innovation and performance (hewlett, marshall & sherbin, 2013). a bcg study in 2018 showed a significant positive correlation between diversity and organizational innovation. it surveyed diversity managers, hr executives, and directors of 171 german, swiss and austrian companies with up to 10,000 employees and operations in various industries, such as chemistry, technology, goods, finance and healthcare. jelena lukić nikolić, pero labus 185 the study highlighted that innovation benefits from various types of diversity. the presence of diverse managers, including women or individuals from different countries, industries or companies can boost innovation. this is particularly beneficial for innovation in complex companies with multiple product lines or operating in various industry segments. in addition, it should not be lost sight of the fact that employees with different educational backgrounds have distinct perspectives on observing problems, which can contribute significantly to finding the best solution. higher profits: ethnically diverse organizations are 35% more likely to achieve higher profits, while organizations with gender diversity have a 15% greater chance of the same, as demonstrated by a mckinsey institute study (hunt, layton & princeet, 2015). according to this study, while diversity does not automatically equate to higher earnings, organizations with rich gender, racial and ethnic diversity within their workforce benefit from varied attitudes and ways of thinking. this diversity contributes to greater productivity, innovation, and reputation through better service provision, leading to improved business results. certainly, an inclusive work environment, where employees have the right to vote and express their opinions regardless of the mentioned differences, positively influences business results. not only are employees more motivated in their work and in contributing to the success of the organization, but this inclusive image is also reflected externally among co-workers, partners and consumers. many studies have confirmed the positive economic impact of diversity and inclusion. for instance, companies that lack diversity are 1.32 times less productive than those with pronounced diversity (kasinathan, mallu & bozinski, 2024). results on diversity and inclusion at the global level a large number of organizations and institutions analyse the state of diversity and inclusion at the global level. additionally, an increasing number of organizations consider diversity and inclusion important topics in their business practices. the results of the research involving over 247,000 students from the 12 largest world economies as reported by universum (2019), pointed out the following:  in 2019, 85% of over 2,000 of the world's most desirable employers considered diversity in employment a high priority.  when asked what diversity means to them, 93% of global talent described workplace diversity and inclusion as cultural diversity, which transcended age, ethnicity or gender.  companies in consumer goods, technology, professional services, engineering and manufacturing, and consulting were seen as those investing the most in and communicating their diversity and inclusion initiatives effectively.  authentic communication of a company's efforts to create a more inclusive environment is key to gaining a better position in rankings. a survey of 107 participants about the top priorities of human resources in 2018 showed that for only 8% of them, diversity and inclusion were among the leading concerns. the first place was taken by the digitization of human resources (28%), followed by continuous performance management (26%), then employee experience (24%), adapted organizational design (11%), and only then diversity and inclusion (gartner, 2018). however, one should consider the limitation of this research a small sample size that prevents generalizing the the role of education and training in fostering workplace diversity and inclusion in digitally oriented organizations 186 results. on the other hand, the key advantage of this research is that it provides a general picture of diversity and inclusion. many studies conducted in the field of human resources by various global consulting organizations indicate that diversity and inclusion are important factors. mckinsey points out that organizations with a gender-diverse executive team are up to 21% more likely to achieve above-average profits and up to 27% more likely to create long-term value than organizations where one gender predominates in leadership roles (hunt et al., 2018). although the promotion and representation of diversity are significant steps towards business improvement, if the entire organization is not ready and able to adopt and incorporate this diversity into its daily operations, the end results will be suboptimal. it is essential for all organization members to practice tolerance towards their colleagues and associates, embrace and respect diversity, and conscientiously avoid any form of discrimination or exclusion in collaborative projects and activities, particularly based on individual characteristics. commitment to diversity and fostering an inclusive culture within an organization is just the beginning. it is crucial for all employees to embrace and embody these values. often, there are individuals within organizations who may not fully understand the repercussions of discrimination and intolerance and may continue to treat colleagues and associates unfairly based on their differences. therefore, it is imperative to actively raise awareness and provide comprehensive education and training on diversity and inclusion to all employees, ensuring a truly inclusive and respectful work environment. the role of education in promoting diversity and inclusion training is a planned organizational activity aimed at enabling employees to acquire the knowledge, skills, and behaviours necessary to perform daily activities and tasks (noe et al., 2016). the outcome of training is the development of intangible assets, namely human capital, which encompasses knowledge (knowing what), skills (knowing how), systemic understanding and creativity (knowing why), and the motivation to produce high-quality products and services (sincere concern for quality). (campbell, coff & kryscynski, 2012). diversity training specifically seeks to increase awareness, understanding, or action regarding diversity and inclusion, emphasizing the need to clearly define its purpose and goals. there are two key training models: awareness training and skills training (roberson, kulik & tan, 2013). awareness training focuses on developing awareness and understanding of diversity through an informal or emotional approach. this approach draws attention to diversity issues as a foundation for behavioural change. one approach to awareness training involves providing information on topics such as company diversity strategies, the significance of various identities, and the mechanics of stereotypes, prejudice, and discrimination. another approach involves educating about group dynamics and social categorization processes. a third approach emphasizes increasing self-awareness of personal biases and their impact on behaviour towards others. while this can lead to conflict and negative emotions due to challenging established ways of thinking, it can also motivate positive attitude and behaviour changes, though it may sometimes be stressful or even cause negative reactions. jelena lukić nikolić, pero labus 187 skills training is a model designed to equip participants with new skills that enhance diversity and inclusion. a notable shortcoming of this model is the lack of a universally recognized, empirically backed catalogue of diversity skills. nonetheless, skills such as communication, conflict resolution, and listening are essential to fostering understanding and cooperation. among the various frameworks for this training, the most renowned is social learning theory, which emphasizes modelling appropriate behaviour, practice and feedback, positive outcomes, and developing self-efficacy the belief in one’s ability to learn and perform new behaviours. this model requires time and significant investment, leading many organizations to prefer the simpler awareness training model. when designing a training program, it is important to start with a needs assessment. this process, as outline by hays-thomas (2016), included three levels of analysis:  individual analysis: identifying and analysing individuals who need training, considering their education level, habits, and motivation.  analysis of knowledge, skills, and abilities: determining training content based on the required characteristics, knowledge, skills, and abilities for job tasks.  organizational analysis: assessing organization support or resistance to training, alignment with organizational goals, and available resources like funding, time, and personnel. after conducting the assessment, the information obtained is used for further steps in training design. this involves setting appropriate goals or learning outcomes, detailing what employees will learn or be capable of after training. these outcomes will ultimately be used to evaluate the quality and success of the training. this phase also includes selecting the training environment, methods, schedules, and trainers. after the completed training, it is necessary to collect data in order to identify whether the training met its intended goals. this assessment checks if the results are attributable to the training or other factors. evaluating the effectiveness of the training is vital to decide whether it should continue, be modified, or be adapted for others. additionally, it is important to verify if the training has been effectively learned and applied in the workplace, ensuring that participants integrate the learned content into their daily activities. digitally oriented organizations are proactive in designing varied learning activities related to diversity. these activities help to enhance collaboration among employees with differing characteristics. furthermore, keeping in mind the rapid progress of modern technologies, it is crucial to continuously adapt and update the content and strategies of training programs. this adaptation is necessary due to the increasingly diverse skills, knowledge, learning styles, and languages of employees. decisions about the implementation of training (whether in printed form, traditional lessons, online classes, etc.), should align with the capabilities and preferences of the employees. it is important for managers of digitally oriented organizations to differentiate between diversity training and broader diversity and inclusion programs. while training is a component of these programs, it alone is not sufficient for achieving true diversity and incorporation of these values into the organization. many organizations require specialized programs to effectively foster and support diversity and inclusion. the role of education and training in fostering workplace diversity and inclusion in digitally oriented organizations 188 conclusion this paper highlights the key benefits of diversity and inclusion in digitally oriented organizations, assesses the current state of diversity and inclusion, and emphasizes the importance of employee education and training in promoting and nurturing diversity and inclusion. conducted desk research showed that workplace diversity and inclusion are crucial for survival and business success of any organization, especially of those organizations who are digitally oriented. modern information technologies facilitate diversity and inclusion, making them integral to organizational practices. digitally oriented organizations leverage the benefits of diversity and inclusion by enabling remote work and flexible working hours. this broadens their talent pool and maximizes the advantages of diversity. the key advantages of workplace diversity and inclusion include a more diverse and high-quality pool of candidates, enhanced organizational reputation among employees, increased innovation, and greater profitability. to fully realize these advantages, it is essential to provide education and training on diversity and inclusion, aiming to raise awareness, promote understanding, and encourage positive practices and engagement by all employees. the theoretical implications of this paper include an extensive review of current literature and a broadening of theoretical knowledge in a contemporary organizational environment shaped by digital technologies. this provides researchers with a foundation for future research on the topic. this paper's practical implications include providing crucial recommendations and guidance to leaders and managers in digitally oriented organizations on how to provide organizational culture, as well as the overall organizational climate and atmosphere, in order to achieve high levels of diversity and inclusion. the paper's main limitation was its focus on desk research and secondary data sources. future study proposals on this topic include conducting empirical research and collecting primary data to gain real insights about the role and significance of employee education and training in fostering and nurturing diversity and inclusion. references 1. aškerc zadravec, k. (2023). connections between online international learning and inclusion of intercultural and international elements in the curriculum-the perspective of slovene academics. education sciences, 13(7), 680. https://doi.org/10.3390/educsci13070680 2. bcg. (2018). how diverse leadership teams boost innovation. https://www.bcg.com/enus/publications/2018/how-diverse-leadership-teams-boost-innovation.aspx 3. campbell, b., coff, r., & kryscynski, d. (2012). rethinking sustained competitive advantage from human capital. academy of management review, 37(3), 376-395. 4. champoux, j. e. (2011). organizational behavior. integrating individuals, groups, and organizations. new york and london: routledge. taylor & francis group. 5. chaudhry, i. s., ymbong paquibut, r., & nawaz tunio, m. | len tiu wright (reviewing editor) (2021). do workforce diversity, inclusion practices, & organizational characteristics jelena lukić nikolić, pero labus 189 contribute to organizational innovation? evidence from the u.a.e. cogent business & management, 8(1), doi: 10.1080/23311975.2021.1947549 6. ciderova, d., rutkay, j., & sirotka, v. (2023). the european year of skills 2023 and employment prospects for eu and third country nationals. agora international journal of juridical sciences, 17(2), 134-138. https://doi.org/10.15837/aijjs.v17i2.6478 7. confetto, m. g., ključnikov, a., covucci, c., & normando, m. (2023). diversity and inclusion in employer branding: an explorative analysis of european companies' digital communication. employee relations, 45(7), 121-139. https://doi.org/10.1108/er-11-20220522 8. deloitte australia. (2013). waiter, is that inclusion in my soup? a new recipe to improve business performance. https://www2.deloitte.com/content/dam/deloitte/au/documents/ human-capital/deloitte-au-hc-diversity-inclusion-soup-0513.pdf 9. garg, s., & sangwan, s. (2021). literature review on diversity and inclusion at workplace, 2010–2017. vision, 25(1), 12-22. https://doi.org/10.1177/0972262920959523 10. gartner. (2018). the future of hr. http://www.portailrh.org/lecercle/pdf/gartnerwebinaire-16-avril-2018-future-of-hr.pdf 11. gigauri, i. (2020). effects of covid-19 on human resource management from the perspective of digitalization and work-life-balance. international journal of innovative technologies in economy, 4(31). doi: 10.31435/rsglobal_ijite/30092020/7148 12. glassdoor. (2014). what job seekers really think about your diversity and inclusion stats. https://www.glassdoor.com/employers/blog/diversity/ 13. greif, t. (2015). upravljanje različitostima pri zapošljavanju. beograd: študentski kulturni centar škuc. 14. hays-thomas, r. (2016). managing workplace diversity and inclusion a psychological perspective. new york: routledge. 15. hewlett, s.a., marshall, m., & sherbin, l. (2013). how diversity can drive innovation. harvard business review. https://hbr.org/2013/12/how-diversity-can-drive-innovation 16. hofhuis, j., van der rijt, p. g. a., & vlug, m. (2016). diversity climate enhances work outcomes through trust and openness in workgroup communication. springerplus, 5(1), 714, doi: 10.1186/s40064-016-2499-4 17. hunt, v., layton, d., & prince, s. (2015). why diversity matters. https://www.mckinsey.com/~/media/mckinsey/business%20functions/organization/our %20insights/why%20diversity%20matters/why%20diversity%20matters.ashx 18. hunt, v., prince, s., dixon-fyle, s., & yee, l. (2018). delivering through diversity. https://www.mckinsey.com/~/media/mckinsey/business%20functions/organization/our %20insights/delivering%20through%20diversity/delivering-through-diversity_fullreport.ashx 19. kasinathan, r., mallu, m., & bozinski, m. (2024). diversity and inclusion in industry. a road to prosperity. crc press. taylor & francis group. 20. loden, m., & rosener, j. b. (1991). workforce america! managing employee diversity as a vital resource. homewood, il: business one irwin. https://doi.org/10.1108/er-11-2022-0522 https://doi.org/10.1108/er-11-2022-0522 https://www2.deloitte.com/content/dam/deloitte/au/documents/%20human-capital/deloitte-au-hc-diversity-inclusion-soup-0513.pdf https://www2.deloitte.com/content/dam/deloitte/au/documents/%20human-capital/deloitte-au-hc-diversity-inclusion-soup-0513.pdf http://www.portailrh.org/lecercle/pdf/gartner-webinaire-16-avril-2018-future-of-hr.pdf http://www.portailrh.org/lecercle/pdf/gartner-webinaire-16-avril-2018-future-of-hr.pdf https://www.glassdoor.com/employers/blog/diversity/ https://hbr.org/2013/12/how-diversity-can-drive-innovation https://www.mckinsey.com/~/media/mckinsey/business%20functions/organization/our%20insights/delivering%20through%20diversity/delivering-through-diversity_full-report.ashx https://www.mckinsey.com/~/media/mckinsey/business%20functions/organization/our%20insights/delivering%20through%20diversity/delivering-through-diversity_full-report.ashx https://www.mckinsey.com/~/media/mckinsey/business%20functions/organization/our%20insights/delivering%20through%20diversity/delivering-through-diversity_full-report.ashx the role of education and training in fostering workplace diversity and inclusion in digitally oriented organizations 190 21. mor barak, m. e. (2008). social psychological perspectives of workforce diversity and inclusion in national and global contexts. in r. patti (ed.), handbook of human service management (pp. 239-254). thousand oaks: ca: sage publications. 22. noe, r. a., hollenbeck, j. r., gerhart, b., & wright, p.m. (2016). human resource management. gaining competitive advantage. new york: mcgraw-hill education. 23. o’donovan, d. (2018). diversity and inclusion in the workplace. in c. machado & davim, j. (eds.), organizational behaviour and human resource management. management and industrial engineering (pp. 73-108). springer, cham. https://doi.org/10.1007/978-3-31966864-2_4 24. roberson, l., kulik, c. t., & tan, r. y. (2013). effective diversity training. in q. m. roberson (ed.), the oxford handbook of diversity and work (pp. 341–365). oxford university press. 25. stevens, f. g., plaut, v. c., sanchez-burks, j. (2008). unlocking the benefits of diversity. all-inclusive multiculturalism and positive organizational change. the journal of applied behavioral science, 44(1), 116-133. doi:10.1177/0021886308314460 26. talent intelligence. (2014). inclusion and the benefits of diversity in the workplace. https://www.talentintelligence.com/blog/bid/377611/inclusion-and-the-benefits-ofdiversity-in-the-workplace 27. universum. (2019). 2019 world’s most attractive employers rankings and report. https://universumglobal.com/wmae-2019/ https://universumglobal.com/wmae-2019/ agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 no. 1 (2023), pp. 145-153 145 global trends of modern inclusive economy i. zvarych, o. brodovska iryna zvarych¹, oksana brodovska² west ukrainian national university, b. havrylyshyn education and research institute of international relations/department of international economics, ternopil, ukraine ¹ orcid.org/0000-0001-5155-540x, e-mail: irazvarych@gmail.com ² orcid.org/0000-0003-4828-528x abstract. the purpose of the article is to highlight and work out the global trends of the modern inclusive economy. methodologically outline the main concepts on which modern inclusive economies are based, taking into account the war in ukraine, climate challenges, displacement of migration centers. the key point is the development of a model of a successful modern and exclusive economy. research on building inclusive workplaces, inclusion and entrepreneurship, corporate responses to the refugee and forced migration crisis, delivery of essential services to disadvantaged groups, enriched by diverse practitioners’ perspectives. although the global economy began to rebound in 2021, bringing some improvement in unemployment, recovery remains elusive and fragile. by the end of 2021, global economic recovery had been hampered by new waves of covid-19 infections, rising inflationary pressures, major supply-chain disruptions, policy uncertainties and persistent labour market challenges. сompanies need to ensure that they implement the right sustainable technologies in all of their processes and in every area of their operations in providing the inclusive economy, increasing implementation of the idea of circular economy. in deciding which circular economy actions to prioritise and integrate into climate-focused policies and measures, countries and companies are to be able to compare the relative merits, as well as emissions reductions, of individual circular economy measures. keywords: inclusive economy, circular economy, emission, waste, virgin material, value chain, pollution, climate introduction recent global upheavals, including the covid-19 pandemic and the war in ukraine, together with the various effects of digital transformation, have reinforced the historical legacy of discrimination and inequality. thus, according to the world economic forum's global gender gap report 2021, another generation of women is forced to wait for gender parity, as the global gender gap widened by one generation, from 100 years to 136 years. rigid norms and beliefs about sexual orientation, gender identity, and self-expression still challenge social and family acceptance of people around the world. at the same time, according to the world health organization, 1.3 billion people 17% of the world's population live with a disability. but inclusive economy should be developed with circular economy together. the circular economy is the so-called push factor for the decarbonisation of the economy. this trend is one of the main factor in development idea of inclusive economy. while the transition to renewable energy sources and the implementation of energy efficiency measures can tackle 55% of global emissions, circular economy strategies are required to tackle the remaining 45%. mailto:irazvarych@gmail.com global trends of modern inclusive economy 146 the necessary relationship between (ghg emissions/electric power generation, transmission and distribution) vs (circular rates) is shown at the level of 9%. in fact, it is very little, but at the same time reflects the real picture. because based on the circular gap report for 2022, the level of circularity of the economy is 8.6%. based on the growing importance of place-based strategic intelligence, kitagawa and vidmar (2023) present a conceptual framework for a new methodological approach to influence the shaping of subnational economic development. although scholarly attention towards inclusive economic development is emergent, its concept and evaluation remain ambiguous since few attempts have been made to elaborate on its definitions and goals (zhu, 2022). in this study, it is conceptualized and defined inclusive economic development, a productivity perspective for evaluating is proposed, and it construct an inclusive total factor productivity index based on data envelopment analysis. the purpose of the nonlinear relationship between financial inclusion and inclusive economic development in developed economies (timer & raza, 2022) is to investigate the nonlinear association between financial inclusion and inclusive economic growth (ieg) in developed economies. a block of g7 countries (germany, japan, canada, france, italy, the uk and the us) are considered in this study. nurazira, daud and ahmad (2022) examine the relationship between financial inclusion, digital technology and economic growth. a dynamic panel data analysis examines 84 countries since the gfc period. the results show that there is a positive and significant effect of financial inclusion and digital technology on country economic growth. in addition, digital technology plays a role in complementing the effects of financial inclusion on economic growth, implying that consolidation efforts should take place in improving financial ecosystems via digital technology infrastructure. the necessity of formally incorporating identity group stratification as a pillar alongside economic and political understandings of any political economy framework demonstrated in work of chelwa, hamilton and green (2022). they made case by juxtaposing mutual inadequacies and myopic limitations associated with two influential but polar political economy frameworks marxian and public choice theory-since neither framework formally incorporates an identity group stratification lens beyond class reductionism. in view of the 2020 global health crisis and its repercussions on the global economy (niekerk, 2020), the need to redirect conventional economic thinking towards securing global economic sustainability is most critical. the sustainable development goals (sdgs) are a significant move in this direction. however, in the past few years, a clearer understanding of inclusive economics and sustainability indicators have progressed our ability to reduce economic exclusion, chiefly represented by global inequality. the covid-19 pandemic has created shockwaves across the globe and impacted businesses and economies. ghosh, sigdyal and khursheed (2022) described enormous disruptive transformations that have happened in the work models and systems to enable businesses to flexibly operate, sustain, and remain agile in uncertain times. the future of work, which seemed uncertain post-pandemic, has reached normalcy due to the organisational resilience and strategic responses shown by organisational leaders and small businesses. although small businesses across the world have been impacted negatively leading to closures, financial crunches, and job losses worldwide, many have shown signs of resilience and recovery. the chapter throws light on the work transformations across economies and strategic iryna zvarych, oksana brodovska 147 responses to deal with them. it describes the challenges faced by various small businesses and the way they have been flexible and resilient. the chapter proposes a framework for building an inclusive economy that has been asserted to be the solution to a sustainable and resilient future in times of uncertainties and crises. the alzhanova, guzev, loginova and polkovnikov (2022) propose an econometric model to analyze the correlation between the indexes that evaluate digital technologies adoption in economic activities and social interactions and the indexes that quantify the attributes of an inclusive economy. firstly, open-access values were collected for the two groups of indicators, namely, the exogenous indexes measuring the effect of digital technologies on socio-economic systems, and endogenous indexes characterizing the economic development of society. whether financial inclusion and economic growth can sustainably release poverty alleviation effects in long term has been the focus of academia and government sector (chen, zhu, zhao, cao and cai, 2022). this article uses provincial panel data from 2004 to 2019 to examine the dynamic nonlinear connectedness between the financial inclusion, economic growth, income inequality, and poverty alleviation; the main objective is to reveal the direction and intensity of the long-term and short-term impact of each factor on poverty alleviation. by building a panel vector autoregression model (pvar), the comparison analyses of national, eastern, central, and western sample groups verify the existence of dynamic nonlinear connectedness among the four variables. inequalities and social exclusion are the consequences of imbalanced economic growth, prompting the world bank to establish new targets for eradicating extreme poverty and promoting shared prosperity. ismail, shah and rasid (2022) developed those ideas. surprisingly, the contemporary solution methods are consistent with shari'ah's objectives. stressing the importance of balanced growth, this study aims to quantify prosperity sharing in 28 developed and 14 developing nations by reshaping the notion of sustainable development from an islamic perspective. i. methodology in order to adequately define and evaluate, the authors used statistics from the eurostat database, in particular circular economy indices and gas emissions. at the same time, 27 countries of the european union were analyzed for the period from 2000 to 2020. namely we used statistics for such 2 indicators: recycling rate of municipal waste and net greenhouse gas emissions. the following scientific methods were used for the analysis and methodological approach: the method of absolute and relative chain transformations, and the method of generalization.the new methodological approach helps to identify the cyclical efforts that can contribute emissions decrease in any sector and highlights the key ways to diminish emissions in the building sector. we offer the author's methodological approach, which we did not meet in the works that were reviewed. 1) using the method of linear absolute and relative chain transformations, we will show the dynamics of two key indicators: gas emissions and the level of recycling (fig.1); 2) only after point 1, we can distinguish 4 types of strategies, singling out 1 main one (emissions decrease↓ recycling increases↑) and the top countries characterized by these 4 strategies are selected accordingly (fig.2); 3) on the basis of this, we highlight the so-called inclusive decarbonation platforms: stakeholders in those top countries with the most characteristic 'bypass' emission hotspots (table 1). global trends of modern inclusive economy 148 ii. results the purpose of the article and research of the authors was to prove the very idea that with the increasing implementation of the idea of circular economy, the functioning of various programs and strategies at different levels, the number of emissions will decrease and it will increase the effect of inclusive economy. figure 1. analysis of circular economy in europe source: made by authors a larger cycle and more efficient use of materials opens up new opportunities to further reduce greenhouse gas emissions. therefore, we analyzed european countries according to the eurostat database and calculated linear absolute and relative chain transformations for two key indicators: emissions and the recycling rate (figure 1). after that, they choose the countries in which three strategies are followed (figure 2): 1) gas emissions decrease ↓, and recycling increases↑ 2) gas emissions are decreasing ↓ , and recycling is decreasing ↓ 3) gas emissions increase ↑ and recycling increases ↑ 4) gas emissions increase ↑ and recycling decrease ↓ figure 2. linear absolute chain transformations, 2020/2000 + top country. source: made by authors -6 -4 -2 0 2 4 6 eu 2 7 b el gi u m b u lg ar ia c ze ch ia d en m ar k g e rm an y es to n ia ir el an d g re ec e sp ai n fr an ce c ro at ia it al y c yp ru s la tv ia li th u an ia lu xe m b o u rg h u n ga ry m al ta n e th e rl an d s a u st ri a p o la n d p o rt u ga l r o m an ia sl o ve n ia sl o va ki a fi n la n d sw ed en ic el an d n o rw ay sw it ze rl an d u n it ed k in gd o m recycling rate of municipal waste [cei_wm011] net greenhouse gas emissions (source: eea) [sdg_13_10] iryna zvarych, oksana brodovska 149 the new methodology can help to identify which circular economy measures in each sector can make the most promising contribution to reaching the goals of reducing emissions and achieving climate neutrality in europe and in the end of our idea – to increase effectiveness of inclusive economy. in the building sector, the selected circular economy measures could lead to a reduction of up to 61% of material-related greenhouse gas emissions over the life cycle of buildings. greenhouse gas emissions can be reduced by making material flows more efficient and by preserving the utility and value of materials and products for as long as possible. the european green deal emphasises the importance of transforming the european economy into a more cyclical one. this strategy is a key element of the european commission's vision for a climateneutral economy by 2050 (ec, 2018a). improving circularity and increasing the efficiency of materials management can take different forms: • extending the service life of the product • reduction of material losses • recycled materials and products • prevention of downcycling • replacement of materials with intensive emissions of greenhouse gases with materials with lower emissions. table 1. drivers of the transformational shifts (decarbonation platforms: stakeholders) country inclusive decarbonation platforms: stakeholders (country) portugal crave is a content and ecommerce platform all in one, with a focus on waste-based and zero-waste products in the home, fashion and lifestyle categories. spain the life circ-elv project has developed a new process for managing end-of-life vehicles to recover bumpers and fuel tanks, recycle the materials and use them to manufacture pipes and new parts for vehicles. using this recycled plastic in products from this industry and others will help reduce the carbon footprint by 85%. latvia in latvia, a project developed by the ministry of agriculture (in cooperation with private investment) seeks to improve biomass production in the country’s forests. cyprus green dot cyprus is the first collective compliance system for packaging and packaging waste in cyprus. lithuania the lithuanian commune diy, a team of skateboarding professionals and enthusiasts, collects old, broken canadian maple hardwood skateboards that have lost their original purpose and recycles them 100 %. the new products made of skateboards are sustainable, strong and have a new life span which is longer than the one of an average skateboard deck. tarkett is pioneering post-use flooring recycling in europe. it is working with ikea to transform used tarkett flooring from the ikea kungens global trends of modern inclusive economy 150 kurva store into new flooring. sweden recreate pushes towards circular construction by investigating the system changes needed in the whole ecosystems of construction and demolition. finland the interreg north-west europe project seramco (secondary raw material for concrete precast products) focused on researching and promoting the use of secondary raw materials from construction and demolition waste (cdw). germany iclei is a global network working with more than 2 500 local and regional governments committed to driving local action towards a social and ecological transition. in future, whether purchasing services or products such as buildings, furniture and food, local authorities will need to look for increasingly sustainable supplies. italy crave is a content and ecommerce platform all in one, with a focus on waste-based and zero-waste products in the home, fashion and lifestyle categories. source: made by authors nevertheless, when deciding which circular economy actions to prioritise and integrate into climate-focused policies and measures, countries and companies are to be able to compare the relative merits, as well as emissions reductions, of individual circular economy measures. in accordance with the direction of transformations, we consider countries with the so-called top transformational strategies and offer for your consideration those inclusive platforms and stakeholders that, in our opinion, are the drivers of these transformational shifts (table 1). there has been a recent acceleration of ambitions on decarbonization, with numerous countries adopting targets to achieve net-zero carbon emissions by the middle of this century. although the predominant policy approach to decarbonization over the past two decades – the replacement of fossil fuels with renewables in power generation, and improvements in energy use efficiency – has contributed the largest proportions of offsets to co2 emissions from economic growth in recent years, there are two reasons why this approach may leave some sectors un-decarbonized in the context of accelerated ambitions. first, there is evidence that direct electrification may not be possible, for technical and/or economic reasons, in ‘hard-toabate’ sectors outside of electricity generation. decarbonization in these sectors will require costly rebuilds and retrofits, and the additional costs could render some products uncompetitive on world markets. and second, the predominant approach to decarbonization has disregarded the globalization of trade and supply chains and the spatial dissociation between places of extraction, production, and consumption. in the current ‘linear’ decarbonization model, a sole focus on the reduction of emissions from energy production is likely to be insufficient to achieve net-zero objectives, as emissions would need to decline very rapidly to offset the expansion in economic output, which is not the case at present. iryna zvarych, oksana brodovska 151 figure 3. new trends of global inclusive economy source: made by authors so, the main trends and vectors of modern inclusive economy is described in figure 3.  inclusive economy as a new world paradigm;  covid-19 – changing game rules;  new economic structure (inclusive policies);  impact of 5g, 3d, holographic technologies;  "green" factor;  technological factor;  social redistribution;  social inclusion – transition of poor people, poor countries into their existence;  social unrest;  the position of governments regarding;  "personal philosophy";  capitalization of investments;  the latest infrastructure – the architecture of the digital world in the digital economy at the global level;  "green impetus" a green impulse in a "green" world. conclusions inclusive economy and crises in the world need the regulation of government countries because they have many different resources needed. governments do the most work during a crisis (financial, pandemic). global business is changing not only under the influence of the pandemic but as now war. now one of the crises, which is the background, is an economic crisis (environmental crisis). such a megatrend as the globalization of all sustainability will be part of how to do business. these are not external events affecting the business. this is part of how we will do business. this is not the "new normal" – we just learn from it. society is a crucial part of recovery and need the critical role of governments. global trends of modern inclusive economy 152 kitagawa and vidmar (2023) based on the growing importance of place-based strategic intelligence, present a conceptual framework for a new methodological approach to influence the shaping of subnational economic development. we also propose our new methodological approach but in another structure – using circular indicators and present circular economy as inclusive circular economy. alzhanova, guzev, loginova and polkovnikov (2022) propose an econometric model to analyze the correlation between the indexes that evaluate digital technologies adoption in economic activities and social interactions and the indexes that quantify the attributes of an inclusive economy. i strongly agree but we develop this idea in our article. we used the method of linear absolute and relative chain transformations, we will show the dynamics of two key indicators: gas emissions and the level of recycling. in 2022, a series of events led to rapid changes in the world economy. the war between russia and ukraine, complicated by sanctions imposed by the united states and the european union, disrupted the recovery process after the global pandemic. the hostilities caused serious upheavals, which, accordingly, led to an increase in commodity prices. this situation further exacerbated inflation caused by the recovery in demand amid supply chain disruptions. central banks around the world have been forced to tighten financial constraints to reduce inflation. this means that central banks have had to normalize the loose liquidity/monetary policies seen during the pandemic earlier than expected to curb rising inflationary pressures. in 2023, due to uncertainty, the global economic situation will still be difficult due to the emergence of uncertainty. global economic growth could potentially be hampered by several lingering risk factors: • geopolitical tension, • consistently high inflation, • rising interest rates and likely a recession. inflation and an increase in interest rates led to a decrease in confidence in the prospects of economic growth. the sharp rise in interest rates, especially in the "developed" countries, including the us, uk and european countries, has raised new concerns that the global economy will fall further into recession. adding to the pressure is the fact that one of the largest economies, china, recorded worse-than-expected economic growth as the country is still following a zero-covid-19 policy that has led to a partial lockdown of the economy. a slowdown in the growth of the world's largest economies will have significant consequences for the global outlook. according to forecasts of the international monetary fund, economic growth will decrease from 6.1% in 2021 to 3.2% this year. the economy is projected to slow to 2.9% in 2023. in 2023, the implementation of innovations and developments in transformative technologies, such as: •artificial intelligence, • internet of things (iot), • virtual and augmented reality (vr/ar), • cloud computing, • blockchain and high-speed network. • protocols (5g). in addition, such transformative digital technologies do not develop in isolation from each other, and in the future the boundaries between them will disappear. new solutions for iryna zvarych, oksana brodovska 153 advanced operations, hybrid and remote work, business decision-making, and automation of manual, routine, and creative workloads combine these technologies in ways that enhance each other. with this in mind, in the near future we will be able to create "smart enterprises" where systems and processes work together to perform simple and everyday tasks in the most efficient way. to prepare for this, companies need to ensure that they implement the right technologies in all of their processes and in every area of their operations. today, every entrepreneur should understand how ai and the other technologies mentioned above affect their business and industry. more efficient sales and marketing, better customer service, more efficient supply chains, products and services that are more responsive to customer needs, and optimized manufacturing processes are all out in the open, and in 2023 the barriers to access will be lower. references 1. alzhanova, f., guzev, m., loginova, e. and polkovnikov, a. (2022). the development of inclusive economy based on digital technologies: econometric assessment of formation, new technology for inclusive and sustainable growth, pp 99–110, 2022, doi: 10.1007/978-981-16-9804-0_9. 2. chelwa, g, hamilton, d., green, a. (2023). identity group stratification, political economy & inclusive economic rights, daedalus, volume 152, 2023 https://doi.org/10.1162/daed_a_01973 3. chen, z., zhu, h., zhao, w., cao, b., and cai, y. (2022) dynamic nonlinear connectedness between the financial inclusion, economic growth, and china’s poverty alleviation: evidence from a panel var analysis, complexity in finance and economics, 2022 https://doi.org/10.1155/2022/9584126 . 4. daud, s., ahmad, a. (2023) financial inclusion, economic growth and the role of digital technology, finance research letters, volume 53, may 2023, 103602, https://doi.org/10.1016/j.frl.2022.103602 5. ghosh, n., sigdyal, p., bakersfield, ramya u. and khursheed, r. (2022) post-covid-19 transformations for future of work and small business sustainability: towards an inclusive economy, sustainability and the future of work and entrepreneurship for the underserved|pages: 27, 2022, doi: 10.4018/978-1-6684-4322-4.ch002 6. ismail, n., eskandar, m. (2022) promoting an inclusive economy: the relevance of sustainable development and islamicity prosperity index, journal of islamic monetary economics and finance, volume 8, 2022 https://doi.org/10.21098/jimf.v8i4.1530 7. kitagawa, f., vidmar, m. (2023) strategic intelligence for the future of places: enabling inclusive economic growth through the opportunity areas analysis tool, regional studies, volume 57, pp. 656-669, 2023. https://doi.org/10.1080/00343404.2022.2045267 8. niekerk, a. (2020) inclusive economic sustainability: sdgs and global inequality, sustainability 2020, 12(13), 5427; https://doi.org/10.3390/su12135427 9. timer, s. and raza, s.a. (2022) nonlinear relationship between financial inclusion and inclusive economic development in developed economies: evidence from panel smooth transition regression model, international journal of social economics, 2022 https://doi.org/10.1108/ijse-04-2022-0223 10. zhu, c. (2022) conceptualising and evaluating inclusive economic development: a productivity perspective, development studies research, volume 9, pp. 219-229, 2022. https://doi.org/10.1080/21665095.2022.2112729 https://doi.org/10.1162/daed_a_01973 https://doi.org/10.1155/2022/9584126 https://doi.org/10.1016/j.frl.2022.103602 https://doi.org/10.1080/00343404.2022.2045267 https://doi.org/10.3390/su12135427 https://doi.org/10.1108/ijse-04-2022-0223 https://doi.org/10.1080/21665095.2022.2112729 agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 17, no. 2 (2023), pp. 99-104 99 international experience in measuring the digital economy s. khalil, a. ibrahimov saida khalil 1, aykhan ibrahimov2 dokuz eylul university, turkey 1 orcid no. 0000-0003-3695-7755, e-mail: saida_khalil@unec.edu.az 2 orcid no. 0000-0003-4679-1576 abstract: the article discusses the importance and challenges of measuring the digital economy. it evaluates the overall benefits of the gdp framework and introduces new concepts to define the digital economy as an object of measurement. the concepts used to define the digital economy as an object of measurement are the following. in order to quantify the benefits associated with the digital economy, a new metric is introduced to formally link it to traditional gdp and the concept of gross income is used as the main indicator to assess its economic impact on the regional economy. the main methodological approaches for constructing relevant indicators are described. the methodology for measuring the digital economy and the prospects for improving the knowledge base are identified. keywords: digital economy, measurement of economy, gdp, total incomes. introduction digitalisation is "a general process beyond the industrial revolution that refers to the replacement of machines that depend upon humans and machines that do not depend upon humans by machines that can think for themselves, are intelligent and capable of working independently, participating in the production of sectors and causing fundamental changes in business life" (yilmaz, 2020). the digital economy, meanwhile, is defined as "an economy that is extensively based on digital computer technologies" (kalkınma bakanlığı, 2018). by renewing business processes in production, digitalisation supports the symbiosis of man and machine in working life in order to increase productivity and reduce production costs. however, the expected productivity gains are not keeping pace with the speed of the digitalisation process, despite the rapid pace of technological innovation and transformation. as any change in its own reality takes time to manifest its economic or social effects, these effects of digital transformation are expected to become more apparent over time. in particular, the adoption of digital by the public sector, the increase in the share of high-tech digital firms and the adaptation of business models to digital technologies should facilitate the adjustment of the productivity rate to the pace of digital transformation (oecd, 2021). measuring the digital economy new perspectives maps existing indicators across a range of domains, including education, innovation, entrepreneurship, and economic performance, against the current mailto:saida_khalil@unec.edu.az international experience in measuring the digital economy 100 policy challenges of the digital economy, as reflected in the oecd's internet policy guidelines (2011). the essence of the definitions is also influenced by the specifics of a particular historical period. the first definitions were based on contrasting earlier concepts such as the "information economy" and the related broader concept of the "information society". don tapscott (1996), for example, stated that the digital economy encompasses two types of economic activity. the first type, informational, involves basic tasks such as uploading static information to online resources; the second type, communication, includes activities made available by the internet. the definition of a concept reflects the times and current trends, especially in the field of technology. early interpretations (mesenbourg, 2001, tapscott, 1996) focused on internet technologies, which became a kind of technological mainstream of the 1990s, at least in the global north. a number of works provide specific interpretations, but current approaches are generally simplified versions of the definition of the digital economy as a "digitally based economy" (ec, 2013). the measurement of the digital economy is a priority, given the increase in the number of economic activities that are made possible by digital technologies and the consequent growth in their economic importance. but there are many challenges: high quality data is needed for good policy making, fiscal policy and resource allocation. at the moment, this component is lacking in the digital economy and, as a result, it is unlikely that public policies will be fully supportive of the development of the digital economy (house of commons, 2016). challenges of the digital economy there are several obstacles to measuring the digital economy:  definitions/frameworks: as the discussion above shows, definitions of the digital economy are very diverse and sometimes inconsistent. this does not in itself make it difficult to measure the digital economy, but it does make comparative analysis difficult. the same definitions that cannot draw a clear line between the traditional and the digital economy also make the initial measurement difficult (oecd, 2014).  data quality problem: currently, especially in developing countries, there is a fundamental problem with the data being collected it is either missing or unreliable. this is exacerbated by further innovation data collection always lags behind technological progress.  the cost problem: moore's law and similar phenomena "my watch has more computing power than the computer that launched apollo" mean that the cost of the same amount of ict power, storage capacity, etc. is constantly falling. something similar can happen with types of ict-related services, which also undergo qualitative changes that do not always affect their value; the emergence of free products (such as wikipedia) that still add value is relevant (house of commons, 2016, oecd 2016). saida khalil, aykhan ibrahimov 101  adjustments are needed to take this into account, but this is no longer relevant to science (oecd 2014, 2016). the virtuality of the digital economy: many types of digital economic activity do not immediately produce a finished product. some of these types of services may be intermediate at the business-to-business or consumer level; there may be difficulties in calculating value added; and digital services are delivered in virtual space and therefore may not be easily traceable, especially when there is cross-border e-commerce6 or the digital consumer-as-producer phenomenon (house of commons, 2016, oecd, 2016, wef, 2015).  some researchers argue that these obstacles make measuring the digital economy using traditional methods of economic analysis "not only incomprehensible, but unrecognisable" (sheehy, 2016). at present, unresolved difficulties mean that the size of the digital economy is "substantially underestimated". research methodology policymakers use gdp data to make decisions about everything from infrastructure to r&d, from education to cybersecurity. regulators use this data to make policy decisions that affect technology companies and others. because the benefits of digitalisation are dramatically overlooked, most of these policies remain divorced from reality. for example, a study by felix eggers of the university of groningen found that facebook has created $225 billion in unrecognised value for consumers since 2004. if we start from the fact that digital products and services are growing at an incredible rate in our economy, we better understand the need to solve this problem as soon as possible. the main reason why the digital economy is under-represented in gdp is that gdp is defined in terms of the price people pay for a product or service. therefore, with few exceptions, if the price of a product or service is zero, its contribution to gdp is also zero. however, many of us use free digital applications such as search engines and online maps much more than we use their paper versions. in order to measure these benefits related to the digital economy, a new measure was developed to map them onto traditional gdp in a formal way. this new measure is called gdp-b, due to its reliance on gdp to consider the advantages (instead of the cost) of new and free goods (brynjolfsson, et al., 2019). gdp-b was developed by erwin diewert as a way to complement gdp in order to capture the welfare gains of new and free goods, together with felix eggers and kevin fox. it is recommended that policy makers and managers use this measure of gdp-b when focusing on the welfare of the consumption side of the economy, instead of the production side. they found that the average annual gdp-b growth in the us since facebook's inception in 2004 would increase by between 0.05 and 0.11 per cent if facebook's benefits were included. while our gdp-b estimates are not as precise as gdp measurements, they at least attempt to directly measure economic well-being, which in the digital age is not adequately captured by gdp. our measure of gdp-b remains within the neoclassic framework, reflecting only the private economic benefits related to the digital revolution (collis and brynjolfsson, 2020, brynjolfsson, et al., 2019). international experience in measuring the digital economy 102 figure 1. spectrum of well-being measures source: https://www.brookings.edu/wp-content/uploads/2020/01/wp57-collis_brynjolfsson_updated.pdf macroeconomic indicators are easy to measure, but they only tell part of the story, and well-being measures provide a more realistic picture of how consumers are faring, but they too may be subjective. by considering a combination of measures, including our proposed gdp-b, policymakers, regulators and managers would be better placed to make decisions (figure 1). to estimate the total income of digital economic activity, we use the following formula (glinsky, et al., 2011): 𝑀 = 𝑀𝑇 + 𝑀1 × 1 1−𝑅 (formula 1) where m total income (direct and indirect, taking into account the multiplier effect) from digital activities in the region; 𝑀𝑇 direct economic effect from digital activity (the amount of funds generated by the digital economy in the first round of circulation of funds, included in the grp of the region) ; 𝑀1 the part of the proceeds (income) of the digital economy that has an impact on grp (the volume of grp caused by orders of digital activities) ; 𝑀1 = 𝑌×𝑄𝑇×(𝑉𝑇−𝑍𝑇i̇) 𝑋 (formula 2) 𝑉𝑇 volume of produced products and services of the digital economy in value terms (the value of goods and services of the digital economy); 𝑍𝑇i̇ volume of expenditures for the purchase of goods and services for digital production from other enterprises (cost of goods and services of the digital economy); 𝑌 gross regional product; x gross domestic product; 𝑅 coefficient reflecting the degree of closedness of the regional economy and reflecting the relationship between two consecutive circles of circulation of digital economy funds in the region; 𝑄𝑇 the share of digital economy costs remaining in the national (regional) economy (lovelock, 2018, katz,2017). results gdp-b(measures consumer rent generated by free digital goods, services and other nonmarketable products) measures of well-being (e.g. happiness, life satisfaction) macroeconomic indicators (e.g. gdp, productivity) high low relevance to prosperity subjective objective certainty https://www.brookings.edu/wp-content/uploads/2020/01/wp57-collis_brynjolfsson_updated.pdf saida khalil, aykhan ibrahimov 103 the basis for the calculations is the estimation of mt the amount of funds generated by digitalisation in the first round of circulation, included in the grp of the region (direct economic effect from digital activity). as the main indicator for assessing the economic impact of digitalisation on the region's economy, this methodology is based on the concept of total income from the digital economy. the total income is understood as a set of annual benefits, both direct and indirect, received by the region as a result of digital activities and is expressed in value terms (glinsky and serga, 2021, glinsky et al. 2011). this is a measure of how much money is spent by digital businesses, digital infrastructure businesses, information and communication businesses, and non-digital businesses on production, consumer goods, and services. moreover, the indirect income for the region from digital activities is only the part of the expenditure (direct and overall cost) which stays within the region. the following points should be taken into account when calculating total revenues from the digital economy (glinsky and serga, 2021): 1. the gross value added by the type of economic activity 'information and communication activities' (annual calculation of grp) is the volume of funds generated by digitalisation in the first cycle of funds circulation. 2. expenditure on the services of third parties used in the production of information and communication services is assumed to be equal to the volume of expenditure on the purchase of goods and services for digital activities from other enterprises (costs constituting the cost of the digital product). multiplier effects in monetary terms can be estimated using multipliers, especially on gross domestic product. conclusions the study focuses on the methodological issues involved in assessing the contribution of digital economy activities to national and regional revenues, discusses possible methods for assessing the digital economy, and specifies the points to be taken into account when calculating total revenues. in conclusion, the digital economy is a transforming power for the global economy and has considerable potential for revenue generation. however, there are a number of barriers to its development, the overcoming of which is essential for the full realisation of its benefits. accurate definition and measuring their effects on gdp are essential for informed policy and economic analysis. policy makers, regulators and managers can make better decision-making by evaluating a range of measures together, including the proposed gdp-b. focus not only on price but also on the value created. references 1. avinash collis, erik brynjolfsson (2020) how should we measure the digital economy? hutchins center working paper #5 7 https://www.brookings.edu/research/howshould-we-measure-the-digital-econom 2. brynjolfsson, e., collis, a., diewert, w. e., eggers, f., & fox, k. j. (2019). gdp-b: accounting for the value of new and free goods in the digital economy. nber working paper no. 25695. https://www.brookings.edu/research/howshould-we-measure-the-digital-econom international experience in measuring the digital economy 104 3. ec (2013) expert group on taxation of the digital economy. brussels: european commission. available at: http://ec.europa.eu/taxation_customs/sites/taxation/files/resources/documents/taxatio n/gen_info/good_ governance_matters/digital/general_issues.pdf (2018). 4. glinsky v.v., serga l.k., (2021). approaches of measuring digital economy in the region. doi: 10.25801/src.2021.44.47.002 5. glinsky v.v., serga l.k., zolotarenko v.s., shcherbak i.v., myzin a.a. (2011). on the issue of assessing the multiplicative effect of the industry // bulletin of nsuem. – no. 2. – p. 102-110. 6. house of commons (2016). the digital economy. london: house of commons business, innovation and skills committee. available at: https://www.publications.parliament.uk/pa/cm201617/cmselect/cmbis/87/87.pdf (accessed 1 june 2018). 7. katz, r. (2017). social and economic impact of digital transformation on the economy. itu (vol. 41). gsr-17 discussion paper. 8. mesenbourg t.l. (2001). measuring the digital economy, us bureau of the census, suitland. available at: https://www.census.gov/content/dam/census/library/working papers/2001/econ/umdigital.pdf (accessed at 1 june 2018). 9. oecd (2011). oecd guide to measuring the information society 2011, oecd. 10. oecd (2014). measuring the digital economy, paris. available at: http://www.oecd.org/sti/measuring-thedigital-economy-9789264221796-en.htm (accessed 1 june 2018). 11. oecd (2016). measuring gdp in a digitalised economy, paris. available at: www.oecd.org/dev/measuringgdp-in-a-digitalised-economy.pdf (accessed 1 june 2018). 12. oecd (2021, mart). productivity growth in the digital age. https://www.oecd.org/ going-digital/productivity-growth-in-the-digital-age.pdf 13. peter lovelock (2018). framing policies for the digital economy: towards policy frameworks in the asia-pacific. undp, global centre for public service excellence, singapore. 14. sheehy a. (2016). gdp cannot explain the digital economy. forbes, 6 june. available at: https://www.forbes. com/sites/andrewsheehy/2016/06/06/gdp-cannotexplain-the-digital-economy (accessed 1 june 2018). 15. t.c. kalkınma bakanlığı. (2018). on birinci kalkınma planı (2019-2023) sanayide dijitalleşme çalışma grubu raporu. ankara 16. tapscott d. (1996) the digital economy: promise and peril in the age of networked intelligence. new york, ny: mcgraw-hill. 17. wef (2015). expanding participation and boosting growth: the infrastructure needs of the digital economy, geneva. available at: www3.weforum.org/docs/wefusa_digitalinfrastructure_report2015.pdf (accessed 1 june 2018). 18. yasin yilmaz (2020). dijitalleşmenin etkisi altında değişen çalışan yapısı geleceğin işgücü yetkinlikleri. 19. yasin yilmaz (2021). dijital ekonomiye geçiş süreci, ölçümü ve dijitalleşme verimlilik i̇lişkisi, i̇stanbul i̇ktisat dergisi istanbul journal of economics 71, 2021/1, s. 283-316 agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 17, no. 2 (2023), pp. 34-40 34 the impact of ai on marketing: opportunity or threat? m. fornazarič milena fornazarič ljubljana school of business, ljubljana, slovenia orcid id: https://orcid.org/0009-0002-7175-7687, e-mail: milena.fornazaric@gmail.com abstract: today we are talking about a new generation of ai, about generative ai, which came into mass use at the end of last year. artificial intelligence is useful if we know how to use it and it has certainly been fundamentally changing the marketing universe for some time. in marketing, ai tools help in customer segmentation, in finding new customers who show propensity to buy, in product recommendations, in sales, in customer support, in the production of advertising messages, in the generation of responses on social networks, in purchasing behavior research, in algorithms for predicting buyer behavior, etc. chatgpt and related technologies are the reality of individuals and organizations. new technologies develop very quickly and exponentially, where we do not know where and how the development will go, but we know that changes will happen. it is best to start preparing for the changes today. ai is not so much a technological change as it is a business change in organizations that requires change management, strategy and vision. keywords: ai, marketing, changes, chat gpt, technology introduction there are many unknowns, there is also a lot of coordination, what is ai in marketing anyway. one of the very useful definitions says: ai marketing refers to the advanced approach of using artificial intelligence (ai) in marketing to automate, optimize, and improve elements of the marketing procedure and process. you can also leverage ai to make more informed and data-driven decisions through the insights ai marketing gathers through its data collection, hence improving overall marketing (sauter, 2023:2). the aim of the article is to listed some of positive and negative impacts of ai on current practices in marketing. generative ai and global economy breakthroughs in generative artificial intelligence have the potential to bring sweeping changes to the global economy, according to goldman sachs research. as tools using advances in natural language processing work their way into businesses and society, they could drive a 7% (or almost $7 trillion) increase in global gdp and lift productivity growth by 1.5 percentage points over a 10-year period (goldman sachs, 2023). the percentage of respondents who say that their company uses ai has jumped from 22% in 2018 to 50% in 2023. nearly half of respondents, 46%, say that they have experimented with generative ai, and 27% say that they use it regularly (boston consultancy group, 2023:3). ai is changing the marketing universe https://orcid.org/0009-0002-7175-7687 mailto:milena.fornazaric@gmail.com milena fornazarič 35 today we are talking about a new generation of ai, about generative ai, which came into mass use at the end of last year. artificial intelligence is useful if we know how to use it (meden, 2023, p. 1), and it has certainly been fundamentally changing the marketing universe for some time. in marketing, ai tools help in customer segmentation, in finding new customers who show propensity to buy, in product recommendations, in sales, in customer support, in the production of advertising messages, in the generation of responses on social networks, in purchasing behavior research, in algorithms for predicting buyer behavior, etc. there are many unknowns, there is also a lot of coordination, what is ai in marketing anyway. one of the very useful definitions says: ai marketing refers to the advanced approach of using artificial intelligence (ai) in marketing to automate, optimize, and improve elements of the marketing procedure and process. you can also leverage ai to make more informed and data-driven decisions through the insights ai marketing gathers through its data collection, hence improving overall marketing (sauter, 2023:3). a study by gartner predicts that by 2024, ai-generated content will account for 30% of the total content produced by enterprises. by automating content creation, companies can save time and resources, allowing their marketing teams to focus on higher-level strategic initiatives. gartner predicts that: by 2024, 40% of enterprise applications will have embedded conversational ai, up from less than 5% in 2020. by 2025, 30% of enterprises will have implemented an ai-augmented development and testing strategy, up from 5% and 2021 (gartner, 2023:1). in a recent gartner webinar poll of more than 2,500 executives, 38% indicated that customer experience and retention is the primary purpose of their generative ai investments. this was followed by revenue growth (26%), cost optimization (17%) and business continuity (7%) (gartner, 2023:1). gen ai has captured interest across the business population: individuals across regions, industries, and seniority levels are using gen ai for work and outside of work. seventy-nine percent of all respondents say they've had at least some exposure to gen ai, either for work or outside of work, and 22 percent say they are regularly using it in their own work (mckinsey, 2023:1). when we talk about marketing, we assume that it is a holistic approach to marketing that emphasizes the holistic understanding of our customers and the satisfaction of their needs, which focuses on creating consistent and connected marketing activities through all communication channels (kotler, et al., 2016:347). the authors start from the assumption that significant changes are taking place in consumer behavior, for which the internet enables greater expectations and the expected consistency in communication with brands. holistic marketing allows companies to integrate different communication channels in a coherent marketing plan, which enables more effective communication with customers. customers expect a multifaceted experience that includes all aspects of integration with the company, from advertising, social media, mobile applications, sales support to customers, etc., which increases customer satisfaction. it is easier and more efficient to measure the success of marketing campaigns, since holistic marketing allows all channels and activities to be connected in a single data analysis system. this makes it easier for brands to understand which channels are more effective than others. brands must also express the values of their customers, who are increasingly sustainable and expect social responsibility from brands. holistic marketing therefore enables companies to develop elements of their own competitive advantage, as they the impact of ai on marketing: opportunity or threat? 36 are more comprehensively and efficiently equipped to meet the needs of their customers and respond more quickly to changes in the market environment. positive effects of changes in marketing with the use of ai in addition to processing existing data with algorithms that accurately predict customer purchasing behavior, predict trends and enable the creation of personalized marketing campaigns, improved user experience increases marketing efficiency, and thus also the value and roi of companies. according to eurostat (2023), the number of slovenian companies that use ai in marketing and research is higher than the average in europe (22.8% in slovenia compared to the eu, where the average is 12.6). in slovenian advertising, ai tools are mostly used in sales, the development of ai tools in advertising agencies and the research sector is relatively balanced between the development of employees and the use of already developed tools. the biggest obstacle to using ai seems to be that they do not consider ai technologies useful. ethical considerations and concern about invasion of data protection and privacy do not seem to be an issue (eurostat, 2023). a more personalized consumer shopping experience ai improves the buying process of customers because it gives a more personalized experience and more accurate results (meden, 2023:2). customers have an easy shopping process that is accurate and personalized. we address the customer in a personalized way when, e.g. in the online store we present a certain product, we offer the possibility to compare it with similar products, sometimes also to test it, and above all with the help of ai conversation bots can answer typical questions of customers, which responds in real time. buyers get an answer to their question immediately, which is why the purchase decision is faster and more efficient (meden, 2023:2). the use of personalized addresses is especially suitable for the creation of customized landing pages, the use of email marketing and the selection of products (sauter, 2023:2). better customer segmentation ai will address customers in a personalized manner, based on activities on the website, mobile application, activities in the physical store, based on demonstrated interest in communication (on social networks), and above all, the company will take into account the customer's interest in addition to classic segmentation. more targeted communication has improved conversion rates and targeting specific keywords (sauter, 2023:3). by using predicative algorithms, we can predict trends, more easily follow the changed purchasing habits of customers and optimize marketing campaigns. cost aspects and savings as early experience shows, the need for repetitive tasks will be reduced. most of the answers or questions that customers address to the content of the website are repeated. with well-structured data, ai will be able to answer them on its own. we will need fewer people in contact centers to answer questions. it is expected that the productivity of those individuals who will use ai tools will improve compared to those who will not learn it. the use of ai can milena fornazarič 37 improve the effectiveness of marketing efforts, leading to higher roi. this can include optimizing ad placement, adjusting bid prices, and targeting specific audiences (sauter, 2023:3) changed the way of communication with customers we expect that at the expense of conversational interfaces, communication with customers will be faster, the customer will also be able to quickly get more accurate answers that will be generated by ai, for example to his email address (meden, 2023, p.3). the content of the message is already and will be adapted differently for different individuals. ai, especially by understanding the unified communication of an individual on various digital platforms, is changing digital marketing, where it connects social networks, online stores, customer responses... in addition to better customer support and the preparation of appropriate personalized marketing materials, especially sales documents, it is easier to analyze data (especially in large quantities), market research, etc. benefits of ai in digital marketing (sauter, 2023:3):  analyze customer behavior  increase customer engagement  detect churn tendencies  anticipate purchase preferences  predict future trends  personalize marketing campaigns  increase conversion  target past customers  enhance ad targeting understanding customer needs and preferences when it comes to unstructured data, ai tools already know how to process it well in real time, form a recommendation for a possible purchase to a customer who is still on the website, comments, a customer satisfaction survey are possible, ai detects potential problems and can adjust them. ai is also excellent at detecting trends in the market. this can include insights into customer behavior, interests, and preferences, as well as sentiment analysis of customer feedback (sauter, 2023:3). ai tools also make it possible to read the emotions of customers in the purchasing process (mckinsey, 2023:2). research shows that customer expectations are changing, 43% of customers are starting to replace traditional ways of finding products or service recommendations with tools like chatgpt, 70% want wider implementation of generative ai in their interactions with organizations, 30% of customers are willing to pay more to use certain virtual services based on the use of ai (capgemini, 2023:1). ai as a sales tool virtual and augmented reality are already important marketing tools in the field of sales, enabling a more authentic and personalized shopping experience. brands will have the opportunity to connect sound with ai and gain the opportunity in the meta universe to create sound environments that will attract visitors, potential buyers (salzman, 2023:3). optimizing content for voice search is becoming increasingly important as more people use voice assistants the impact of ai on marketing: opportunity or threat? 38 such as siri, alexa, and google assistant to search for information, while augmented reality (ar technology) connects the real and virtual worlds and improves the shopping experience. (mckinsey, 2023:3). by analyzing customer data and transaction patterns, ai can detect suspicious behavior and prevent fraudulent transactions. this can include strategies such as monitoring for unusual transaction patterns and identifying suspicious ip addresses (mckinsey, 2023:3). negative effects of changes with the use of ai ai response control with modern generative systems, control is not the easiest, since there is no desire to limit them on the one hand, and on the other hand, it is necessary to prevent intentional offensive, obscene or inappropriate provocations on the part of users that can force the ai to give answers that are not appropriate. how to control that both ai and users do not cross the line of decent and acceptable communication in their behavior? unrelated data in the company in companies, especially larger systems and those that operate in several markets, not only local, we come across a lot of data in an unconnected, aggregated state. if we want to develop our own conversational bot, we need to make sense of the data according to some key and connect it in a way that will be understandable by modern ai that works on large language models. if the data is not relevant enough, we get bad answers. all the time, the answers must be controlled so that the content is not offensive, biased or fabricated. a significant challenge in the use of ai in marketing is ensuring the credibility and integrity of data (sauter, 2023:4), since ai works on the basis of predicative algorithms based on data. incomplete databases are the reason ai results are unreliable. at the same time, it is also worth emphasizing the issue of privacy and data protection, as well as the fact that different ai tools have different rules for protecting the privacy of users, as well as their own conditions of use. lack of empathy humans are generally distrustful of messages generated by ai, especially when a problem arises that ai cannot solve without human help because it lacks empathy. companies also have the opportunity to develop their own sources of competitive advantage, i.e. combinations of human intervention and generated responses. ai can automate tasks that are routine, analyze large amounts of data, optimize marketing strategies, but it is not precise. in addition, she lacks creativity, intuition, ability to see the big picture and understanding of complex emotions and motivation (sauter, 2023:3). the issue of intellectual property and copyright is also unclear. distrust of employees if we know how to formulate questions correctly, i.e. i. prompt, we will get more or less useful answers. as it seems, routine jobs in marketing (writing electronic responses, data analysis, press releases, writing other marketing texts, etc.) will give way to more strategic ones, which require more consideration and knowledge that ai does not yet possess. ai will not replace humans, but it will change their work. ai is unlikely to replace marketing employees, milena fornazarič 39 as it lacks creativity. however, according to the bcg survey, 86% of employees believe that the use of ai at work will require additional training, almost 30% believe that the employer will take care of the responsible use of ai, and as many as 36% believe that ai will replace their job (boston consultancy group, 2023:3). the impact of ai on people's mental health (fake news, deep fakes, trolls, etc.) deliberately inaccurate information that has flooded the world web, the media, destroys our ability to rely on scientists, facts, institutions (salzman, 2023:4). fake news, disinformation, influencing elections and democracy, mistrust of institutions, politics, media, affect people, their fears, which is related to mental health (depersonalization disorder (salzman, 2023:4), when people feel alienated and have a reduced sense of reality. the ethical use of ai, which takes into account users' privacy and is based on their consent to data processing, is a prerequisite for the transparent use of ai (sauter, 2023:4). the use of ai also has positive effects on employees (microsoft, 2023:4): increasing productivity, increasing job satisfaction, enabling greater creativity and opening new jobs. the same survey found that the time employees spend on microsoft teams has tripled since february 2020, 70% employees would delegate tasks to ai if it would reduce the amount of their work, 49% fear that they will be replaced by ai, twice as often management believe that ai will increase productivity rather than reduce the number of jobs, and 89% of managers believe that their employees will need new skills to support ai exploitation. however, wage pressures, the need for restructuring and less competitiveness due to skill equalization will be expected (microsoft, 2023:4). conclusions chatgpt and related technologies are the reality of individuals and organizations. new technologies develop very quickly and exponentially, where we do not know where and how the development will go, but we know that changes will happen. it is best to start preparing for the changes today. generative ai can bring new business models, new business opportunities and create new jobs, but the biggest challenge is the speed of change, as well as the lack of knowledge about ai and the resulting lack of ai strategies. with increased productivity, costs are expected to decrease, the range of new products and services will increase, processes and business models will be transformed, and there will be less need for certain services, as changes in customer behavior will also change their expectations. it is also worth mentioning the elements of responsible use of ai, from data protection, copyright issues, ethics and influence on decision-making, and risk management. ai models will get smarter, they will support all forms of data, text, images, audio, video, they will have up-to-date data, often in real time. they will often be industry oriented (e.g. for marketing). marketing is one of the fields that, even after a year of commercial use of generative ai, is exposed to major changes, both in terms of the speed of individual tasks performed by advertising agencies, as well as the quality of the agency's work performed (graphics, pitch preparation, production of texts, media posts, especially on social networks), as well as certain new services (media buying in real time). technology goes hand in hand on the one hand with fears and on the other with high expectations for cost, content and time the impact of ai on marketing: opportunity or threat? 40 efficiency of employees. lack of current knowledge on how to use existing and developing ai tools is a big problem. ai is not so much a technological change as it is a business change in organizations that requires change management, strategy and vision, skilled, empowered employees and large amounts of data. chatgpt is just the beginning. references 1. boston consultancy group. (2023, june). ai at work: what people are saying. retrieved november 23, 2023, from https://www.bcg.com/publications/2023/whatpeople-are-saying-about-ai-at-work 2. capgemini and salesforce collaborate to enable a new era of generative ai powered customer experience. (2023, september). retrieved november 27, 2023, from https://www.capgemini.com/at-de/news/press-releases/capgemini-and-salesforcecollaborate-to-enable-a-new-era-of-generative-ai-powered-customer-experiences/ 3. eurostat. (2023). artificial intelligence by nace. retrieved november 27, 2023, from https://ec.europa.eu/eurostat/statisticsexplained/index.php?title=use_of_artificial_intelligence_in_enterprises 4. gartner. (2023). gartner experts answer the top generative ai questions for your enterprise. retrieved november 21, 2023, from https://www.gartner.com/en/topics/generative-ai 5. goldman sachs report. (2023, april). artificial intelligence. retrieved november 23, 2023, from https://www.goldmansachs.com/intelligence/artificial-intelligence/ 6. mckinsey & company. (2023). the state of ai in 2023: generative ai's breakout year. retrieved november 21, 2023, from https://www.mckinsey.com/capabilities/quantumblack/our-insights/the-state-of-ai-in2023-generative-ais-breakout-year 7. microsoft. (2023, may). microsoft build 2023: ai redefines software development and future of work. retrieved november 27, 2023, from https://news.microsoft.com/en-hk/2023/05/24/microsoft-build-2023-ai-redefinessoftware-development-and-future-of-work 8. salzman, m. (2023, november 10). 9 ways ai marketing can grow your business (with examples & tools). retrieved from https://www.engati.com/blog/8-ways-aiwill-change-the-future-of-marketing 9. sauter, e. (2023). the 5 impacts of artificial intelligence on marketing. hbi communication. retrieved november 20, 2023, from https://www.hbi.de/en/blog/the5-impacts-of-artificial-intelligence-on-marketing/ https://www.bcg.com/publications/2023/what-people-are-saying-about-ai-at-work https://www.bcg.com/publications/2023/what-people-are-saying-about-ai-at-work https://www.capgemini.com/at-de/news/press-releases/capgemini-and-salesforce-collaborate-to-enable-a-new-era-of-generative-ai-powered-customer-experiences/ https://www.capgemini.com/at-de/news/press-releases/capgemini-and-salesforce-collaborate-to-enable-a-new-era-of-generative-ai-powered-customer-experiences/ https://ec.europa.eu/eurostat/statistics-explained/index.php?title=use_of_artificial_intelligence_in_enterprises https://ec.europa.eu/eurostat/statistics-explained/index.php?title=use_of_artificial_intelligence_in_enterprises https://www.gartner.com/en/topics/generative-ai https://www.goldmansachs.com/intelligence/artificial-intelligence/ https://www.mckinsey.com/capabilities/quantumblack/our-insights/the-state-of-ai-in-2023-generative-ais-breakout-year https://www.mckinsey.com/capabilities/quantumblack/our-insights/the-state-of-ai-in-2023-generative-ais-breakout-year https://news.microsoft.com/en-hk/2023/05/24/microsoft-build-2023-ai-redefines-software-development-and-future-of-work https://news.microsoft.com/en-hk/2023/05/24/microsoft-build-2023-ai-redefines-software-development-and-future-of-work https://www.engati.com/blog/8-ways-ai-will-change-the-future-of-marketing https://www.engati.com/blog/8-ways-ai-will-change-the-future-of-marketing https://www.hbi.de/en/blog/the-5-impacts-of-artificial-intelligence-on-marketing/ https://www.hbi.de/en/blog/the-5-impacts-of-artificial-intelligence-on-marketing/ agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 17, no. 2 (2023), pp. 27-33 27 policies and strategies aimed at ensuring the security of banking institutions and their it systems m.a. butcovan, r. ivan marinela adriana butcovan1, rica ivan2 1 romanian court of auditors – bihor branch, romania e-mail: adriana.butcovan@rcc.ro 2 faculty of electrical engineering & information technology, university of oradea, romania e-mail: rika_ivan2005@yahoo.com abstract: with the development of the banking system, its security and, implicitly, security policies emerged as critical factors in the entire banking sector. in the context of the current technologicaldevelopment, the vulnerability of banking institutions has increased dramatically. for both bank employees and customers, cybersecurity, operational security and data privacy have become top priorities. therefore, a central concern for banks is the prompt detection of threats and the development of measures aimed at eliminatingsuchdangers, which might both considerably increase the level of security in the banking sector. keywords: banking security, banking strategy, fraud, cyber-terrorism, banking system, international transactions, it security. 1. introduction in time, the concept of security and its component elements have undergone essential changes, along with the attitude of the states towards the means whereby this notion can be transposed into life, in relation to the changes that occur at the global level. the term "security", derived from the latin words securitas-securitatis, represents "the state of beingprotected against danger; the feeling of security that one associates with the absence of any type ofrisk''. security also means "protection, defence". in principle, security represents “that state of affairs that protects any community or country from any external and internal danger, following specific measures, which are adopted and can ensure the existence, independence, sovereignty, territorial integrity of the state and the respect for fundamental interests''. (mica enciclopedie de politologiethe little encyclopaedia of politics, 1977) starting from the general understanding of security as the absence of physical violence, while progress is seen as material development related to the standard of living in a continuous process of improvement, mary kaldor observes that "both concepts encompass the idea ofexemption from fear and the absence of needs" (marty kaldor, 2010) the concept of security applies to all levels in the organization of a society, from the individual to the state andto the international system. security is based onboth economic and political stability. thus, a viable security system can only be built if the two components are strengthened. certainty, trust, and tranquillityare associated not only with the absence of dangers, but also with the idea of keeping them under control. mailto:adriana.butcovan@rcc.ro mailto:rika_ivan2005@yahoo.com policies and strategies aimed at ensuring the security of banking institutions and their it systems 28 the banking sector operates in an environment characterized by instability and uncertainty, and losses can generate significant disturbances within the banking sector. the reputation and stability of banks depend on their ability to cope with the unstable economic environment, whether such instability is associated with money laundering, terrorist financing, corruption or fraud, or if it is generated by globalization or economic crises. in the case of banks, security is an essential issue, being characterised by a state when even the smallest dangers might be anticipated. with the development of the banking system, security and, implicitly, the security policy was categorically imposed in the entire banking system. although a remarkable subject, bank security continues to be an impenetrable area, associated particularly with the idea of securing the banking system, but also with other issues. the economic environment is constantly evolving while also being subject to a state of perpetual uncertainty. the economic and banking events of the last period brought to the fore the fact that the accentuation of specific risks generate the problems experienced by the entire banking system. consequently, credit institutions must comply with legislative acts, norms and regulations that include provisions regarding the security of information. the need to ensure security at the level of the system involves ensuring minimum security requirements for each participant, since the security problems of a participant can affect the functioning of the entire system. as a result, cyber security is not only a protection factor, but also an element of trust and stability for financial institutions. 2. policies and strategies regarding the security of banking systems any financial-banking operation involves a series of risk factors. exposure to risk is inherent tothe banking system; therefore, the objective of risk management is to mitigate risk. only the banks that succeed in accepting and managing risks have the possibility to anticipate the evolution of future events. the bank security policy is an essential document regarding the security of banking institutions and includes considerable aspects, guidelines, as well as requirements that the management considers appreciable in order to maintain its security. at the same time, it includes a set of rules, norms and procedures that regulate the manner of managing, using, protecting and distributing resources in the banking institution. this policy applies to all activities, processes, procedures, directives, regulations, products, assets and decisions associated with the institution, since they may all influence the secure way in which a bank operates. when it comes to operations and security, financial organizations should use a multilevel, layered approach, which nevertheless involvesseveral challenges. the pressure to improve and secure it systems in financial institutions is enormous, since cyber-attacks on banks are on the rise. the policy of the authorities and the obligation of the banks is to disclose and prevent the trafficking of illegally obtained funds. the threat of terrorism is a problem for all of humanity. this phenomenon is hard to detect because the sources of funding can be both illegal and legal. those who intend to prepare various terrorist attacks seek to find new marinela adriana butcovan, rica ivan 29 sources, relying on the vulnerability of the financial and banking system, but also that of the legal system. in most cases, financial transactions are neutral; they come to the attention of specialized institutions only when suspicious persons are involved. as far as money laundering is concerned, this phenomenon, which has already acquired an international character, leaves even deeper traces not only in the activities of banking institutions, but also in their image, which represents a crucial factor. criminals, in their attempt to hide values gained from illegal acts, make use of banking institutions, by means of bank transactions. thus, illegally obtained profits are "laundered" much more easily. however, the damages resulting from the crime of money laundering affect the economy worldwide. with the development of organized crime, the profits obtained also increased, and the banking circuit has become involved into the transfer of illegally acquired funds; for those involved in money laundering, technological progress has been a means whereby financial advantage can be obtained. the banking system is, without a doubt, one of the economic systems dramatically affected by financial globalization. in their attempt to cope with all the changes in the economic environment, banks sought to implement new strategies and policies; their purpose was to protect themselves from criminals and the risks associated with the activities carried out, but also to survive the competition. crises, along with other social phenomena, become problematic only when they affect the social order, and their effects can no longer be controlled. these crises negatively affect the entire economic system. along with it, the banking system has also suffered from desecurization and destabilization caused by these crises. most banking institutions, as well as other types of institutions, have recently operated in an environment characterized by uncertainty and instability, and the destruction or losses can cause serious disturbances to the activities of the institutions concerned. considering the crime situation at global level, which has accentuated dramatically, while also taking into accountthe it system, geographical location, and the community of employees and customers, the banking system is more exposed and vulnerable than other economic systems. the banking institution, as actor on the capital market and credit institution, is exposed to vulnerabilities. therefore, a significant part of its activity requires special security measures. in order to solve securityrelated problems, many innovative schemes have been developed (singh & malhotra, 2004; rombel, 2003). some authors have proposed the inclusion of biometric features in authentication schemes (arumuga, 2006). maintaining banking stability and security is a fundamental requirement for the successful conduct of banking operations, but also a requirement that must be treated with particular care. the consequencesgenerated by either natural disasters or the human factor have shown that it is hard to anticipate the totality of the potential causesthat might generate an undesirable event. instead, it should be pointed out here that the damage caused by these disasters can be compared in terms of value to the destructive effects of cyber-attacks. banking institutions that do not have a well-developed security policy, according to the standards in force, may face situations that negatively influence their existence and reputation, and the resulting effects also impact their financial situation. the security policy must provide support, inspire credibility, but also demonstrate efficiency in the efforts that banking institutions make with the view of protecting their policies and strategies aimed at ensuring the security of banking institutions and their it systems 30 resources. maintaining the security of a banking institution is the daily task of every bank employeewho holds a position of either executor or bank manager, in conformity with the duties of their specific position and related skills. in order to ensure its security, the banking institution in question will proceed in accordance with the legal regulatory framework in force. every standard, recommendation, and good practice, experience and information that can contribute to improving security will be evaluated and appreciated. 3. it security in banking institutions in the current global business environment, where information systems have effectively penetrated all organizations, the importance of information technology is widely accepted and recognized. the increasing dependence of most organizations on information systems, in conjunction with the risks, benefits and opportunities they bring, make information security control a critical component for the general administration of the organization. information is a vital resource of any organization and must be protected accordingly, by ensuring confidentiality, integrity, and availability. in the interconnected business environment, information is currently exposed to an increasing number and a much wider variety of threats and vulnerabilities. nowadays, information security is a fundamental pillar in the banking environment. banks face various and multiple threats, caused by internal or external factors. financial institutions must ensure the protection of data relating to corporate customers, clients' personal information and their financial resources. in the absence of security, the trust of customers and business partners can be easily compromised or lost. in addition, risk management and compliance requirements must be assessed constantly. the deterioration of the economic situation, together with the inefficient activity of the institutions responsible for the financial security of the country, will affect the quality of assets in the banking sector and generate new challenges for financial institutions. at the same time, the volatility of the foreign exchange market and the low trust in public and financial institutions represent a risk for the stability of the banking sector. risks can have an obvious impact on the value ofboth financial and banking institutions, dueto its effects on staff, partners, clients, or the banking authority, or because it might take the form of direct losses. in the banking sector, risk should be understood as a conglomerate of threats, which are often interdependent and might have common causes. at the same time, the emergence of one type of risk can generate the appearance of a succession of other risks. (gheorghe manolescu, adriana sîrbea diaconescu, 2001) when it comes to operations and security, financial organizations should use a multilevel, layered approach that presents a number of challenges. the pressure to improve and secure it systems in financial institutions is enormous, with cyber-attacks on banks being on the rise.” both financial institutions and consumers agree upon the fact that financial fraud and attacks are becoming more complex, since they are perpetrated by a different class of criminals, who use increasingly sophisticated methods, where technology is part of their marinela adriana butcovan, rica ivan 31 strategy. moreover, experts predict that the current global crisis is likely to increase the frequency of internal fraud and security breaches. banking institutions must focus on preventing security events as the best means of ensuring security. in order to establish security, a bank must develop a clear and consistent regulatory environment, but also avoid exceptional procedures. when customers are inquired about their expectations in relation to the banking institution they work with, two aspects are generally mentioned: security of operations and cyber security, as well as confidentiality of information. the need for the cyber-security of banking institutions has increased simultaneously with the total computerization of banking activity. the implementation of an it security policy gives the management of a banking institution the security of a quantifiable and controllable system. computer system vulnerabilities are basically weaknesses that can be exploited by a possible threat at any time. thus, we can say that information security is not only a technical problem, but also a managerial problem. following the emergence of situations related to criminality in the banking cyber system, as well as customer panic, banking institutions have increased their measures and efforts to protect the it infrastructure. maintaining it security has never been more important than now. there are more sophisticated and lethal cybercrime trends that the banking sector should pay attention to. internet fraud is currently the most practiced type of fraud at international level. the phenomenon is booming, correlated with the increase in the number of users and, at the same time, in electronic transactions. these events can cause financial damage, it infrastructure damage, but most importantly, reputation damage. in such cases, banking institutions should not wait for legislation or government decisions to find solutions to suchproblems but reactpromptly instead. (cindy collins-taylor, 2013) investments in software and hardware solutions, however, remain a necessity, as by such means institutionsare ablerespond quickly to it threats. and the training and testing of both employees and customersmay contribute to reducing computer fraud. concerns for it security increased in direct proportion to the increase in the number of users, but also in the value of transactions made by banking institutions. along with technological development, the security of information systems has also developed. at the same time, attackers managed to develop their skills and opportunities to penetrate deeper and faster into information systems, the effects of their actions being most often particularly serious. thus, it can be stated that computer security is a constant and continuous process, because in order to increase security, one should always return to the starting point. innovative technologies and ideas constantly require an update of the it security policy. once connected to the internet, banking institutions become more accessible to the public, but also vulnerable, in the face of unforeseen attacks, caused by unauthorized penetration into the it system. in order to achieve the protection objectives of the it system, banking institutions must hire reliable personnel, who have the necessary skills and qualifications, while also being prepared for critical events. the continuous training of employees who use the policies and strategies aimed at ensuring the security of banking institutions and their it systems 32 computer system is also of significant importance, so as they might constantly update their knowledge and reaction skills. the employees should also receive information about new methods used by cybercriminals with the view of penetrating the banks’ it system. each user of the it system is responsible, in one way or another, for ensuring the security of the data. a well-implemented and selected it security strategy can help the institution avoid undesirable events, with impact upon the information resources of a banking institution. the security requirements are constantly changing due to the developments of the banking system in recent years. such prerequisites include the expansion of electronic communication channels with customers and partners, the electronic payment system, the reporting systems to the national bank of romania, the development and integration of payment systems, etc. in this context, in addition to the individual demands that relate toensuring information security, there is also the issue of the risks that a properly unsecured component induces in the system and the need to ensure the safety of the entire banking system.each banking institution, in part, must implement its own information security system. its management can be achieved by implementing practices, tools, procedures, policies, organizational structures, or software functions. following the emergence of situations related to criminality in the banking cyber system, which generate panic among customers, banking institutions have intensified their measures and efforts to protect the it infrastructure. maintaining it security has never been more important than now. sometimes, the banking system might encounter difficulties in controlling the increasingly sophisticated and lethal cybercrime trends. these events can cause financial damage, it infrastructure damage, but most importantly, reputation damage. in such cases, banking institutions should not wait for legislation or government decisions to find solutions to these problems, but to react immediately. investments in software and hardware solutions, however, remain a necessity, so as banks might be ready to respond to cyber threats. and the training and testing of employees, but also the instruction of customers, is a solution to reduce computer fraud. 4. conclusions in the current climate, banks are called upon to implement strategies and business models that make them stronger and more competitive in a market heavily involved in innovation. at the same time, they must strengthen customer trust and loyalty. most often, companies avoid sufficient investment in it security because their perception is that the threats do not justify a very high level of expenses. however, the costs of a computer breach and the loss of confidential data, as a result of large-scale cyber-attacks, arevery important issues. the creation of a security culture is essential to any organization. this can be achieved by the continuous instruction and training of the staff, through permanent collaboration with partners for a common approach to security issues, and by constantly making customers aware of the risks regarding information security. the security of the computer system can be increased by building and improving collaborations between banking institutions, governments and institutions specialized in combating computer crime. it is also important to adapt the national security strategy to these cyber issues, as well as to expand it security in order to support both banking and national or global security. marinela adriana butcovan, rica ivan 33 banking institutions must determine and develop it tolerance, in a context where protection will never be enough and tolerance should be high. depending on the level of risk and protection, the level of investment necessary to reach the comfortable level of protection is determined. but no one knows the cost associated with the aim to reduce the risk. according to the commitments assumed, romania has undertaken measures to develop the national normative framework in the field of cyber security, harmonized with the provisions of eu legislation, which will meet international requirements, facilitate bilateral cooperation and the exchange of information among the competent authorities. to fully ensure the safety and security of critical data and systems, financial institutions should use a robust privileged access management solution in order to protect both themselves and their customers against attacks. since it is necessary to comply with this large number of regulations, standards and requirements, information security must be considered a crucial concern for the organization, which requires the involvement of the management at the highest level and the active engagement of all the structureswithin the organization, from professionals in the domain to the final users of data. references 1. arumuga, s., 2006. effective method of security measures in virtual banking. journal of internet banking and commerce [online], available at: http://www.arraydev.com/commerce/jibc/2006-04/vb.asp 2. cindy collins-taylor, new cyber security “rules of the road” for the financial services industry, television, april 2013, p. 2, www.aspenpublishers.com 3. dumbrava, dumitru, agresiunile în spațiul cibernetic (aggressions in cyberspace), in revista română de studii intelligence (romanian journal of intelligence studies), no. 06, 2011; 4. gheorghe manolescu, adriana sîrbea diaconescu, management bancar (banking management), bucharest, the publishing house of the foundation “românia de mâine”, 2001, p. 123 5. lică-banu, laura-susana, apariția și proliferarea finanțării terorismului (emergence and proliferation of terrorism financing), bucharest, universul juridic publishing house, 2010; 6. marty kaldor, securitatea umană (human security), editura ca publishing, 2010, p. 39; 7. mica enciclopedie de politologie (the little encyclopedia of political science), enciclopedic publishing house, bucharest, 1977, page 402; 8.nagy, agnes, benyovszki, annamaria, provocările crizei asupra sistemului bancar (challenges of the crisis on the banking system), theoretical and applied economics, vol. 20, no. 4 (581), 2013; 9. *** manual de management al fraudelor în activitatea de creditare (handbook on the management of fraud in crediting activity), 2012; 10. rombel, a., 2003. next step for internet banking. [online]. available at: http://www.gfmag.com/archives/87-87-february-2003/2176-features--next-step-forinternetbanking.html#axzz0ihum79xl; 11.singh, b. & malhotra, p., 2004. adoption of internet banking: an empirical investigation of indian banking sector. journal of internet banking and commerce, [online]). available at: http://www.arraydev.com/commerce/jibc/9909-05.htm http://www.arraydev.com/commerce/jibc/2006-04/vb.asp http://www.aspenpublishers.com/ http://www.gfmag.com/archives/87-87-february-2003/2176-features--next-step-forinternet-banking.html#axzz0ihum79xl http://www.gfmag.com/archives/87-87-february-2003/2176-features--next-step-forinternet-banking.html#axzz0ihum79xl http://www.arraydev.com/commerce/jibc/9909-05.htm agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 17, no. 2 (2023), pp. 87-98 87 estimation of regional innovation activity a. huseynova, o. mazanova arzu huseynova1, ophelya mazanova2 azerbaijan state university of economics (unec), azerbaijan 1 orcid no. 0000-0002-0981-9923, e-mail: arzu_huseynova@unec.edu.az 2 orcid no. 0000-0001-7344-3492, e-mail: ofelya.mazanova@unec.edu.az abstract: in the article, the estimation of the regional innovation activity, the general methodology of the estimation of the innovation development of the regions in this direction were analyzed by the author. the innovation index was formed based on the principles accepted in the international world to assess the innovation potential. according to the comparative evaluation of azerbaijan's innovation potential, an innovation index was found for each region, zones were ranked according to this index, and cluster analysis was conducted. the selected system of indicators allows us to evaluate the level of innovation development in different areas, and to analyze the factors affecting the innovation index in the regions. keywords: azerbaijan, innovation, regional innovation, global innovation index. introduction today, the formation of the innovation structure in the regions in azerbaijan is still at the initial stage. the assessment of the regional innovation system (ris) is still in the formative stage. various scientists (a.huseynova, and t.aliyev) have investigated and evaluated the methods of regional innovation activity assessment in the republic in their studies. the existence of numerous approaches to the assessment of ris is due to the complexity of its structure. a special system of indicators should be developed to reveal the internal structure of the region's innovation-oriented economic system and to evaluate the interaction mechanisms of its main elements. the main goal is to identify a more effective regional innovation system by conducting an estimation. the "european innovation scoreboard" methodology, which we consider as a basis, determines the information source, the composition of criteria and indicators, organizational ways, and common rules for the analysis and evaluation of the scientific and technical complex on the basis of the innovation index. the "european innovation scoreboard" methodology, which we take as a basis, determines the information source, the composition of criteria and indicators, organizational ways, and general rules for the analysis and evaluation of innovation potential on the basis of the innovation index. this methodology consists of 4 stages. mailto:arzu_huseynova@unec.edu.az mailto:ofelya.mazanova@unec.edu.az estimation of regional innovation activity 88 figure 1. let's explain each stage separately figure 1. indicator system of innovation activity source: author’s work figure 2. stages of the methodology source: author’s work source: author’s work in our case, regions are taken as objects. in fact, we consider states, ministries, organizations, research institutes, universities, etc. as objects. it depends on the existing issue. as mentioned, the system of indicators characterizes the innovation potential and socio-economic environment of the region. all indicators correspond to the statistical system (huseynova, a., mazanova, o. , 2013). during the development of the methodology, the development of innovation, the indicators of the socio-economic environment, their interrelationship and complex compatibility, the proposed indicators, and the methods of evaluation and analysis with the application of the system of indicators were considered. in the first stage, the selection and collection of required indicators are carried out to calculate the innovation index . as we mentioned before, the indicators are grouped according to their characteristics. in the second stage, indexes are calculated and summed up according to each group of indicators. in the third stage, regions are ranked according to the value of the innovation index, and similar ones are selected according to the level of scientific and technical development according to the cluster analysis. the fourth stage is the construction of a regression model that determines the influence of socio-economic environment factors on the formation of the innovation index. innovation index socio-economic factors of the scientific and technical environment information provision living standard of the population educational environment infrastructu re developme nt economic developm ent reserves of activity the scale of the activity results of action i stage ii stage iii stage iv stage the formation of the initial database determination of innovation index ranking according to innovation index producing a regression model (factor analysis) arzu huseynova, ophelya mazanova 89 methodology and analysi̇s the tool of this methodology is the multidimensional statistical method. we used the spss 17 statistical package and ms excel spreadsheet as economic modeling tools. first of all, the used indicators are made comparable, in other words, a single scale of indicators is created. normalization of indicators is carried out by linear scaling methodology: minmax min gg gg g i nor    (1) where gnor – is the normalized value of the indicator; gi – is the initial value, gmin and gmax – are the smallest and largest values, respectively. the linear transformation procedure scales the data. all quantities are located in the interval [0; 1]. such data is easy to interpret. the normalization procedure does not affect the results of the analysis, since our goal is a qualitative assessment based on the examination of numerical indicators. the normalized values of the indicators are combined in the first level indicators corresponding to their functional structure. for example: first, the average value of the normalized indicators for subgroups is determined, and then a special index for the group is determined. in other words, the special index of the group ("reserves") is calculated according to the average value of the normalized indicators of the "labor reserves" and "materials and technical base" subgroups of the "reserves" group (appendix 2). average indicators for groups ( jg , j=1,2,3 indicate groups) are calculated by the following formula: n g g n i i j   1 (2) where gi is the i-th indicator included in the group, ns the number of indicators. it forms the basis of the resulting ranking and cluster analysis. special indices obtained jg by groups allow to determine the innovation index. special indices obtained by groups allow to determine the innovation index.the innovation index (i) is calculated as follows: 3 321 ggg i   (3) where jg j=1,2,3 is the average price for groups. the analysis of the division of objects is carried out according to the system of indicators selected on the basis of the reports on the standardization of indicators. based on the ranked set of economic zones, they are grouped into clusters. the cluster method is a multidimensional statistical procedure (arzu huseynova, 2022, pp. 867-875). this method arranges the objects in groups according to relatively similar characteristics based on the available information. the cluster analysis method consists of several steps: estimation of regional innovation activity 90 figure 3. steps for the cluster analysis method source: author’s work in our case, since the number of objects is small, the hierarchy algorithm ward method is chosen. the method of analysis allows us to analyze the factors. here, too, indicators are initially normalized. then they are checked. socio-economic factors can have both positive and negative effects on the environment. therefore, they should be divided into two groups accordingly. the initial data prepared in this way can be used in the construction of the regression model. then, the formation of a correlation model to determine the effect of the factor indicators on the final signs is necessary. in the modeling process, the important indicators for the final signs are determined. the structure given for economic zones is divided into stages corresponding to the functional structure of the factor indicator. in the first stage, the influence of the education level on the innovation index; the level of information provision infrastructure elements of the region; standard of living; level of economic development, etc. the parameters of the reflective regression equation are calculated. the next stage of modeling is the calculation of variance and coefficient of determination for each factor characteristic. based on these coefficients, a decision is made to include special indicators in the regression model and a pair regression model is built for each cluster. this model allows predicting the value of the innovation index, which depends on the change in the values of the factor indicators. calculations were made according to two main methods: figure 4. methods for innovation development regions model source: author’s work both methodologies are based on the system of indicators characterizing the internal and external environment and socio-economic factors of ris. the proposed methods use widely applied tools in the international world. in order to evaluate the regional innovation system, an innovation index was formed based on internationally accepted principles. according to the comparative evaluation of the innovation potential of azerbaijan, the innovation index was calculated for each region (arzu huseynova 2022, pp. 867-875). 1. algorithm selection. 2. the choice of the cluster method, which determines the strategy of the process of merging objects into clusters (merging signs). 3. the selection of the method of calculating the inter-cluster distance, which determines the different aspects of objects united in clusters. 4. determini ng the number of clusters. estimation of innovation development of regions factor analysis of innovation development of regions arzu huseynova, ophelya mazanova 91 this methodology has been refined considering the national and specific characteristics of azerbaijan, statistical indicators in this field, information that can be collected and processed, and the innovation potential of the regions, the system of indicators has been changed and calculated for azerbaijan. calculations were made on 2 blocks (reserves and activity scale), 4 groups, and 14 indicators. the special index indicator is denoted by gijl where i=1, 2; j=1, 2; and l depends on the number of indicators in each group. table 1. division of the indicators system [huseynova a.] block group division of the indicators system reserves labor resources 4 material-technical base 2 scale scientific activity 6 innovation activity 1 data were collected and calculated according to the methodology we mentioned. the calculation results are not much different from previous years. this is proof that there was no great progress in this field in the regions, the situation has not changed. the obtained results are given in the table. table 2. innovation index by regions according to innovation development regions on reserve group i1 on scale group i2 regional innovation index i baku 0,355347 0,40469 0,380019 nakhchivan 0,248108 0,228631 0,23837 mountainous shirvan 0,312987 0,048597 0,180792 absheron 0,117459 0,234816 0,176137 ganja-kazakh 0,109372 0,225259 0,167315 lankaran 0,143004 0,129577 0,13629 gubakhachmaz 0,087007 0,17371 0,130358 aran 0,120869 0,104973 0,112921 sheki-zagatala 0,037363 0,145204 0,091283 as seen from the table, baku is progressing in all groups. the regional innovation system consists of 3 subsystems: regional policy, scientificinnovation policy, regional socio-economic policy. according to the methodology mentioned above, huseynova a.d.(huseynova a.d.&mazanova o.i., 2015, p. 54–72) presented the methodology for evaluating the influence of the socio-economic environment on the innovation development of regions. the evaluation was carried out on 4 factors (innovation development level, education level, population welfare level and infrastructure development level). estimation of regional innovation activity 92 table 3. factor index (арсентьев а.с, 2010) № regions innovation development level index education level index population welfare level index infrastructure development level index 1 baku 0,91 1 1 0,75 2 absheron 0,50 0,28 0,21 1 3 nakhchivan 0,28 0,24 0,20 0,41 4 ganja-kazakh 0,26 0,20 0,25 0,33 5 aran 0,18 0,03 0,17 0,36 6 mountainous shirvan 0,17 0,03 0,13 0,33 7 lankaran 0,16 0,04 0,18 0,27 8 shekizagatala 0,16 0,03 0,17 0,27 9 gubakhachmaz 0,14 0,02 0,15 0,24 as seen from the table, baku is again sharply ahead. the science and technology in azerbaijan should be improved today. during the development of the national innovation system in the country, the development of scientific and technical potential and innovation in the regions is one of the essential issues. let's analyze the indicators of science in azerbaijan. table 4. the main indicators of science by regions of the republic of azerbaijan economic regions number of st organizations number of st employees (people) the volume of scientific and technical works performed during the year (thousand manats) total expenses incurred by st (thousand manats) domestic expenses incurred by st (thousand manats) st cost of fixed assets used (million manats) on azerbaijan 137 20 580 124 545,4 132 340,0 129 871,8 157,4 baku 102 16292 93 745,5 108 212,0 106 042,6 137,2 absheron 8 758 13 072,5 13 408,7 13 408,7 8,6 ganja-kazakh 8 2 364 3 016,4 3 712,5 3 712,4 1,2 sheki-zagatala 1 89 457,6 457,6 457,6 0,4 lankaran 3 93 284,6 284,8 284,8 0,1 gubakhachmaz 2 140 759,2 759,2 759,2 1,3 aran 3 6 51,1 51,1 51,1 0,5 mountainous shirvan 2 156 1 124,0 1 124,0 825,3 nakhchivan 6 682 2 272,8 4 330,1 4 330,1 8,1 arzu huseynova, ophelya mazanova 93 analyzing the indicators of science in azerbaijan, we observe that 76% of organizations engaged in scientific research are located in baku. for the calculation of the science index, it is necessary to bring the indicators given in table 7 to the same unit of measurement. in other words, let's normalize the indicators and calculate the science index based on the average value of the normalized values of these indicators. 𝐸i̇ = ∑ 𝐸i̇𝑖 𝑛 𝑖=1 𝑛 (4) where, ei̇i – is a i-th indicator included in the group, nis the number of indicators. table 5. normalized values of science and science index by region regions number of st organizations number of st employees (people) volume of scientific and technical works performed during the year (thousand manats) total expenses incurred by st (thousand manats) domestic expenses incurred by st (thousand manats) st cost of fixed assets used (million manats) science index (si) baku 1 1 1 1 1 1 1 absheron 0,069307 0,046175 0,138977 0,123497 0,126025 0,062682 0,094444 ganja-kazakh 0,069307 0,144787 0,031649 0,033851 0,034543 0,008746 0,053814 sheki-zagatala 0 0,005096 0,004339 0,003758 0,003835 0,002915 0,003324 lankaran 0,019802 0,005342 0,002492 0,002161 0,002205 0,000729 0,005455 guba-khachmaz 0,009901 0,008228 0,007558 0,006547 0,006681 0,009475 0,008065 aran 0,019802 0 0 0 0 0,003644 0,003908 mountainous shirvan 0,009901 0,00921 0,011451 0,009919 0,007304 0 0,007964 nakhchivan 0,049505 0,041508 0,023712 0,039561 0,040371 0,059038 0,042283 note: developed by the author an unequal distribution of science in the republic and the low volume of scientific and technical works performed by regions during the year, the low share of innovation in the development of the economy of azerbaijan's regions is a negative trend. at the next stage, regression models showing the dependence between indicators included in different factor groups of innovation activity are built. as a result, equality was obtained for all blocks. as we know, regression analysis determines the relationship between dependent and independent variables. spss software was used to construct regression equations. here, the factor variable is given with the outcome variable in the input. but in the output: figure 5. output source: author’s work the obtained regression equations and statistics are given in table 4.3. a linear regression model was constructed for the following indicators:  g13 – number of students per 1000 people; 1. correlation matrix; 2. coefficients of regression equations; 3. coefficients of r quadratic equations; values that determine the level of importance of the model. estimation of regional innovation activity 94  g23 – unemployment rate, %;  g41 – number of mobile phone subscribers per 1000 people. table 6. linear regression equations for the factors group a group of factors a linear regression equation determination coefficient r darbin-watson coefficient dw education level i=0,15+0,80itəh r2=0,93 1,575 the level of population welfare i=0,11+0,82irif r2=0,76 0,831 level of infrastructure development i=0,03+0,60iinf r2=0,56 1,530 note that the coefficient of determination is completely dependent on the indicator of the innovation index, and since the darbin-watson coefficient is less than 2, it means that the autocorrelation is adequate for the indicators involved in the equation. the coefficients of determination in the models of the dependence of the innovation index on the level of education, the level of welfare of the population, and the level of infrastructure development show that the innovation index depends on the indicators included in the model: the most on the level of education (93%), and the least on the development of infrastructure level (56%). a multidimensional regression model was given. here, the dependence of the innovation index with the indices calculated by factor groups is established: i = 0,337i1+ 0,332i2+0,329i3 +0,01 (5) ii – is a factor groups index, ai – is their coefficient. dw=2; r2=1 when the coefficients of this equation are calculated, it is obtained that since the darbinwatcon coefficient is equal to 2, autocorrelation is not possible for the indicators involved in the equation. therefore, this model cannot be a worker. it means that there is no general dependence of the innovation index on the whole group of factors. let's form the model using stepwise regression. in this model, the variables are entered into the equation one by one, and the coefficient of determination is above r2=0,93 as a result of the first step regression model at each stage. i = 0,15+0,80itəh (6) where iedu are educational elements. in the multidimensional regression model, the elements of education seem to be the main ones. thus, 93% of the change in the innovation index depends on the educational elements of the region. conclusions we can conclude that the field of science and technology in azerbaijan should improve today. in the period when the national innovation system was developing in the country, the development of innovation potential and innovation in the regions was one of the main issues. the formation of the national innovation system requires the development of regions. as a result of the research, two arzu huseynova, ophelya mazanova 95 methodologies were adapted to azerbaijan and calculations were made: evaluation of innovation potential development and factor analysis methodologies of innovation potential development. both are based on a system of indicators that characterize the internal and external environment and factors of innovation potential. the proposed methods use widely applied tools in the international world. in order to justify the indicators, the studies conducted in the world on the basis of intercountry and inter-regional comparisons were studied, and based on those models, a system of characteristic indicators for azerbaijan was selected and calculated. the system of selected indicators allows us to evaluate the level of innovation development in different areas, and to analyze the factors affecting the innovation index in the regions. a methodical approach to the assessment of regional economic systems was proposed. the proposed approach considers the shortcomings of local experience and can be the basis for the development of management decisions related to innovation development and improvement of the efficiency of the economic system (егорова м.в., 2009). in the study, local and foreign methodological approaches to the assessment of regional innovation development were reviewed and analyzed, the general directions and general characteristics of methodical approaches to the assessment of regional innovation development were determined, and the innovation index was calculated for each region according to the comparative assessment of azerbaijan's innovation potential. the methodology used in the study was refined considering the national and specific characteristics of azerbaijan, statistical indicators in this field, information that can be collected and processed, and the innovation potential of the regions, the system of indicators was changed and calculated for azerbaijan. as a result of the conducted research, proposals were made to determine the role and competitiveness of the regions in the development of the economy of the republic. the following results were obtained according to the results of the analysis of methodical approaches for the evaluation of the innovation development of the regions: figure 6. results source: author’s work 1.the estimation issue of the region innovation development should be developed by developing complex indicators and a necessary data collection system; 2.in the estimation of innovation development of the region, a comprehensive approach is appropriate, including expert assessment, considering quantitative and qualitative indicators; 3.it is necessary to consider the natural, demographic, and economic characteristics of the region. in regions with a majority of small nations, the impact of innovation on traditional lifestyles and traditional economic activities should be analyzed. 4.we should consider the natural, demographic, and economic characteristics of the region. in regions with a majority of small nations, the impact of innovation on traditional lifestyles and traditional economic activities should be analyzed. estimation of regional innovation activity 96 thus, a comprehensive estimation of regional innovation development should be developed. the results of this evaluation can be the basis for the improvement mechanism of the state policy. the proposed model is an efficient tool for the analysis of ris. it allows us to assess the origin and structure of resource flows, and to predict the risks that occur during the operation and development of the system under the influence of external factors. this also creates profiles of the regional innovation development to determine the individual characteristics of the territories. references 1. (арсентьев а.с., 2010) диагностика инновационной деятельности в региональной экономике (на примере владимирской области) [электронный ресурс] / арсентьев а.с. // проблемы современной экономики. – 2010. – № 3 (35). – режим доступа: http://www.m-economy.ru/art.php?nartid=3276. 2. (huseynova, a., mazanova, o. , 2013) arzu huseynova ophelya mazanova. theoretical and methodological aspects of innovation technologies of the knowledge economy. scientific reviews in azerbaijan state university of economics. 2013;1, january–march 2013:105– 113. 3. (president of the ar , 2012)"azerbaijan 2020:look into the future" development concept dated december 29, 2012;baku, azerbaijan.2012. 4. (president of the ar , 2016)"strategic road maps for the perspectives of national economy" approved by an order dated december 6, 2016 of the republic of azerbaijan. baku, azerbaijan.2016. 5. (helen georgiou msaal, 2017) helen georgiou msaal. endnote. issn: 1470-3297 (print) 1470-3300 (online) journal homepage: http://www.tandfonline.com/loi/riie202017. 6. (dean md., 2016) dean md. a call to embrace social reading in higher education. innovations in education and teaching international. 2016;53:296–305. 7. (huseynova, a., and mazanova, o. , 2020) huseynova a., mazanova o., expanding the application of cloud and mobile technologies for information exchange in the use of elearning management systems //economic and social development: book of proceedings. – 2021. – с. 99-103. 8. (huseynova, a., and mazanova, o., 2020) huseynova a., mazanova o. methods of evaluating the economic effectiveness of e-learning in azerbaijan //economic and social development: book of proceedings. – 2020. – т. 3. – с. 167-173. 9. (they know a lot, but at a very basic level: 2020) they know a lot, but at a very basic level: the teacher about why there are more minuses than pluses in the exam // ngs55 2019 url: https://ngs55.ru/news/more/66261208/ (date of access: 06.08.2020). (a. huseynova and o. mazanova, 2016) "model evaluation of an innovative capital," 2016 ieee 10th international conference on application of information and communication technologies (aict), baku, azerbaijan, 2016, pp. 1-3, doi: 10.1109/icaict.2016.7991775. 10. (егорова м.в., 2009) инновационная система региона: базовые модели анализа и направления развития // вестник казанского технологического университета. 2009. № 1. с. 233–238. 11. (ерохина е.в.,2012) влияние ряда факторных величин на процессы инновационного развития региональной и национальной экономики россии // журнал национальные http://www.m-economy.ru/art.php?nartid=3276 arzu huseynova, ophelya mazanova 97 интересы: приоритеты и безопасность. научно-практический и теоретический журнал. 33 (174) – 2012 сентябрь. 12. (ерохина е.в., 2013) проблемы доверия при создании российской инновационной системы // журнал национальные интересы: приоритеты и перспективы. научнопрактический и теоретический журнал. 19 (208) 2013 май. 13. (arzu huseynova, ophelya mazanova, simuzar mammadova, saadat majidova, afaq aslanova, samira rustamova, 2022), "analysis of the relationship between the economic confidence index and gdp growth in azerbaijan," wseas transactions on business and economics, vol. 19, pp. 867-875, 2022. 14. (коломыцев в.м.,2006), формирование долгосрочной инновационной стратегии развития экономики россии и механизмы её реализации // вестник чувашского университета. 2006. № 6. с. 377–382. 15. (huseynova, a. d.; mazanova, o. i.) model of a evaluation of an innovative capital of the subjects on the basis. journal of economic sciences: theory & practice, [s. l.], v. 72, n. 2, p. 54–72, 2015. 16. (huseynova arzu, salifova tarana, mazanova ophelya, 2019) estimation of innovation activity of the regions of the azerbaijan republic. 37th international scientific conference on economic and social development –"socio economic problems of sustainable development" baku, 14-15 february 2019,41-50; web of science 17. (названова к.в., 2015) совершенствование методических подходов к оценке эффективности развития региональных хозяйственных систем: аспект инновационности / названова (к.в., захаров п.н., 2015) // владимир: транзит-икс. – 2015. – 138 с. 18. (смирнова т.в., 2012) инновации как ресурс социально-экономического развития регионов // диссертация на соискание ученой степени кандидата экономических наук по спец. 08.00.05 – экономика и управление народным хозяйством (управление инновациями), 2012. – 189 с. agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 18, no. 1 (2024), pp. 144-156 144 enterprise ecosystem and sustainable development: immanent interdependence m. nahara maryna nahara west ukrainian national university, ukraine https://orcid.org/0000-0003-3052-6911, e-mail: nahara.marina@gmail.com abstract: global hypercompetition necessitates the development of new models of business collaboration among economic entities. enterprise ecosystem is one form of organization and support for entrepreneurship that facilitates the transition from competition to cooperation among business entities. the article explores various theoretical approaches to defining the concept of ecosystem that enabled to propose the author’s interpretation. it is substantiated that the entrepreneurial ecosystem offers optimal pathways and effective tools for fostering innovation and economic growth, grounded in the principles of sustainable development. a comparative analysis of organizational models of activity is conducted. compared to other organisational models, the ecosystem entails the transformation of hierarchical management mechanisms, giving rise to a dynamic environment facilitating the free exchange of knowledge, information, resources, technologies, and competencies. the synergistic model of the enterprise ecosystem within the framework of sustainable development is proposed. the model exhibits several characteristic features: cross-industry interaction, which maximizes synergies more effectively than corporate ties; diversification of activities with a focus on lean innovation; emphasis on environmental sustainability and the commercialization of developments; flexibility of business processes; autonomy of participants and adherence to voluntary cooperation principles. the article substantiates the key improvement strategies that enterprises should implement to achieve synergistic effects and sustainable development goals within the enterprise ecosystem. keywords: ecosystem, sustainable development, partnership, ecosystem life cycle, synergistic effect. introduction the transformation of national economies in the context of the growing fifth industrial revolution is accompanied by multi-vector, large-scale changes across all sectors. at its core, this involves structuring the global economy, advancing sustainable development initiatives, fostering circular business models, and establishing ecosystems that are inherently shaped by innovative changes in global economic processes. in the context of intensifying international competition, business entities that effectively develop and implement innovative projects, leveraging their resource capabilities productively and maximizing their scientific and technological potential, will gain a competitive advantage. to realize these advantages, it is imperative to establish an appropriate information and technology framework and develop a new management model – an ecosystem – designed to facilitate the digital transformation of enterprises, foster innovation, promote the intellectual https://orcid.org/0000-0003-3052-6911 mailto:nahara.marina@gmail.com maryna nahara 145 and professional growth of employees, and modernize business processes in accordance with evolving market conditions. this highlights the imperative to tackle challenges associated with the exploration of organizational and management models – ecosystems that provide optimal methods and efficient tools to promote innovation and economic growth, all anchored in the principles of sustainable development. the challenges posed by the accelerated process of globalization and transnationalization, coupled with the unpredictable nature of the global economy amidst prolonged crises, necessitate that business entities realign their economic, technological, innovative, and environmental development strategies. the growing role of the ecosystem is a polymorphic phenomenon today and an important element of management in a turbulent business environment. the issues of environmental protection and the rational use of natural resources, crucial for societal well-being, industrial development, and public health, are intricately intertwined with the modern concept of vuca – volatile, uncertain, complex, and ambiguous. vuca represents a turbulent and volatile business environment where stability cannot be guaranteed. simultaneously, the significance of the enterprise ecosystem is on the rise, necessitating the consideration of changes in both internal and external environments, and the assurance of control amidst escalating complexity and inherent instability. at the present stage, long-term economic development is only achievable through the establishment of a new ecosystem for resource utilization, aimed at fostering the growth of various economic activities. moreover, the theoretical underpinning of the enterprise ecosystem constitutes an integral aspect of the concept of sustainable development. the evolution of the ecosystem concept the dynamic shifts in competitive forces towards innovation, the rapid adoption of new technologies, and a receptiveness to change have transformed the primary objective of prevailing enterprise strategies. now, it’s not only about attaining competitive leadership but also about fostering effective cooperation to ensure sustainable development of each partner and society as a whole. ecosystem is one of the organizational forms for entrepreneurship that facilitates the coordination of interactions between business entities, guiding them from dynamic competition towards productive partnerships. the concept of ecosystem represents a post-neoclassical approach in economic science, as evidenced by its distinct features: the advancement of synergetics concepts, the widespread adoption of co-evolution principles, and the utilization of interdisciplinary integrated approaches within the realm of entrepreneurship. understanding the fundamentals of utilizing ecosystems in economic theory requires an examination of the historical origin of the prefix “eco”. the earliest recorded use of the prefix “eco” dates back to the writings of hesiod in the 8th to 7th centuries bc (alvedalen & boschma, 2017). hesiod described an autonomous household, the “oikos” (οἶκος), which is the basic economic unit of a state and encompasses various activities, products and citizens. the terms “ecology” and “economy” are derived from the concept of “oikos”. there are different scientific views on the formation of the concept of ecosystem and its relationship with the economy. rothschild (1991) in his work “bionomics: economy as ecosystem” considers the economy to be an analogue of a biological ecosystem. the author enterprise ecosystem and sustainable development: immanent interdependence 146 emphasised the nature of cooperation between economic agents, their innovativeness and relations with the external environment. according to muegge and mezen (2017), the greatest influence on the emergence and development of the concept of ecosystems in the economy was made by such areas of economic theory as organisational ecology, neo-institutional theory, and the concept of dynamic capabilities of the enterprise. additionally, these theories are part of the strategic management concept, which considers ecosystem as a competitive advantage of the enterprise in value creation. examining ecosystem through the lens of entrepreneurship allows us to trace its evolutionary development, which can be attributed to theories such as the cluster theory of economic development (bergman & feser, 1999), the concept of regional innovation systems (cooke, 1996), and the theory of entrepreneurial networks (hite & hesterly, 2001). the pioneer of the concept of ecosystems in the realm of entrepreneurship is the british economist valdes (1988), who first introduced this concept to the scientific community in 1988. in his article “entrepreneurial ecosystem: towards a theory of new business formation”, he asserts that ecosystem structure in the process of new business formation contains two dynamic elements: the entrepreneur and the entrepreneurial environment. in the book “the emergence of a new corporate form”, moore (1998) emphasizes that “entrepreneurial ecosystems, much like successful species in nature, emerge from essential resources. ecosystems condense from capital, customer interests, and the talent generated by innovation, mirroring how successful species thrive from sunlight, water, and nutrients in the soil” (moore, 1998, p. 170). noteworthy is the opinion of spilling (1996), who, in his works on regional entrepreneurship, states that entrepreneurial ecosystem consists of various actors, roles, and environmental factors that interact with each other. a similar perspective is shared by cohen (2006), who observes that “entrepreneurial ecosystems are a diverse set of interdependent actors within a geographical region that influence the formation and trajectory of the entire group of actors and, possibly, the economy as a whole” (cohen, 2006, p. 4). isenberg’s (2010) interpretation of the ecosystem holds practical significance. the scientist believes that entrepreneurial ecosystem consists of a set of individual elements, such as leadership, culture, capital markets, and customers, which are interconnected. mason and brown (2015) define the concept of ecosystem through the lens of partnership. the authors argue that “ecosystem is a set of interrelated business entities, organizations, institutions, and processes, formally and informally united for interconnection” (mason & brown, 2015, p. 53). a similar opinion is shared by adner (2017), who defines ecosystem as follows: “a set of networks of suppliers, distributors, outsourcing companies, producers of related goods or services, technologies, providers, and other organizations that influence and are influenced by a company by creating and delivering their own offerings” (adner, 2015, p. 48). the innovative aspect of ecosystems is emphasized by autio and thomas (2014). the scientists note that “ecosystem is a network of interdependent organizations linked to a central maryna nahara 147 firm or platform, including a producer and external partners, which together create new value through innovations” (autio & thomas, 2014, p. 90). the technological orientation in defining ecosystems is evident in the scholarly work of adomavicius, boxstedt, and kaufman (2007). these scientists argue that ecosystem comprises a collection of interdependent technologies and technological advancements that influence evolutionary processes. thus, an analysis of publications dedicated to ecosystem research reveals that scientists possess a deep understanding of existing challenges. furthermore, it demonstrates the gradual formation of theoretical, methodological, and methodical approaches aimed at addressing these issues. from the generalization of views on the essence of ecosystem, five scientific areas of ecosystem interpretation through the prism of sustainable development emerge. these include the rational use of resources, environmental protection, economic growth, improvement of social protection, and consideration of the interests of present and future generations. the essence and the main stages of ecosystem development the ecosystem concept enables to reevaluate agglomeration interaction across several dimensions: regional (national, sectoral, municipal ecosystems), sectoral (industrial, media, financial, etc.), and functional (entrepreneurial, innovative, digital). the goal of ecosystem is to achieve coordinated development among its stakeholders by integrating requirements, rights, and responsibilities. consequently, coevolution becomes a dynamic component of the business ecosystem, representing the overarching goal of its evolution. coevolution entails the attainment of new system properties, the realization of social and economic effects, and both quantitative and qualitative changes in the processes of cooperation and competition. it is worth noting that, unlike clusters and network groups, the initiation of ecosystem association does not solely belong to one participant. cooperation within the ecosystem is driven by self-organization, where each member benefits from the others. self-organization underpins the principles of cooperation and partnership, serving as the foundation for relations among ecosystem participants and distinguishing ecosystem from other organizational models. a comparative analysis of organisational models is presented in table 1. table 1 comparative characteristics of organisational models comparison criteria cluster network organisation ecosystem 1. the purpose of the formation increasing the competitiveness of an industry or region the utilization of features, resources, and specific advantages for the collaborative implementation of entrepreneurial projects. initiating and implementing business innovations or a unique product 2. boundaries of the association geographic or sectoral the value chain of a particular product or service cross-sectoral, crossterritorial enterprise ecosystem and sustainable development: immanent interdependence 148 3. criteria for mergers by stages of the production process along the chain of creation and sale of products or services by stages of the life cycle of a new product or new technology 4. relationships between participants internal competition consolidation of goals cooperation and partnerships 5. opportunity to become a member restrictions and requirements for participants specific rules for entering the system high degree of openness 6. management existence of governing bodies at the state or regional level the management body belongs to the initiator of the network association self-organisation source: wurth et al., 2021 based on the information in table 1, it can be argued that the differences between these models are not fundamental, but reflect the goals and challenges of certain stages of economic development. it is worth noting that, unlike other organisational and economic models of development, ecosystems have three important advantages: they provide access to multi-vector opportunities for innovative growth, facilitate rapid scaling, and are flexible and models. so, it can be concluded that in our opinion, ecosystem is an integrated adaptive system that includes a complementary set of active subjects, types of activities, cooperative relations, internal and external environment factors (social, economic, infrastructural, and institutional) that provide for the efficient use of human, material, and intellectual resources for the purpose of sustainable development. the scope of the study in line with the theoretical framework previously outlined, which emphasizes the conceptual foundation of ecosystems, the subsequent sections of the article will present fundamental findings, concentrating on the following objectives:  to justify the growing interest and relevance of research in the field of entrepreneurial ecosystems;  to outline the relationship between the enterprise ecosystem and the innovation ecosystem;  to determine the main stages of ecosystem development  to substantiate key development vectors that enterprises need to implement in order to ensure the leadership position of the entrepreneurial ecosystem;  to develop the synergistic model of enterprise ecosystem within the framework of sustainable development. the proposed synergistic model includes fostering collaboration, innovation, and mutual benefit among ecosystem participants, as well as implementing sustainable practices maryna nahara 149 and policies that promote the triple bottom line of economic prosperity, environmental stewardship, and social equity. methodology this article is based on secondary sources of data, which were obtained from published books, journals, and research papers. the study adopts a qualitative research approach. results the increasing interest and relevance of research in the field of creating and ensuring effective enterprise ecosystems can be attributed to objective reasons. firstly, through the remarkable results achieved by ecosystems. for instance, 7 out of the 10 largest companies in the world employ the concept of ecosystems. according to the bcg henderson institute’s 2022 analysis, companies operating on the principles of the ecosystem include alphabet, amazon, apple, facebook, microsoft, alibaba, and tencent (jafarov & szakos, 2022).). the second reason for the creation and development of entrepreneurial ecosystems is the transformation of traditionally structured industry markets. according to research conducted by “accenture” analysts, it’s noteworthy that ecosystems serve as a catalyst for reshaping various industries, leading to “tectonic shifts” among them. seventy-six percent of surveyed business leaders agree that over the next 5 years, business models will undergo reengineering due to the impact of ecosystems (velt et al., 2020). thirdly, the enterprise ecosystem model also appeals to companies that are not necessarily aiming for leadership positions in global rankings. their goal is to achieve and sustain a high level of competitiveness. in the face of turbulent changes, many companies struggle to operate independently. they require collaboration with partners, involving the sharing of unique technologies, databases, customer information, key competencies, and mechanisms for commercializing innovations. the formation of enterprise ecosystem enables increased flexibility and reduces the time required for making relevant management decisions, obtaining necessary infrastructure support, distributing risks, and converting the knowledge and skills of human resources into new technologies. entrepreneurial ecosystem is an adaptive form of partnership among actors from various sectors of the economy. it integrates the outcomes of interdisciplinary research and development to collaboratively address complex problems, primarily of a practical nature. a key condition for the formation and successful implementation of entrepreneurial ecosystem projects is the presence of a project initiator who is deeply committed to its success, along with a favourable environment that offers free market access, financial and other forms of support, as well as knowledge and information. thanks to the systemic functions of entrepreneurial ecosystem, the potential for development among actors increases, leading to the emergence of new forms of multi-vector cooperation within the context of economic transnationalization. on the other hand, the likelihood of entrepreneurial ecosystem’s survival also increases as its participants’ social, economic and environmental efficiency grows. the term “enterprise ecosystem” is most closely related to the term “innovation ecosystem”. the conceptual foundations of enterprise ecosystems are presented in studies of regional innovation systems, which emphasize the interconnection of formal and informal institutions and innovative developments. enterprise ecosystem and sustainable development: immanent interdependence 150 a number of researchers, such as echterhoff, and amshoff (2013), poetz, and prügl (2019), have studied the impact of inter-sectoral interaction within industries on the results of innovation activities. as noted by authors n. echterhoff and b. amshoff (2013), there is a need to explore new ways of leveraging production potential to innovate. creating dynamic entrepreneurial ecosystems based on innovation is one way to address this problem. at various times, researchers have emphasized the necessity of eliminating intersectoral barriers to stimulate the innovation process (spigel, 2020). this involves combining unique knowledge and resources from different industries, as well as facilitating free technology transfer. this thesis is corroborated by farhadi’s (2019) published book, “crossindustry ecosystems”, in which the author elaborates on the theoretical and methodological foundations of the new concept. farhadi (2019) emphasizes the complexity and necessity of inter-sectoral economic growth. synthesizing the essence of the enterprise ecosystem, it can be defined as a localized spatial complex comprising hierarchical structures, business processes, and infrastructure facilities that interact to create the necessary conditions and a conducive environment for generating new resource combinations and facilitating knowledge transfer to commercialize innovations. today, the formation and development of entrepreneurial ecosystems are prioritized, driven by the necessity to consider the interdisciplinary nature of modern innovations, the practical value of multidisciplinary competences, and the importance of intersectoral collaboration. it is worth noting that entrepreneurial ecosystems do not have territorial boundaries cooperation is carried out by participants from different territories and industries. enterprise ecosystems do not have a defined timeframe the interaction of specific participants is carried out in accordance with the requirements of innovative engineering projects. the consolidating factors of the enterprise ecosystem are key competencies, unique knowledge, the latest technologies and relevant information. the environment formed based on the principles of the ecosystem model enables each participant to effectively achieve their digitization goals, initiating, developing, and implementing innovative technologies and business processes, thereby achieving a powerful synergistic effect. the trend of ecosystem integration contributes to the formation of an environment for the active development of centers of social and economic growth and ecological balance, fostering synergies through cooperation between enterprises and organizations in the value creation process. the theoretical and practical aspects of forming enterprise ecosystem within the framework of sustainable development are summarized in the developed synergistic model (figure 1). maryna nahara 151 figure 1 the synergistic model of the enterprise ecosystem within the framework of sustainable development participants of the enterprise ecosystem enterprises and start-ups financial structures engineering centers venture companies nongovernmental organisations educational establishments synergistic effects of enterprise ecosystems increasing the level of intellectual capital increasing of financial flows sharing infrastructure facilities application of tax preferences reducing financial risks reducing transaction costs implementation tools value-based management transfer pricing balanced scorecard business process reengineering peering of network interaction goals of the enterprise ecosystem formation reducing import intervention improving the investment climate concentrating resources on priority areas close interaction between government and business greening of activities increasing business innovation economic growth social progress environmental responsibility sustainable development source: created by the author the presented model illustrates the transition from rigid management to flexible network structures, highlighting opportunities for integrating sustainable practices into business processes, diversifying activities, and outlining strategies for the balanced utilization of resources and productive collaboration among ecosystem participants. these efforts aim to leverage the competitive advantages of participants and achieve synergistic outcomes within the framework of sustainable development. each ecosystem goes through certain stages in its development, which differ depending on the participants, the specifics of cooperation and intra-network connections. however, we can identify a general model of ecosystem development consisting of the following stages (figure 2). enterprise ecosystem and sustainable development: immanent interdependence 152 figure 2 the main stages of ecosystem development potential ecosystem emerging ecosystem evolving ecosystem established ecosystem ecosystem in the process of transformation human capital qualified human resources, researchers networking and collaboration institutions equipment, patents, technologies tangible and financial capital social capital source: created by the author it is advisable to consider the main stages of the ecosystem life cycle in more detail. the first stage, a potential ecosystem, begins as a local concentration of enterprises in related and interdependent industries. there are agglomeration effects, but no integration mechanisms. the concentration of enterprises in one area causes competition and, at the same time, stimulates the development of technologically related enterprises. at the same time, if there are technological and organizational linkages between integrated industries that can become sources of productivity and competitiveness, enterprises are looking for ways to implement and commercialize them. this moment can be the impetus for the development of the ecosystem. the second stage is an emerging ecosystem. competition between producers in the basic industry is reaching a noticeable level, and its pressure is forcing them to look for new forms and strategies of competition. the search is driven by innovations in the end-user value chain. dynamic competition within the system results in increased specialization in line with the needs of the underlying industry, improved quality of raw materials, improved equipment and specialized services, and the development of employee competence. an important result is the beginning of close personal contacts between entrepreneurs participating in the ecosystem. the third stage is an evolving ecosystem. it is characterised by a high level of competition between manufacturers of the final product, developed markets for raw materials, equipment and skilled workers. new formal and informal cooperation institutions, nongovernmental organizations, and websites related to participating companies and the industry are emerging. the third stage may be driven by the emergence of new ecosystem participants, as the complex of interconnected ecosystem enterprises is assessed as attractive for investment. an innovation and source of development may be the involvement of enterprises from new industries that are part of a vertical integration chain or have horizontal links. the fourth stage is an established ecosystem. at this stage, the collaborative effects should be pronounced. the ecosystem is highly competitive, innovative and environmentally friendly. a high degree of vertical and horizontal integration has been achieved; markets for end products, raw materials, equipment, and human resources are highly developed; and maryna nahara 153 effective information exchange mechanisms are in place. stimulating factors of development are a high level of competition and cooperation within the ecosystem, maximization of economic, social, cultural, qualification ties and protection of environmental interests. the fifth stage is a transforming ecosystem. it is characterized by a change in the form and properties of the ecosystem in response to environmental challenges. in order to function successfully in the new environment, the ecosystem should develop and perform new technical, product, information and management solutions, improve environmental standards, and implement improved social and economic principles of ecosystem functioning. it should be added that the dominant idea initiating the formation of an ecosystem can often be the production and implementation of an innovative project, the creation of a new product or technology, the development of digital platforms, etc. at the same time, one company can participate in several ecosystems simultaneously, implementing various projects, being, for example, a customer, a supplier of unique resources or a contractor of various projects based on a preliminary analysis of the theoretical aspects of ecosystem theory, we propose key development vectors that enterprises need to implement in order to achieve sustainable development goals, synergistic effects, intensify innovative growth, and ensure the leadership position of entrepreneurial ecosystem in economic, social, and environmental aspects:  creation of a unified enterprise information environment and information management system. the utilization of algorithms and software to generate, transform, interpret information, and predict the development of business processes is essential for enhancing the efficiency of enterprise ecosystems in the digital age;  formation of innovative business processes. special spaces such as accelerators, corporate innovation centers, and laboratories are being created and actively function to model the business processes of modern ecosystems. they serve as the foundation and key drivers of the new digital economy;  implementation of digital reverse engineering requires a set of technologies, hardware, and software tools. these tools are necessary for obtaining a digital model of a finished product, enabling further improvement or modernization;  ensuring energy efficiency within the ecosystem of enterprises involves certifying them according to leed and breeam standards, which in turn leads to reduced operating costs;  establishing cross-industry cooperation, interacting with partners in professional associations and consortia, and collaborating with other ecosystems to organise social, economic and technological partnerships;  implementation of a customer-centric approach to management. the collection, analysis, and intensive utilization of customer knowledge, coupled with a strong customer focus, serve as critical tools for creating competitive advantages within the enterprise ecosystem;  developing hr partnership system is essential for maximizing the productive potential of human resources in addressing key tasks, implementing business functions, and optimizing production processes through effective cooperation and efficient communication; enterprise ecosystem and sustainable development: immanent interdependence 154  introducing the concept of lean manufacturing serves as a tool to optimize business processes, aiming to eliminate various losses in the functioning of the enterprise ecosystem. the purpose of implementing the proposed vectors is to ensure the continuous development and flexibility of participants within the enterprise ecosystem. this involves preparing them for ongoing adaptation to turbulent environmental conditions and accelerated technology diffusion. it also entails implementing new technological architecture solutions, fostering organizational learning, and creating a decision-making system that utilizes data from the product life cycle, supply chain, and all business processes. conclusions thus, to summarize the above, we can conclude that in recent years, the most effective functioning of enterprises has been ensured by ecosystem-based optimization, and the concept of ecosystems has gained both scientific and practical recognition. as emphasized by wurth, stam, and spigel (2021), the most effective use of the capabilities of the enterprise ecosystem is possible only with a comprehensive program. this program should include the creation of active partnerships, intensification of the digital transformation of business entities, involvement of the research community, allocation of resources, and favourable tax regulation to create investment incentives. at the same time, the priority task is to establish a productive integration between the participants of enterprise ecosystem. this involves identifying priority areas of development to ensure a synergistic effect. moreover, enterprise ecosystem plays a vital role in fostering an ethic of sustainable development, which encompasses developing a conscientious attitude toward the environment as the foundation of life. this includes observing the laws of its development, as well as adhering to restrictions and prohibitions. additionally, it entails cultivating an ethic of efficient management, rational consumption, and a healthy lifestyle. the article examines various theoretical approaches to defining the concept of an “ecosystem”, upon which the author presents their interpretation. it is argued that the ecosystem offers optimal pathways and effective tools for fostering innovative economic growth based on the principles of sustainable development. the article presents a synergistic model of the entrepreneurial ecosystem. the key features of this model include: cross-industry interaction, which maximizes synergistic effects more effectively than corporate ties; diversification of activities with a focus on creating frugal innovations; environmentalization of activities alongside the commercialization of developments; mobility and flexibility of business processes; and autonomy of participants with a commitment to voluntary cooperation principles." it should be emphasized that the priority of ecosystem sustainable development implies a shift in focus from economic to ecological and social concerns, as well as from material to spiritual and informational values. besides, it involves harmonizing society’s interaction with the environment. that is why there is an urgent need to form a new ecosystem model of economic development. this model should be based on the dominance of elements such as partnership between business structures and the state, broad and diversified support for the innovation activity of enterprises, and greening of activities with efficient resource consumption. maryna nahara 155 the prospects for further research lie in developing recommendations for the formation and functioning of enterprise ecosystems in specific regions and industries. the unique characteristics of each territory and business processes necessitate an individualized approach to establishing new ecosystems references 1. adner, r. (2017). ecosystem as structure: an actionable construct for strategy. journal of management, 43(1), 39-58. https://doi.org/10.1177/0149206316678451 2. adomavicius, g., bockstedt, j., gupta, a., & kauffman, r.j. (2007). technology roles and paths of influence in an ecosystem model of technology evolution, information technology and management, 8(2), 185-202. https://doi.org/10.1007/s10799-007-0012-z 3. alvedalen, j., & boschma, r. (2017). a critical review of entrepreneurial ecosystems research: towards a future research agenda. european planning studies, 25(6), 887-903. https://doi.org/ 10.1080/09654313.2017.1299694 4. autio, e., & thomas, l.d.w. (2014), innovation ecosystems: implications for innovation management. oxford: oxford university press. 5. bergman, e.m., & feser, e.j. (1999). industrial and regional clusters: concepts and сomparative applications. reprint. edited by scott loveridge and randall jackson. wvu research repository, 2020. https://researchrepository.wvu.edu/cgi/viewcontent.cgi?article=1004&context=rri-web-book 6. cohen, b. (2006). sustainable valley entrepreneurial ecosystem. business strategy and the environment, 15(1), 1-14. https://doi.org/10.1002/bse.428 7. cooke, p. (1996). the new wave of regional innovation networks: analysis, characteristics and strategy. small business economics, 2, 159-171. https://doi.org/ 10.1007/bf00394424. 8. echterhoff, n., amshoff, b., & gausemeier, j. (2013). cross-industry innovations – systematic identification and adaption. international journal of mechanical, aerospace, industrial, mechatronic and manufacturing engineering, 7(4), 606-616. https://zenodo.org/records/1083853 9. farhadi, n. (2019). cross-industry ecosystems: grundlagen, archetypen, modelle und strategische ansätze. verlag: springer fachmedien wiesbaden gmbh. 10. hite, j.m., & hesterly, w.s. (2001). the evolution of firm networks: from emergence to early growth of the firm. strategic management journal, 3, 275-286. https://doi.org/ 10.1002/smj.156. 11. isenberg, d.j. (2010). how to start an entrepreneurial revolution. harvard business review, 12, 40-50. https://hbr.org/2010/07/how-to-start-an-entrepreneuria 12. jafarov, n., & szakos, j. (2022). review of entrepreneurial ecosystem models. aserc journal of socio-economic studies, 5(1), 3-16. doi:10.30546/2663-7251.2022.5.1.3 13. mason, c., & brown, r. (2015). entrepreneurial ecosystems and growth oriented entrepreneurship. final report to oecd. paris: oecd. 14. moore, j.f. (1998). the rise of a new corporate form”, washington quarterly, 21(1), 167-181. https://doi. org/ 10.1080/01636609809550301 15. muegge, s. m., & mezen, m. (2017). business ecosystems and new venture business models: an exploratory study of participation in the lead to win job-creation engine. https://doi.org/ http://dx.doi.org/10.1080/09654313.2017.1299694 https://researchrepository.wvu.edu/cgi/viewcontent.cgi?article=1004&context=rri-web-book https://doi.org/ https://zenodo.org/records/1083853 https://doi.org/ https://hbr.org/2010/07/how-to-start-an-entrepreneuria http://dx.doi.org/10.1080/01636609809550301 enterprise ecosystem and sustainable development: immanent interdependence 156 international journal of technology management, 75(1-4), 157-192. https://doi.org/ 10.1504/ijtm.2017.085700. 16. poetz, m.k., & prügl, r. (2019). crossing domain-specific boundaries in search of innovation – exploring the potential of pyramiding. journal of product innovation management, 27(6), pp. 897-914. doi:10.1111/j.1540-5885.2010.00759.x 17. rothschild, m. (1991). bionomics: economy as ecosystem. new york: henry holt and company inc. 18. smolović, s., živanović, s., abramović, n., živanović m. (2023). management of sustainable development and environmental protection. agora international journal of economical sciences, 17(2), 142-157. https://doi.org/10.15837/aijes.v17i2.6452 19. spigel, b. (2020). entrepreneurial ecosystems: theory, practice and futures. edward elgar publishing. 20. spilling, o.r. (1996). the entrepreneurial system: on entrepreneurship in the context of a mega-event”, journal of business research, 36(1), 91-103. https://ideas.repec.org/a/eee/jbrese/v36y1996i1p91-103.html 21. valdez, j. (1988). the entrepreneurial ecosystem: toward a theory of new business formation. san antonio: university of texas. 22. velt, h., torkkeli, l., & laine, i. (2020). entrepreneurial ecosystem research: bibliometric mapping of the domain. journal of business ecosystems (jbe), 1(2), 1-31. https://doi.org/ 10.4018/jbe.20200701. 23. wurth, b., stam, e., & spigel, b. (2021). toward an entrepreneurial ecosystem research program. entrepreneurship theory and practice, 46(3), 729-778. https://doi.org/10.1177/1042258721998948. https://doi.org/ http://dx.doi.org/10.1111/j.1540-5885.2010.00759.x https://univagora.ro/jour/index.php/aijes/issue/view/189 https://univagora.ro/jour/index.php/aijes/issue/view/189 https://doi.org/ agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 18, no. 1 (2024), pp. 171-181 171 perspectives and directions of development of organizational culture in the digital age g. nikčević, d. pavićević gordana nikčević¹, djordjije pavićević² ¹ ² university adriatic bar, faculty of business economics and law, montenegro ¹ https://orcid.org/0000-0002-9804-6917, e-mail: gogan@t-com.me ² https://orcid.org/0000-0002-9484-3361, e-mail: djpavicevic3@gmail.com abstract: in the conditions of the strong development of digital technologies, the business of organizations in a traditional environment becomes very tight. new digital technologies have implications for modern business operations. digital trends require changes not only in the way business organizations work (jobs, workplaces and employees) but also a change in the entire concept of organizational culture (behavior and thinking of employees). in order for digital technologies not to become an obstacle to the business of modern organizations, in our work we will identify a new organizational culture that is able to support new technologies. at the same time, we will look at the key elements of the traditional organizational culture, which we have to transform. in the final part, with the aim of improving the business of business organizations, guidelines will be given for the development of a new digital organizational culture that will contribute to the improvement of business, all in the context of adapting to new digital technologies. in the study of digital transformation and organizational culture, the authors employ analytical and synthetic approaches to achieve a deeper understanding. the analytical approach deconstructs elements through qualitative analysis, while the synthetic approach integrates information and theories to form a comprehensive concept. these approaches enable the identification of optimal strategies for different contexts, which is crucial for this study. overall, the study contributes to theoretical understanding of digital transformation and organizational culture, while also offering practical guidance for organizations undergoing the process of digital transformation. keywords: organizational culture, digital technologies, digital organizational culture, knowledge, transformation introduction in the modern business environment, in response to the challenges of the global market, organizations face the need to introduce new digital technologies in order to achieve their goals. digital technologies provide enormous opportunities for the creation of new products and services, making them more competitive. by using digital tools, organizations do not benefit only for themselves, but significantly contribute to the development of the entire society. whether it is a small or a large organization, recognizing the importance of digital technologies is essential for doing business in the modern world. through the process of digital transformation, every organization should shape a new digital culture that will support all https://orcid.org/0000-0002-9804-6917 mailto:gogan@t-com.me https://orcid.org/0000-0002-9484-3361 mailto:djpavicevic3@gmail.com perspectives and directions of development of organizational culture in the digital age 172 aspects of the new business model and ensure success in the digital age. digitization brings greater efficiency, agility, flexibility, readiness for changes and taking risks in business. however, it also brings with it the need to abandon traditional business approaches and adopt new ways of working that require changes in organizational culture. therefore, the creation of a new organizational culture becomes crucial for a successful digital transformation and opens new paths to innovative business. the work is structured in two parts. the first part explores the key factors for successful digital transformation, focusing on the role of digital technologies in improving business processes for their effective implementation. this process requires the development of an innovative organizational culture within organizations. bearing in mind the frequent changes in organizational culture for the successful implementation of digital transformation and the utilization of its full potential, the second part of the paper is focused on the analysis of organizational culture in the context of the digital age. considering the complexity and speed of changes arising from digital transformation, it is desirable that organizations have defined guidelines and strategies in order to successfully go through this process. therefore, in the final part of the paper, guidelines are offered that are crucial for adapting the organizational culture to the requirements of the digital age. 1. digital transformation 1.1. key steps towards the implementation of new technologies in today's business context, the integration of digital technologies becomes necessary for the improvement of business strategy, operational processes, products and services of organizations. this process requires the implementation of digital transformation, which entails adapting the business strategy to new digital opportunities. effective implementation of this process requires a comprehensive plan that involves different levels of employees in shaping the strategy, starting from operational teams and ending with management. on the way to a successful digital transformation, organizations face certain aspects that require careful consideration. these aspects include the organization's vision and goals, technology and infrastructure, human resources and organizational culture, processes and operations, security and data protection, as well as continuous monitoring and adaptation. they are essential for the successful implementation of digital transformation, enabling organizations to adequately respond to the changes brought about by the digital environment (fichman, dos santos & zheng, 2014; fitzgerald et al.; 2014, bogdan, 2023). in connection with the above, digital technologies play a key role in improving the business of modern organizations. digitization enables effective communication and exchange of information inside and outside the organization, which significantly contributes to better business. through the implementation of technological solutions such as the internet, mobile devices, cloud computing and big data software analysis, companies can improve the quality of products and services, optimize business processes, and reduce business costs. the concept of "internet" enables the connection of various devices to the internet for more efficient information gathering and remote control. "smart companies" integrate information and gordana nikčević, djordjije pavićević 173 production, creating smart products with detailed information for users. through the use of cloud computing, companies can use applications faster by sharing resources. the application of tools such as customer relationship management (crm) enables the improvement of connection with customers through the efficient management of data on their engagement. also, virtual teams enable organizations to achieve effective communication and collaboration without geographical limitations, which further contributes to productivity and innovation in business. computer networks are crucial for the efficient exchange of information, knowledge, and skills among employees, regardless of their physical location and different time zones. with this system, managers can monitor the work of a large number of employees without the need for direct communication. the use of digital technology brings significant benefits to the organization, which would be limited in a traditional work environment. in this context, it is especially important to empower employees by providing training in the use of advanced technology, which allows them to assume greater responsibilities and authority in the performance of their work tasks (westerman, bonnet & mcafee, 2014; brynjolfsson & mcafee, 2014; woerner & wixom, 2015, gjoni & elezi, 2023; blichfeldt & faullant, 2021). at the same time, new digital technologies require changes at the management level of the organization, on the part of the management. managers are required to encourage employees to adopt new skills and technologies through education (education/training). investing in employee education becomes essential for creating agile teams that are able to quickly adapt to changes and take advantage of digital tools. through continuous education, organizations can ensure that their employees remain relevant and competitive in the digital era, following the latest trends and technological opportunities (martínez-caro; cegarranavarro & alfonso-ruiz, 2020; zhang, xu & ma, 2023; hashimova, 2023). 1.2. advantages and disadvantages digital transformation, although a necessity for organizations in the modern business environment, brings with it both positive and negative sides. the primary advantage of digital transformation is in increasing the efficiency of business processes through automation, optimization of work and elimination of manual processes, which results in faster decisionmaking and higher productivity. in addition, digital transformation enables organizations to be more innovative, to respond faster to changes in the environment and to provide a more personalized experience to users, which can be key to achieving a competitive advantage (wokurka, et.al. 2017; haleem et al, 2022; davronovich & mansurjonovich, 2023). however, the process of digital transformation brings with it certain disadvantages and challenges. the financial investments required to implement new technologies and infrastructure can be significant, which can be a burden for many organizations, especially small and medium-sized ones. additionally, changes in organizational culture and work processes can cause employee resistance, requiring training, support and engagement to achieve successful integration of new technologies. also, due to the risk of cyber attacks and violations of data privacy, it is necessary to ensure data protection and security (haleem et al, 2022). perspectives and directions of development of organizational culture in the digital age 174 therefore, digital transformation is proving to be a necessary process for organizations in the modern business environment, providing significant advantages, primarily increasing efficiency and innovation (jilcha, 2020). however, it also brings with it certain challenges, such as high financial investments, employee resistance and increased risk of data security, which require careful management and adequate solutions for successful implementation. therefore, finding a balance between advantages and disadvantages is crucial for the successful implementation of digital transformation, through properly exploiting its positive sides and minimizing negative effects (wokurka et.al, 2017; nadkarni & prügl, 2021). in the context of digital transformation, it is important to recognize that changes are not limited to the operational aspects of business, but also encompass deep transformations in organizational culture. in fact, the values and norms of employees represent essential elements in the formation of a new organizational culture that require alignment with the new requirements and goals of the organization in the digital context, and the creation of a new, innovative and successful organizational culture (haleem et al., 2022). 2. understanding organizational culture in the digital age 2.1. concept and classification of organizational culture digital transformation also affects the organizational culture, which should adapt to the requirements of digital transformation. bearing that in mind, in this part we will point out the organizational culture by looking at its concept, key aspects and its improvement. organizational culture can be defined in different ways, but essentially it represents the way the organization functions, the normative expectations of behavior in it, and the context in which employees and teams operate. (mumford et al., 2011). it affects the success of the organization and represents its identity that distinguishes it from others (nyarugwe et al., 2016). organizational culture can be seen as a set of informal rules (assumptions, beliefs, values, norms of behavior) that the members of the organization adhere to. this perspective, proposed by the authors deal and kennedy (1982), emphasizes the structure of organizational culture that shapes the way of working within the organization. furthermore, research by authors such as hofstede (2001), barbera (2014), petitte et al. (2017) also confirm this approach, emphasizing that organizational culture is a combination of shared knowledge and experiences of organizational members that define the work atmosphere. it is important to note that the process of forming an organizational culture is long-term and complex, with part of the content being of a subconscious nature, which represents an additional challenge in changing the organizational culture (alvesson, 2012). regardless of the variations in the definition of organizational culture, the essence of the concept of organizational culture is the formation of a system of values, beliefs and norms within the organization, which is a powerful means of shaping the behavior of employees and is often the focus of organizational changes. when employees within the organization adopt basic values and rules of conduct, it leads to a stronger connection with the goals of the organization and a better fit into it. such acceptance can result in the formation of a strong and recognizable organizational culture (barbera, 2014). gordana nikčević, djordjije pavićević 175 different definitions of organizational culture offer different classifications of organizational culture, taking into account the way in which organizations function and shape the behavior of their members. according to deal and kennedy (1982), organizational culture can be classified according to the degree of risk, while cameron and quinn (2011) offer a classification according to the flexibility and stability of the company. handy (1996) distinguishes types of organizational culture according to the distribution of power and orientation to people or tasks. denison and mishra (1995), as well as hartnell et al. (2016) classify organizational culture according to the adaptability and involvement of employees in the organization. sonnenfeld and ward (2008) identify organizational culture types according to employee behavior. it is noted that different types of organizational culture can have different characteristics, which support digital technologies to a greater or lesser extent. accordingly, organizational cultures can be described as modern or traditional. modern organizational cultures usually support digital technologies and tend to adapt to new technological trends. on the other hand, traditional organizational cultures often show resistance to digital technologies, making it harder for them to adapt to new technological innovations (wokurka et al., 2017). classifications of organizational culture in the context of digital transformation are important precisely because of the need for different adaptations. digital transformation requires specific approaches and strategies in order for the organization to successfully adapt to new technologies, changed business models and market demands. here are some reasons why classifications of organizational culture are important in this; context: (williams, 2012; wokurka et.al, 2017; hartl & hess, 2017).  different approaches to innovation: different cultures have different attitudes towards innovation and change. for example, modern cultures are more open to experimentation and risk, while more traditional cultures are much more cautious. understanding these differences enables organizations to tailor their approaches to innovation in line with their existing culture.  agility and adaptability: cultures that are flexible and adaptable tend to cope better with the changes brought about by digital transformation. identifying and understanding a culture that supports agility enables organizations to develop strategies to strengthen these characteristics within their organization.  different levels of participation: digital transformation often requires the active participation of employees in the changes. cultures that encourage collaboration and participation can be key to the successful implementation of digital initiatives. understanding the differences between cultures that support or limit participation enables organizations to adjust their employee engagement strategies.  change management: digital transformation usually involves changes in work processes, technology, roles and responsibilities. therefore, organizations develop different strategies to manage these changes in a way that best suits their specific situation. in short, different classifications of organizational culture in the process of digital transformation are important because they allow organizations to adapt their strategies and processes in order to better cope with changes and successfully implement digital technologies. perspectives and directions of development of organizational culture in the digital age 176 2.2. key aspects of organizational culture organizational culture is a key but invisible aspect within business organizations. its role is reflected in the fact that it serves as an invisible structure that connects different segments of the company and directs the actions of employees, and therefore has a significant impact on the success or failure of the organization. in the context of digital technologies, understanding the key aspects of organizational culture becomes crucial, given that it has the ability to support or limit the integration of new technological solutions (williams, 2022). there are numerous aspects that support digital transformation by creating an environment for knowledge exchange, agility and adaptability, encouraging innovation, as well as employee motivation and engagement (azeem et al., 2021; cook, 2020). first, organizational culture plays a vital role in supporting the digital transformation process. cultures that are open to change and innovation facilitate the adoption of new technologies and business models. by fostering innovation and continuous learning, organizational culture can create an atmosphere that supports digital transformation. second, organizational culture serves as an environment for knowledge exchange among employees. in the digital age, the exchange of knowledge becomes crucial for innovation and competitiveness. cultures that support open communication, collaboration and information sharing facilitate this process, encouraging the development of new ideas and solutions. according to kpmg research, most leading companies in europe and america are focusing on using virtual components such as the internet and data storage to improve knowledge sharing among employees. also, research by ernst & young shows that a large number of american and european companies are introducing technological capacities. these results indicate the dominant role of technological initiatives in business environments. third, agility and adaptability are recognizable elements of organizational culture in the digital context. rapid changes in the market and the technological field require organizations that are able to quickly react and adapt to new situations. through flexibility and quick adaptation, organizational culture can facilitate this process. fourth, organizational culture can foster innovation by supporting creativity, experimentation, and risk-taking. digital technologies often offer new opportunities for innovation, and cultures that support innovative thinking can be the basis for the creation of new products, services and business models. finally, organizational culture can motivate and engage employees in the digital context through support, recognition of contributions and rewarding success. motivated and engaged employees influence the success of the organization in the digital age, and organizational culture can provide a framework for achieving this goal (wokurka et al., 2017). adaptability, openness to innovation and support for teamwork are often highlighted as key elements for improving organizational culture in the digital age (nikčević, 2023). these aspects will be discussed in more detail later in the text, through handy's classification of organizational cultures. 2.3. improvement of organizational culture through handy's classification management theory starts from the assumption that a strong organizational culture is a very important factor in business success. however, whether organizational culture will gordana nikčević, djordjije pavićević 177 positively affect business success depends on its values and beliefs. when the values and beliefs of the organization are aligned with the demands of digitalization, the organizational culture becomes a powerful tool that inspires employees to integrate their knowledge and ideas through a common digital strategy, thus creating a favorable environment for success and progress. therefore, the extent to which the organizational culture will support digitalization processes depends more on its content than on the strength of the specific culture. thus, organizational culture can have a positive influence in a way that will support these processes. while a strong organizational culture with wrong beliefs can have a negative impact on the implementation of a digital strategy (brynjolfsson & mcafee, 2014). for a better understanding of organizational culture in this context, we will start from handy's classification of organizational culture, which distinguishes: culture of power, culture of roles, culture of tasks and culture of support. understanding their differences can help to improve organizational culture in a digital context. organizations with an emphasized culture of power can show resistance to changes brought by digital technologies, because changes in the organization can be experienced as a threat to the existing hierarchy and control. however, research shows that the proper implementation of digital technologies can encourage transparency and participation, which can weaken centralized power and encourage cooperation. organizations with a pronounced role culture are usually more open to the application of digital technologies because they are focused on defined roles and responsibilities. digital technologies can improve collaboration and coordination between different roles and teams, thus supporting a role culture. cultures that emphasize achieving goals and solving problems are often open to experimenting with new technologies that improve business efficiency. digital technologies can support organizational agility and rapid adaptability to change, which is consistent with the task culture. organizations that support support and understanding among team members can use digital technologies to strengthen teamwork, communication and collaboration. digital tools like idea sharing platforms or project management software can support a culture of support. these different types of organizational culture reflect different patterns of behavior within organizations. it is important to recognize the dominant culture in a particular organization in order to understand how that organization responds to the challenges of digitization. the organizational culture that supports the digitization process is usually based on principles such as agility, flexibility and quick adaptations to new digital tools. these organizations are open to change, strive for innovation and support teamwork, democratic leadership style and achieving results. this type of culture provides a favorable environment for the successful integration of new technologies, enabling faster adaptation to changes. conversely, organizational cultures that are often not adequate for the demands of the modern digital age require adaptation. in these cultures, we typically encounter hierarchical structures where decisions are centralized and made by senior managers (piccinini et al., 2015; nafei, 2016). according to handy's model of organizational cultures, task culture often stands out as the most suitable for the digital age because of its orientation towards teamwork, creativity and innovation. (janićijević, 2013). therefore, it can be said that task culture, according to handy's model, is closely related to digital culture. perspectives and directions of development of organizational culture in the digital age 178 3. instead of a conclusion a new digital culture and directives for its implementation bearing in mind the above, digital culture encompasses a number of characteristics that are key to the success of organizations in the digital age. firstly, innovation is highlighted as a fundamental principle, which implies a constant search for new ideas and technological solutions. in addition, the agility of organizations is emphasized, which means their ability to quickly adapt to changes in the environment, be it technological innovations or changes in the market. furthermore, digital culture promotes teamwork as an important component for achieving organizational goals. collaboration within teams is essential for solving complex problems and implementing innovative solutions. also, transparency and openness in sharing information within the organization is emphasized, which encourages cooperation, knowledge sharing and faster decision-making. flexibility is also an important characteristic of digital culture, given the need for organizations to quickly adapt to changes in the environment. in addition, employees in organizations with a digital culture possess digital skills and are able to effectively use various digital tools and technologies in their work. support for continuous learning is an important characteristic of digital culture, because organizations recognize the importance of continuous professional development of employees in order to be ready for new challenges and technological changes. finally, digital culture creates an inspiring environment that supports creativity and the generation of new ideas through freedom of expression and experimentation. if the existing culture does not have the key elements of digital culture, measures should be taken in the direction of its redefinition and adaptation to digitization. the transformation of organizational culture requires a systematic approach that includes gradual evolution and a long-term process. therefore, digital transformation requires the simultaneous evolution of organizational structures and organizational culture. below, we will highlight several guidelines that can serve as useful directions for this process. encouraging creativity and experimentation organizations striving for success in the digital age should be ready to embrace and experiment with new ideas and technologies. in this sense, they must encourage creativity among employees. it is also important that organizations create an environment where reflection is encouraged, while mistakes are seen as opportunities for learning. adapting to new technologies and changes organizations in the digital age should be open to change and adapt quickly to new technologies. in this sense, they should adapt to new circumstances, situations, business requirements and all the challenges brought by the digitization of business. transparent communication in the digital age, it is necessary to establish transparent communication so that employees are informed about all changes and strategies. open communication will encourage better understanding, cooperation and trust among employees. gordana nikčević, djordjije pavićević 179 this creates a positive atmosphere that strengthens the organizational culture and facilitates the process of business digitalization. investing in employee skills development – this guideline is very important for organizations in the digital age. given that technology is advancing, it is necessary for employees to acquire new knowledge and skills through various trainings. this is the only way they can master digital tools. therefore, organizations that recognize the importance of continuous education of their employees have an advantage, because they have a team that is able to adapt to rapid changes, which makes them more vital and competitive in the market. inclusiveness and diversity an inclusive culture means creating an atmosphere where employees feel a sense of belonging to the organization. therefore, their opinion is highly valued and respected. diversity implies different experiences and skills of employees who will be able to solve problems through new ideas. therefore, in the digital age, perspectives on the development of organizational culture include adapting to new technologies and tools in order to improve business efficiency, encourage an innovative approach to work, facilitate communication and cooperation among employees, and promote transparency and openness in the organization. also, it is important to focus on the development of employees' skills, support continuous learning and adaptation to new trends, as well as preserve the human factor in the process of digital transformation. the focus on organizational culture as a key factor for successful digital transformation contributes to the theoretical understanding of the interaction between organizational processes, technology, and human resources. the paper emphasizes the importance of adapting organizational culture to the new demands of the digital age to ensure the success of digital initiatives implementation. identification of key aspects of organizational culture, such as innovativeness, agility, teamwork support, and continuous learning, provides a deeper understanding of how organizations can shape their culture to effectively integrate digital technologies and achieve competitiveness. additionally, practical guidelines are offered for organizations seeking to transform their culture to better adapt to the digital era. these guidelines can serve as a foundation for the development of strategies and approaches to change within organizations. references 1. alvesson, m. (2012). understanding organizational culture. sage. 2. azeem, m., ahmed, m., haider, s., & sajjad, m. (2021). expanding competitive advantage through organizational culture, knowledge sharing and organizational innovation. technology in society, 66, 101635. 3. barbera, k. m. (2014). the oxford handbook of organizational climate and culture. oxford university press. 4. blichfeldt, h., & faullant, r. (2021). performance effects of digital technology adoption and product & service innovation–a process-industry perspective. technovation, 105, 102275. 5. bogdan, m. d. (2023). the law of the digital economy in the evolution of the digitized society. agora international journal of juridical sciences. 17(1), 1-8. perspectives and directions of development of organizational culture in the digital age 180 6. brynjolfsson, e., & mcafee, a. (2014). the second machine age: work, progress, and prosperity in a time of brilliant technologies. ww norton & company. 7. cameron, k. s., & quinn, r. e. (2011). diagnosing and changing organizational culture: based on the competing values framework. jossey-bass. 8. cook, d. (2020). the global remote work revolution and the future of work. u the business of pandemics, 143-166. auerbach publications. 9. davronovich, a. d., & mansurjonovich, j. m. (2023). important advantages of organizing the educational process in a digital technology environment. galaxy international interdisciplinary research journal, 11(2), 149-154. 10. deal, t. e., & kennedy, a. a. (1982). corporate cultures: the rites and rituals of organizational life. reading т. deal, a. kennedy. mass: addison-wesley, 2, 98-103 11. denison, d. r., & mishra, a. k. (1995). toward a theory of organizational culture and effectiveness. organization science, 6(2), 204-223. 12. fichman, r. g., dos santos, b. l., & zheng, z. (2014). digital innovation as a fundamental and powerful concept in the information systems curriculum. mis quarterly, 38(2), 329a15. 13. fitzgerald, m., kruschwitz, n., bonnet, d., & welch, m. (2014). embracing digital technology: a new strategic imperative. mit sloan management review, 55(2), 1. 14. gjoni, m., & elezi, e. (2023). the digital economy part of the internationalization of the labor market the case of albania. agora international journal of economical sciences, 17(2), 41-46. 15. haleem, a., javaid, m., qadri, m. a., & suman, r. (2022). understanding the role of digital technologies in education: a review. sustainable operations and computers, 3, 275285. 16. handy, c. b., (1996), understanding organizations, uk: oxford university press. 17. hartl, e., & hess, t. (2017). the role of cultural values for digital transformation: insights from a delphi study. in proceedings of the 23rd americas conference on information systems (amcis 2017), boston, massachusetts, usa. 18. hartnell, c. a., kinicki, a. j., lambert, l. s., fugate, m., & doyle corner, p. (2016). do similarities or differences between ceo leadership and organizational culture have a more positive effect on firm performance? a test of competing predictions. journal of applied psychology, 101(6), 846. 19. hashimova, a. (2023). personnel work process using digital economy application programs. agora international journal of economical sciences, 17(2), 78-86. 20. hofstede, g. (2001). culture's consequences: comparing values, behaviors, institutions and organizations across nations. sage publications. 21. janićijević, n. (2013). organizaciona kultura i menadžment. beograd: ekonomski fakultet, 35. 22. jilcha, k. (2020). workplace innovation for social sustainable development. sustainable organizations-models, applications, and new perspectives. intechopen gordana nikčević, djordjije pavićević 181 23. martínez-caro, e., cegarra-navarro, j. g., & alfonso-ruiz, f. j. (2020). digital technologies and firm performance: the role of digital organisational culture. technological forecasting and social change, 154, 119962 24. mumford, m. d. (ed.). (2011). handbook of organizational creativity. academic press. 25. nadkarni, s., & prügl, r. (2021). digital transformation: a review, synthesis and opportunities for future research. management review quarterly, 71, 233-341. 26. nafei, w. a. (2016). organizational agility: the key to organizational success. international journal of business and management, 11(5), 296-309. 27. nikčević, g. (2023). modern trends in business in the function of business success. agora international journal of economical sciences, 17(2), 121-129. 28. nyarugwe, s. p., linnemann, a., hofstede, g. j., fogliano, v., & luning, p. a. (2016). determinants for conducting food safety culture research. trends in food science & technology, 56, 77-87. 29. petitta, l., probst, t. m., barbaranelli, c., & ghezzi, v. (2017). disentangling the roles of safety climate and safety culture: multi-level effects on the relationship between supervisor enforcement and safety compliance. accident analysis & prevention, 99, 77-89. 30. piccinini, e., hanelt, a., gregory, r., & kolbe, l. (2015). transforming industrial business: the impact of digital transformation on automotive organizations. 31. sonnenfeld, j., & ward, a. (2008). firing back: how great leaders rebound after career disasters. organizational dynamics. 32. westerman, g., bonnet, d., & mcafee, a. (2014). leading digital: turning technology into business transformation. harvard business press 33. williams, p. (2022). organisational culture: definitions, distinctions and functions. in handbook of research methods for organisational culture (pp. 5-22). edward elgar publishing. 34. woerner, s. l., & wixom, b. h. (2015). big data: extending the business strategy toolbox. journal of information technology, 30(1), 60-62. 35. wokurka, g., banschbach, y., houlder, d., & jolly, r. (2017). digital culture: why strategy and culture should eat breakfast together. shaping the digital enterprise: trends and use cases in digital innovation and transformation, 109-120. 36. zhang, x., xu, y. y., & ma, l. (2023). information technology investment and digital transformation: the roles of digital transformation strategy and top management. business process management journal, 29(2), 528-549. agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 17, no. 2 (2023), pp. 181-186 181 the impact of digital payments on the growth of cashless payments and the factors limiting access to financial services zakir zeynalov azerbaijan state university of economics (unec), azerbaijan orcid id 0000-0001-8110-3025, e-mail: zakir_zeynalov@unec.edu.az abstract. most countries worldwide are undergoing digitalization, with the adoption of non-cash payment methods accelerating. in recent years, the population and economic entities in our country have readily embraced the use of digital technologies. organizing new methods of innovation is a key priority in the pursuit of strengthening the financial stability of the banking system. the introduction of new technologies serves as an effective tool for improving production potential, providing financial support, and stimulating entrepreneurship. ensuring the reliability and security of the payment system, enhancing the efficiency and speed of payment operations, expanding financial inclusion by providing the population with access to payment services, minimizing the volume of cash circulation, and organizing and promoting new methods of innovation in the payment market. the application of financial technologies, especially in payment services, enables market participants to conduct their payments conveniently, safely, and at low cost. it allows for a broader involvement of economic cycles in the banking sector, limits the informal economy, and increases banks' credit resources and financial intermediation. keywords: banking sector, digital payment, financial services, financial intermediation, payment cards. introduction in recent years, a number of serious steps have been taken in azerbaijan in the direction of maintaining macroeconomic stability, forming a favorable business environment and developing non-oil sectors, and reforms have been continued. strategic roadmaps for the national economy and the main sectors of the economy, many state programs have been adopted, economic development goals for the near, medium and long-term perspective have been defined. building a digital economy takes an important place among these goals. the development of the digital economy will lead to wider involvement of economic cycles in the banking sector and will multiply the investment and lending opportunities of the sector, and provide access to sources of financing. renewal of production capacity, increase of fixed capital, finding new forms and mechanisms of investment attraction for modernization of production, will stimulate growth of economic activity and investment opportunities. the deep reforms initiated in the economy have created a favorable opportunity for the formation of a new development model and the achievement of sustainable economic growth. in such circumstances, ensuring the transition from the “capital accumulation” based model to the “effective” based growth model (azerbaijani government, 2016) is considered the most important strategic challenge of the new era. the historical services of the great leader heydar aliyev, who has independent organization, management skills and phenomenal analytical thinking, are invaluable. the mailto:zakir_zeynalov@unec.edu.az the impact of digital payments on the growth of cashless payments and the factors limiting access to financial services 182 national economic development strategy, which was founded by heydar aliyev, is successfully continued by ilham aliyev. the follower of h. aliyev’s policy, political heir, courageous and heroic statesman, president of the republic of azerbaijan commander-in-chief ilham aliyev played an unparalleled role in the formation and establishment of the oil strategy. in the last 20 years, the strategic goals set by the president of the country, ilham aliyev, have been achieved. during this period, the economy of azerbaijan increased by 4 times, the nonoil sector by 2.8 times, and the non-oil export by 4.1 times. strategic currency reserves exceeded 65 billion dollars as of 01.06.2023. the main purpose of the digital payment system is to ensure continuity of the payment service. most countries of the world are moving towards digitalization, the use of non-cash payment methods is spreading faster. the changes in the digital payment system, the availability of non-cash payments in the payment system to the financial services of the population and enterprises, increase the relevance in the financial sector. the covid-19 pandemic has spurred the adoption of digital payments internationally. in recent years, the population and economic entities in our country have readily embraced the use of digital technologies. electronic money is considered safer and more convenient than physical currency, facilitating quick and efficient financial transactions. this approach aims to minimize the risks associated with banking transactions, ensuring the reliability of the payment system and the security of non-cash payment instruments. additionally, it seeks to enhance the efficiency and speed of payment transactions by reducing associated costs, promoting financial inclusion by ensuring widespread access to payment services, and fostering innovation in the payment market within the digital economy. the establishment of a digital economy holds a significant role in fortifying the financial stability of the banking system. the application of digital technologies in payment services enables market participants to conduct their payments securely and conveniently. this, in turn, contributes to broader involvement in economic cycles within the banking sector, restricts informal economic activities, and augments banks' credit resources and financial intermediation. in azerbaijan, several legislative acts have been enacted in recent years to expand non-cash payments and enhance transparency in the economy. the implementation of new laws in this direction creates fresh opportunities. key objectives include expanding the non-cash payment environment among the population and business entities, as well as state structures, while simultaneously minimizing the volume of cash circulation. overall, these initiatives underscore the commitment to embracing digital advancements, fostering financial stability, and driving economic growth through a more efficient and transparent payment ecosystem. the application and expansion of digital payment technology will lead to a reduction in cash-related costs, a systematic provision of the tax base, as well as access to financial services for market subjects, an increase in investment and credit opportunities for the banking sector in general, and ultimately economic growth. within the framework of the state program, the range and volume of electronic banking operations will expand, the proportion of the population using electronic banking will increase, and the growth of the volume of electronic commerce will accelerate the de-cashing of the economy. this will significantly contribute to the increase of budget revenues and the standard of living of the population. it should be noted that banking services are the central link in the financial system and reflect the processes taking place in the economy as a whole, including in zakir zeynalov 183 individual areas, in providing the material and technical base of reproduction. the limitation of banking services restricts the participation of legal and natural persons in the reproduction process, as a result of which the chain of transmission of the product produced in the real sector to the final consumer loses its effectiveness. research methodology creating a stable system in the banking services market and strengthening its integration into the real sector are considered among the main challenges facing the economy of azerbaijan. one of the critical factors for ensuring the development of the non-oil sector in azerbaijan is the availability of investment sources. this, in turn, necessitates efficient operations in the banking sector. a key indicator of the successful functioning of the banking sector is the level of access to financial sources among the population. thus, increasing financial inclusiveness among the population and lending substantial amounts of funds circulating in the economy to the real sector are directly possible as a result of the effective functioning of the banking sector. the rapid adoption of modern technologies in financial payment services creates conditions for market participants to make their payments comfortably and safely, enabling a broader involvement of economic cycles in the banking sector and an increase in banks’ credit facilities. limited access to financial resources – on one hand, causes the banking sector to be deprived of sufficient funds circulating in the economy, and on the other hand, does not allow the revitalization of the non-oil sector. the size of the amount of cash in circulation limits not only the country’s economy but also the financial intermediation of the banking sector to a large extent. in the last 15 years, special importance has been given to the intensive use of the possibilities of the national payment system (nps) among businesses and the population. in 2022, the total volume of payments made through the real-time interbank settlement system (azips) and the small payments settlement clearing system (хохкс), which are the main components of the system, reached 341.9 billion manat (2.6 times of gdp). the number of payments in 2022 was 97.2 million, representing an increase of 37% in the number and 57% in the volume of bank transfers compared to 2021. in azips, the total volume in 2022 was 300.1 billion manat, with 1358.6 thousand payment documents processed, amounting to azn. compared to the previous year, the volume of operations increased by 63.3% (116.3 billion manats), and the number increased by 22% (245.6 thousand units). the average amount of each payment document processed by the system was 220.9 thousand manats. in xohks, an important component of the payment system, 95,896 thousand payment documents with a total volume of 41.9 billion manats were processed. compared to the previous year, the number of transactions increased by 37.7% (26,257.6 thousand pieces), and the volume of transactions was 8.0 billion manats. there was an increase, and the average amount of each processed payment document was 437.3 manats. discussion in recent years, one of the modern payment trends, the instant payment system (ios) and the blockchain-based digital identification system have been created, the card infrastructure has been improved, and the possibilities of non-cash payments have been increased. for the first time in the country, “smart student cards” with payment functionality the impact of digital payments on the growth of cashless payments and the factors limiting access to financial services 184 have been issued to students in the education system. the implementation of this mechanism allows to expand of infrastructure capabilities and offers innovative payments to customers. as a result of the convenience and safety of non-cash payments, the radical change in the financial behavior of the population, the emergence and application of modern innovative payment channels, realizes the possibility of rapid growth in the dynamics of digital payments. 337.3 thousand payment documents with a total volume of 549.6 million manats were processed in the instant payment system (isp) launched on 01.01.2023. compared to 2021, the number of operations has increased by 2.9 times (220.3 thousand units). in the total volume of payment documents processed in the payment system for 2022, azips had a special weight of 87.6%, xöhks 12.2%, and aös 0.2% figure 1. components of the national payment system in % source: prepared by the author based on central bank statistics as a result of the work done in the direction of the development of cashless payments, the pace of development during 2022 was higher than in previous years. as of 01.01.2023, the number of payment cards in circulation is 13.6 million. units, the number of atms was 3 thousand, and the number of pos-terminals was 79.8 thousand. during the reporting period, the volume of non-cash transactions with payment cards within the country increased by 2.1 times to 24.4 billion. formed manat. the number of e-commerce transactions in the country has increased by 2.4 times and its volume by 2.5 times compared to 2021. the specific weight of non-cash payments made with payment cards in the country increased by 11.4 percentage points compared to last year and was equal to 43.2%. during the reporting period, the volume of transactions carried out through internet banking services increased by 50% compared to 2021, and the volume of mobile banking transactions increased by 3 times. (cbar, 2022) one of the main problems of the banking sector is the lack of alternative financial institutions in order to eliminate the limitation of financial inclusion among the population. in the world experience, the creation of alternative financial institutions to traditional banks is encouraged to involve the population in the financial-banking system and, in parallel, to diversify the banking sector and the economy. although such organizations differ according to the characteristics of the countries, they are essentially the same and aim to include large amounts of money flows outside the banking sector into the general financial system of the country and provide cheaper loans to the real sector by providing access to financial services for the population (zeynalov, 2021). the intensity of access to financial services has a positive effect on the demand for banking services and economic activity along with the improvement of the population’s well-being. zakir zeynalov 185 figure 2. cash flow (m0/m2) source: central bank monetary policy review 2023 january – june the specific weight of cash money (m0) in manat broad money (m2) was 46.3% by the end of the period (cbar, 2023). due to the convenience and speed of non-cash payments, radical changes have taken place in the socio-economic landscape of cash in several countries. with the advent of mobile phones and innovative payment channels, the dynamics of digital payments are rapidly increasing. according to the 2020 edition of the world payments report (world payments report 2020), "over the last year, the volume of non-cash payments made via the internet increased by 14.1%, and the volume of payments made by mobile phone increased by 8.1%. at the same time, in 2020, although the size of the world economy shrank due to the covid-19 pandemic, the volume of cashless payments made through electronic commerce increased significantly. thus, a 62.4% increase in the volume of credit card transactions and a 52.7% increase in debit card transactions were observed in electronic commerce" (cbar, 2023). the low level of financial literacy among the population and lack of knowledge about the advantages of digital payments have a negative impact on the use of these services. a study conducted by the world bank shows that "interest in opening bank accounts in azerbaijan is significantly less. financial literacy is lower in regions and rural areas, especially among housewives and elderly population groups" (cbar, 2023). the weak competitive environment and low level of financial literacy in the digital payment system, high cash circulation outside banks (m0/m2=46.3%), and the rapid expansion trend of the monetary base (2 times in the last 5 years) are factors limiting the development of cashless payments and access to financial services. (zeynalov, 2021). at the same time, the weak development of financial markets, the high cost of digital payments, poor use of payment facilities by business entities and population groups, and a number of other factors significantly impact the volume of digital payments. cyberattacks and money laundering also pose serious risks when using electronic money. it is crucial to continuously implement various projects aimed at increasing access to cheap and convenient financial services for the population and businesses in the country and increasing the volume of non-cash payments. for the diversification of the banking sector and the economy, the creation of alternative financial institutions to traditional banks will create the possibility of attracting large amounts of financial flows outside the banking sector to the banking circulation and providing cheaper loans to the real sector by ensuring the population’s access to financial services. the impact of digital payments on the growth of cashless payments and the factors limiting access to financial services 186 conclusions in conclusion, the application of new technologies emerges as a powerful tool for enhancing the qualitative aspects and increasing the production potential of a nation. by extending innovative payment services to customers, there is a positive impact on mobilizing internal financial resources and reducing the high cost of credit resources within the banking sector. furthermore, the improvement of economic management mechanisms, with a heightened focus on formulating sectoral development strategies grounded in the economic and labor potential of distinct regions, stands out as a priority issue. the overarching goal is to foster economic growth and entrepreneurship stimulation. addressing the pressing matter of financial accessibility for both businesses and households is paramount. establishing a robust connection between the real and banking sectors requires concerted efforts, including collaboration with international financial institutions such as the international monetary fund and the world bank. urgent monetary reforms are essential in this context. to expand financial inclusion in the banking services market and deepen financial intermediation, building trust in the financial sector and ensuring transparency are foundational. measures to develop the capital market play a crucial role in this endeavor. the organization and promotion of innovative methods in the payment market, especially those facilitating access to non-cash payments, represent a key priority. this involves fostering confidence, transparency, and regulatory frameworks covering the legal and security aspects of digital payments to ensure the stability and security of the payment system. creating a stable system in the banking services market and reinforcing its integration into the real sector are imperative. diversifying investment sources becomes a strategic approach for the banking sector to minimize risks effectively. lastly, the rapid, efficient, and secure adoption of innovative innovations in digital payments and electronic banking services necessitates ongoing efforts to educate the population and enhance financial literacy periodically. this holistic approach ensures the sustainable growth of the economy, supported by a well-functioning and resilient financial ecosystem. references 1. central bank of the republic of azerbaijan. (2022). annual report. baku. 2. central bank of the republic of azerbaijan. (2021-2023). digital payment strategy. retrieved from https://worldpaymentsreport.com/resources/world-payments-report-2020/ 3. central bank of the republic of azerbaijan. (2021-2023). digital payment strategy. retrieved from http://documents1.worldbank.org/curated/en/880631470853969754/pdf/107748-wpp125462-public-10-8-2016 azerbaijanenhancingfinancialcapabilityandinclusionfinal.pdf 4. central bank of the republic of azerbaijan. (2023). review of monetary policy, january – june. baku. 5. zeynalov, z. (2021). economic opportunities and factors limiting access to financial resources in the financial sector. in republican scientific conference on "economy of azerbaijan in the years of independence" (p. 191). azerbaijan state university of economics. 6. government of azerbaijan. (2016). national economy and strategic road map on the main areas of the economy. baku. https://worldpaymentsreport.com/resources/world-payments-report-2020/ http://documents1.worldbank.org/curated/en/880631470853969754/pdf/107748-wp-p125462-public-10-8-2016%20azerbaijanenhancingfinancialcapabilityandinclusionfinal.pdf http://documents1.worldbank.org/curated/en/880631470853969754/pdf/107748-wp-p125462-public-10-8-2016%20azerbaijanenhancingfinancialcapabilityandinclusionfinal.pdf agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 17, no. 2 (2023), pp. 142-157 142 management of sustainable development and environmental protection s. smolović, s. živanović, n. abramović, m. živanović sanja smolović1, slađana živanović2, nikola abramović3, miodrag živanović4 1 faculty of maritime affairs and tourism, university adriatic bar, montenegro 1 https://orcid.org/0000-0002-9893-0593, e-mail: sanjasmolovic83@gmail.com 2 3 4faculty of business economics and law, university adriatic bar, montenegro 2 https://orcid.org/0000-0002-6001-3685, e-mail: sladja.nautilus@gmail.com 3 https://orcid.org/0000-0002-7865-3592, e-mail: nikola.abramovic.fpe@gmail.com 4 https://orcid.org/0000-0003-3612-6230, e-mail: mico.zivanovic@gmail.com abstract. unifying the concept of social, economic and ecological development, the new development paradigm was established under the name of sustainable development. sustainable development should harmonize sensible consumption of natural resources with their protection and ensure a more equitable division of wealth and equal economic development at the global level. within such a context, science and environmental education constitute the precondition for our joint future. as regards the contents, this paper provides a precise and comprehensive overview of theoretical features of environmental pollution and sustainable development, as well as the most important aspects of environmental and natural resource management. for effective control of environmental pollution to be possible, it is necessary to consider the ethical foundations of environmental economics in particular, and special attention is paid to in the paper. a significant part of this work is devoted to criticism of uncontrolled economic growth and the inefficiency of the state in controlling environmental pollution. knowledge management for the purpose of sustainable development and development of international regulations on the environment are also included. keywords: sustainable development, management, environment, pollution 1.introduction the brundtland report defines sustainable development as "development that meets the needs of the present without compromising the ability of future generations to meet their own needs." sustainable development policies include institutional measures and measures and activities in the field of environmental protection that protect the environmental system, the economic and social system as a single unit, as well as a set of principles of economic and social sustainability. institutional measures include the areas of good governance, access to information, the fight against corruption and supervision over the implementation of measures and activities. measures and activities in the field of environmental protection refer to the integration of the environmental protection dimension into development programs and projects in the programming or design phase, as well as monitoring the achievement of goals in this area. measures in the field of economic sustainability refer to various sectors energy, forestry, agriculture, water management, and others. measures in the area of social sustainability include poverty reduction, gender, cultural and social policy, cooperation with the civil sector, and others. if development is to be sustainable in the long term, economic and sustainability https://orcid.org/0000-0002-9893-0593 mailto:sanjasmolovic83@gmail.com https://orcid.org/0000-0002-6001-3685 mailto:sladja.nautilus@gmail.com https://orcid.org/0000-0002-7865-3592 mailto:nikola.abramovic.fpe@gmail.com https://orcid.org/0000-0003-3612-6230 mailto:mico.zivanovic@gmail.com sanja smolović, slađana živanović, nikola abramović, miodrag živanović 143 policies must be harmonized with institutional arrangements, measures and activities in the field of environmental protection. what is sustainable development? sustainable development represents a general direction, an aspiration, to live in a world in which economic, technological and cultural development is harmonized with the needs of the development of society and the capacity of the environment. the world commission on environment and development in the report "our common future" indicates the danger, for people and our planet, of the policy of economic growth without taking into account the possibility of regeneration of the planet earth. in 1987, this commission defined sustainable development as development that meets the needs of the present without denying future generations the ability to meet their own needs. sustainable development is a long-term concept that indicates the need to create a balanced relationship between three seemingly opposing areas that must ensure environmental responsibility, economic profit and a society of equal opportunities in the future. this concept of sustainable development represents progress for environmental policy, because it explains the connection between environmental, economic, social and cultural problems within which environmental protection problems should be considered (conservation of natural resources, biodiversity, circulation of matter, emissions of harmful substances, sustainable use of land, timely and effective problem solving, aesthetic value of nature), if we want to solve them professionally and in a socially acceptable way. 1.1 problem, subject and object of research the rapid growth of the population in the last hundred years, the strengthening of the economic activity of mankind, the development of international trade, and the increasing needs of mankind for energy and material goods, have had, and will continue to have, negative consequences on the quality of the environment. ecological problems have taken on dramatic proportions because they directly affect people's health and threaten the survival of life on earth. harmful ecological and economic consequences for the environment are manifested not only in the area of pollution and depletion of natural resources necessary for life, but also in the area of a complete reduction of the quality of the environment in certain areas where life and economic activity cannot continue. the economic prerequisite has already reached or exceeded important limitations related to the source, that is, to the natural capacity of the country. parts of the earth have already been damaged or destroyed, so there is practically no place where traces of human existence cannot be noticed. from the center of antarctica to mount everest, waste materials dumped by humans can be clearly seen, and the quantities are increasing. it is not possible to find a sample of ocean water without seeing traces of human waste. toxic substances and compounds of heavy metals have already accumulated within the marine system, and one fifth of the world's population breathes air more toxic than the standard recommended by the world health organization (who). in the eighties of the last century, it became obvious that environmental degradation has become one of the main obstacles to economic development. economists of environmental economics, a new scientific branch of economic sciences, assume a significant role in considering the mutual effects of economic growth and environmental quality. by means of environmental protection policy, they try to integrate the solution of environmental issues. through the economics of the environment, economists strive to express the functions of the environment in monetary terms in order to be able to show the mutual relationship between the goals of economic policy and the goals of environmental protection policy. management of sustainable development and environmental protection 144 in such an environment, the concept of steady or sustainable development was created. accepting such a conception of development, the economy must be trained for a new organization in relation to the use of natural resources and new state economic and environmental protection measures. the economy must set new goals for environmental protection, but also anticipate and reduce the negative consequences of state policy in environmental protection. in such new environmental conditions, the economy has to deal more with research and development projections, taking into account the growing interest in environmental protection. in order to achieve this, it is necessary to investigate basic environmental problems, mutual influences of economic growth and environmental quality, as well as the impact of environmental protection policy on economic growth. as environmental protection is an expensive activity, it is necessary to find an objective measure of environmental pollution, so that the costs for environmental protection are lower than the benefits of economic growth. at the same time, it is necessary to know the entire economic-ecological instrumentation that is available for environmental protection policy. although for a long period of time current phenomena are scientifically studied and current problems of environmental pollution are solved on a global scale and numerous institutional and instrumental activities are undertaken. all these activities are undertaken with the aim of affirming and operationalizing the idea of global sustainable growth and development of all activities and encourage the management of sustainable development, which would be directly in the function of creating basic assumptions for the creation of individual and social well-being. the described issue and the determined problem of the research on the current phenomena of the relationship between management and sustainable growth and development determined the scientific framework for the subject of the research as a project task: to investigate the current theoretical and applied phenomena of the principles, instruments, laws and theories of sustainable development, systematically formulating the results of the research on the causes and the consequences of global environmental pollution, the most important determinants of environmental management, the mission of educational systems in global sustainable development, the legal framework of sustainable development management, and concludes the management of sustainable development in the 21st century. the problem and the subject of the research refer to two interconnected objects of research: management and sustainable development. 1.2 hypothetical framework research problem, subject and object of research, the purpose and goals of the research on the current phenomena of the relationship between management and sustainable development, to which this work is dedicated, determined the scientific paradigm for the hypothetical framework: the main hypothesis is the hypothesis of knowledge and skills about the most important pollution of the environment, sustainable development, management, about the legal framework of sustainable management development, management of sustainable development, which represent the creation of a basic reference for looking at the management of sustainable development for the 21st century in all activities. the main hypothesis set in this way included several auxiliary hypotheses: 1. scientifically based knowledge about the causes and consequences of global environmental pollution and the mission of ecological policies and ecological systems in global sustainable development represent a theoretical framework for the study of numerous current phenomena of sustainable development management. sanja smolović, slađana živanović, nikola abramović, miodrag živanović 145 2. knowledge and understanding of management in general, and especially the functions and specifics of environmental management, enable the management of all potentials, resources and capacities in all activities and the creation of basic assumptions for global sustainable development. 3. good knowledge of the most important pedagogical meanings of educational systems represents a scientific paradigm for the ecological education of children, students, students and adults in the system of lifelong learning and education, but also for the appropriate management of knowledge in the function of global sustainable development. 4. an adequate amount of knowledge and understanding of legal rules and legal institutes, national, international, coercive law, autonomous law, directives and recommendations of the european union, declarations, programs, and environmental documents enables not only environmental managers but also others: teachers, scientists, politicians, entrepreneurs, intellectuals, experts of various professions, to create basic assumptions for micro, macro and global sustainable growth and development. 1.3 purpose and goals of the research the goal of the research is closely related to the previously determined research problem. based on the review of ecological and economic problems of environmental pollution and the determination of the interaction between economic policy and environmental protection policy, the need to involve environmental economics economists is determined to solve environmental problems. it wants to prove that only a new philosophy of development can ensure smooth and sustainable development. accordingly, the new role of the state and companies in environmental protection and the function of management in environmental protection are investigated. the purpose is to draw the attention of the holders of the state environmental protection policy to the need for an effective fight against environmental pollution, providing them with information on the international environmental protection policy in developed countries and countries in transition. as the state's environmental protection policies are based mainly on environmental taxes and incentives, and these on damage assessments and benefits from environmental protection, it is desired to provide a framework for the objective determination of environmental damages, i.e. setting an environmental protection policy and the development of environmental management. bearing in mind the aforementioned and the fundamental mission of this work, the purpose and goals of the research were determined: to investigate the increasingly important meaning, principles, rules, instruments, phenomena about the most important problems of sustainable development management and to define the research results and present them in this paper. 1.4 evaluation of previous researches the first serious study by r. carson called silent spring (silent spring, new york, 1962) scientifically indicated the endangerment of flora and fauna and the problem of human survival on earth. in that study, the environmental problems of our planet are pointed out, but economic growth is not discussed in detail. the economic aspects of the environment are also covered by p. nijkamp in the book theory and application of environmental economics (amsterdam, 1978), in which he discusses the functional and methodological problems of the environment from an economic point of view. he rightly points out that the increase in the use of natural resources and materials causes an increase in management of sustainable development and environmental protection 146 national welfare and at the same time increases the waste of production and consumption, that is, further degradation of the environment. studies by english author david w. pearce et al. economics of natural resources and the environment (london, 1990) and the american author berry c. field's environmental economics (new york, 1994) also include the economic aspects of environmental protection and determine the subject and work methods of the new scientific discipline of environmental economics. the books new direction (zagreb, 1995) by s. schmidheiny and green inc (london, 1995) by f. cairncross indicate a new environmental policy implemented in the economy of developed countries. those books show with numerous examples and quotes that the environmental policy is being integrated step by step with the economic policy of states and companies and that a friendly relationship with the environment is developing. finally, it is necessary to mention the study by the author ratko zelenika, who in the book science of science (rijeka, 2004) defined and clearly presented the basics of economic research and determined the methodology of scientific-research work, which to a considerable extent helped shape this work methodologically and in terms of content. 1.5 scientific methods the following scientific research methods were used in the processing of the topics discussed in this paper in appropriate combinations: inductive and deductive, methods of abstraction and concretization, methods of generalization and specialization, methods of definition and classification, historical method, logical method, and as the most frequently used and most significant methods of analysis and synthesis in determining the appropriate necessary knowledge of environmental managers and applying it to their education and training programs. 2. significance of environmental pollution and sustainable development the strategic threat of human civilization to the global environment has led to negative trends in all environmental indicators. thus, the trends of forest loss and species extinction are accelerating, climate changes are occurring, and with them natural disasters, water is running out, and soil erosion is causing more and more damage. technical and technological growth, which is based on the strong development of science, constantly accelerates the growth of productivity, and contributes to the constant increase in production, and thus to the ever-increasing depletion of natural resources. strong economic growth, especially in certain developed countries, has created global politics and growing differences between the rich and the poor. with its modern technological capacities, the economy has created the illusion of "unlimited power of economic growth and non-distinction between the terms growth and development (šebić, 2002). pollution of the atmosphere and oceans on a global scale is taking on worrying dimensions, and the decline in food production and the growth of genetically modified food are causing hunger and concern. all this points to the imbalance that has arisen between human development and the environment. civilization's great need for natural resources and weak environmental balance have led to an ecological crisis of global proportions. but, the most dangerous threats to our global environment are not only the mentioned threats, but the way in which we experience this crisis. scientists must continuously research environmental and development problems, but this must not diminish our action to "do something now"; the balance between development and the environment must be restored and greater personal responsibility must sanja smolović, slađana živanović, nikola abramović, miodrag živanović 147 be taken for the destruction of the global environment. free market economics, arguably the most powerful tool of civilization, ignores the value of environmental goods (clean air, water, healthy forests, etc.). it cannot see, and even less economists can measure the value of these goods, because there are no points of contact between macroeconomics and the environment. all this indicates that it is necessary to scientifically and professionally point out development and environmental problems with objective information. therefore, it is very necessary to change the overall human awareness towards one's own natural environment, and especially towards ecological systems. it is necessary to reduce the entropy of the earth's ecosystem and create a new philosophy of development that will be in the interest of man, but not for man to destroy the ecosystems without which he cannot survive. in other words, we have to move to sustainable development. as already pointed out, development and economic policy in the search for a balance of economic activities exerts a strong pressure on the environment and creates an ecological imbalance on earth. these pressures are primarily reflected through economic development activities, but also through uncontrolled demographic development in certain parts of our planet. all this points to the fact that through scientific research, public discussions and ecological and moral pressures, political structures on the international and national level will be forced to regulate the use of ecological goods and pressure on the increasingly "sensitive" environment. 2.1 anthropogenic causes of environmental pollution finally, today it is clear that the market cannot automatically (independently) regulate the imbalance of ecosystems, and future development and economic policy are aimed at cooperation with environmental protection policy, namely (schick, 2015):  through appropriate legislation to protect natural resources (water, forests, arable land, sea) from exploitation that is driven primarily by profit and short-term economic interests.  by conducting an industrial policy that should be planned for long-term development.  through state institutions that should encourage comprehensive research on resource and energy management, especially in energy-intensive branches, in order to gain comprehensive scientific insight into the state and perspectives of resource productivity growth. on the basis of such a study, it is possible to start planning the rate of growth of resource productivity until 2025, and create measures of encouragement and monitoring.  through the planned income, which should allocate more funds for education and science, considering that knowledge is the basic resource for the effective disposal of natural and human capital in the 21st century.  they are in line with the precautionary principle, which is one of the foundations of managing a complex adaptive system like the economy. in conclusion, it could be emphasized that the global environmental problems created by the global economy can be solved successfully only by the active role of the state, the international community and the global economy, and not only by the open market and its laws. 2.2 rapid population growth and urbanization from the time of the appearance of man to 1945, it took more than ten thousand generations for the population to reach two billion. and now, in the span of one lifetime, the world's population has grown from two billion to more than 6 billion. while the world population at the beginning of the century numbered 1.6 billion people, today it has grown to 6.67 billion people, and it is predicted that management of sustainable development and environmental protection 148 by 2050 there will be around 9.2 billion people living on earth. at the beginning of the new era, the population of our planet took 600 years to double, and at the beginning of the 19th century, the population doubled in 80 years, and today it doubles in 35 years; it only took 12 years for the population to increase by one billion, which is the shortest period so far (črnjar, 1997). what kind of pressure on the environment is caused by such an "explosion" of the population can be represented by the fact that at the beginning of the 20th century there was hardly any talk about environmental problems, and today we are talking about an ecological crisis of global proportion. during much of human history, the world's population grew very slowly. growth rates began to increase slightly during the 17th and 18th centuries as death rates decreased. the highest rates were recorded during the 20th century and reached a peak of 2% in the period from 1965 to 1970. from 1950 to 2007, the world population increased by about 2.6 times. in the period from 2005 to 2010, the growth rate at the world level will be 1.17% and is predicted to decrease to 0.36% by 20452050. year (table 1). table 1. projections of the total population and population growth rates in the world, developed countries and developing countries (in the period from 1985 to 2050, medium variant) year total population (in millions) world developed countries developing countries 1985 4855 1 115 3 740 1995. 5 719 1 175 4 544 2005. 6 515 1 216 5 299 2015. 7 295 1 245 6 050 2025. 8 011 1 259 6 752 2035. 8 587 1 260 7 327 2050. 9 191 1 245 7 946 average annual population growth rate 1985 – 1990 1,73 0,60 2,60 1990 – 1995 1,54 0,45 1,83 1995 – 2000 1,37 0,32 1,63 2000 – 2005 1,24 0,36 1,44 2005 – 2010 1,17 0,28 1,37 2010 – 2015 1,10 0,20 1,28 2015 – 2020 1,00 0,14 1,17 2020 – 2025 0,88 0,08 1,30 2025 – 2030 0,75 0,03 0,89 2030 – 2035 0,64 -0,01 0,75 2035 – 2040 0,54 -0,05 0,64 2040 – 2045 0,45 -0.08 0,54 2045 – 2050 0,36 -0,10 0,44 source: world popula on prospects: the 2006 revision, popula on division of the department of economic and social affairs of the united na ons secretariat, hp://esa.un.org/unpp sanja smolović, slađana živanović, nikola abramović, miodrag živanović 149 urbanization is a process that developed rapidly after the second world war in developed countries and in development countries. it is a fact that at the beginning of the 20th century there were 11 million cities on earth, but in 1975 in 2005 there were 190, and today there are more than 200. in 2005, about 20 cities had more than 10 million inhabitants, with about 70% of them in developing countries. cities are a very sensitive ecological system and, as a rule, require imports of food, energy, water, etc. that is why the natural creation and expansion of cities is a very sensitive ecological, economic and social problem today, especially in poor and underdeveloped countries. today in developed countries 70-80% of the population lives in urban areas. regardless, estimates indicate that cities will continue to develop rapidly in the future, especially in developing countries, to frightening dimensions. 2.3 industrial and technological revolution in the entire world, fossil fuels (oil, gas and coal) still make up the largest part of the fuel. among them, coal consumption is predicted to grow the most, primarily due to the growth in demand from the energy sector in china and india. such trends lead to a constant increase in global carbon dioxide emissions up to 57%. china is the world's largest emitter of carbon dioxide, while india became the third polluter by 2015. by 2030, china will almost catch up with europe in terms of emissions per capita. because of all this, the global energy policy should be an integral part of the overall economic policy and environmental protection policy. directing energy development to alternative energy sources (sun, wind, sea) can contribute to reducing environmental degradation in the future. when talking about renewable energy sources, the world energy organization (iea) distinguishes between: hydropower, fuel from renewable materials, waste (including biomass and used energy from waste), and others, including geothermal energy, solar energy, wind energy, and wave/tidal energy (oecd, 2007). high technologies can cause a revolution in terms of reducing environmental pollution, but in addition to all other activities that society needs to undertake. it is important to create conditions that will enable the transfer and application of technology. the development of new technologies and the speed of their spread among industrial and developing countries is the most important means for the structural changes that are expected in industry and in environmental protection (pokrajac et al., 2015). through the process of innovation of new technology, new products and production processes are created that enable the increase of people's well-being, creating environmentally friendly products and production processes. 2.4 accelerated development of traffic and traffic infrastructure traffic is a part of human activities and significantly affects its quality, enriches and enriches human life, but at the same time causes many bad environmental consequences. however, the impact of traffic affects the environment by constantly increasing the emission of harmful substances into the air due to the constant increase in the number of vehicles and the consumption of motor fuels, as well as accidents during transportation. harmful environmental consequences of traffic have different characteristics and modes of action. modern society wants to keep the harmful consequences of traffic under control and reduce them with regulatory measures. the main impact of traffic on the environment is related to the emission of greenhouse gases, local air pollution, noise and traffic congestion. traffic activity also creates significant external costs associated with traffic accidents, and depletion of non-renewable energy sources (especially fossil fuels). management of sustainable development and environmental protection 150 2.5 large quantities of all types of waste it is important to point out that the attitude of modern man towards the global environment is in a major crisis, as evidenced by the large quantities of waste that are removed from cities and businesses. large amounts of waste very often end up in nature or in the oceans. today, man has started to drown in that "river" by relying for too long on the old strategy of "out of sight, out of mind". there are several problems associated with procrastination. in addition to taking up more and more valuable land, it also causes air, water and soil pollution, releasing carbon dioxide and methane into the atmosphere, and chemicals and pesticides into the soil and groundwater, which poses a danger to human health, plants and animals. new sanitary landfills are constructed in such a way that they have an impermeable bottom and sides, that seepage water and gases are monitored and drained, and that the quantity and composition of the material that is disposed of is continuously monitored. another form of waste disposal is thermal treatment, which is an effective but relatively expensive way of processing municipal waste. another option for waste management is recycling, as far as that is concerned, the european union has set conditions for constantly increasing the amount of waste that is recycled. 2.6 the development of mass tourism tourism, by its meaning, is "a completely new spatial-socio-economic phenomenon of the 20th century" and is a major user of space, and especially depends on the quality of space and environment. in its development so far, tourism has experienced numerous external and internal changes, starting with different forms and means used, to the change in scope and spatial dimension in which it developed, and to the different functions it had in certain social arrangements. as long as tourism was relatively small in number and disproportionately distributed over space, and was understood as "passive tourist leisure", the impact of such tourism on the environment was not a particular problem. when tourism took on massive proportions, when masses of people began to move mainly to spatially concentrated tourist destinations, and when there was a sudden change in the way tourists behave when tourism turns from passive to active and tourists begin to "consume" nature and natural resources tourism acquires negative characteristics. "tourism has become one of the most relevant spatial-geographic phenomena and, along with industrialization and urbanization, it is one of the strongest factors of pressure on space and the most fatal causes of nature degradation precisely in these areas where nature is the most beautiful, the most attractive, and the most valuable from a tourist point of view, but also the most sensitive. despite the fact that tourism, in addition to all the positive economic, social, cultural and ecological advantages it brings, threatens the quality of the environment, perhaps more than any other sector. the greatest pressures of tourism on the environment are mainly the result of the concentration of tourist activity in a relatively limited space and time. a particularly big problem in tourism is the increase in housing density during the summer, so for example the housing density in monaco increases by 765%, 383% in malta, 207% in france, 157% in italy (trumbić et al., 2005). in addition to the inevitable pressure on the space, certain tourist activities significantly endanger the environment, e.g. excessive visits to sensitive areas, hiking, driving cars in the countryside, building golf courses and the like. in order to be able to develop successfully, tourism requires a quality and clean environment, and its development threatens the quality of that environment every day. the solution to that problem should be sought in the so-called "sustainable tourism development" which will establish a positive relationship between tourism development and environmental protection. sanja smolović, slađana živanović, nikola abramović, miodrag živanović 151 2.7 natural causes of environmental pollution although natural causes of environmental pollution are part of the evolution of our planet, they often turn into natural disasters due to human influence. natural phenomena threaten and disrupt relationships in the environment. natural disasters have always been a great danger for people and their material goods. while in the past natural disasters were caused solely by evolution, today these natural disasters are also influenced by human activity. natural disasters take many human lives and cause great material damage. in the following text, we will mention some natural phenomena that occur as natural disasters, but we will not discuss these phenomena in detail (ahmet, 2017): 1. soil erosion is a natural process as old as the earth itself. it is a process caused by various natural conditions, but also by human activity. as with some other natural processes, man accelerated that process with his activity. soil erosion has become a worldwide problem because it affects large areas and causes irreparable damage. 2. floods they are most often caused by heavy and long-lasting rains and sudden melting of snow. unlike erosion, floods do not occur suddenly and can usually be predicted. 3. an earthquake usually occurs suddenly and causes numerous human casualties and destruction in urban areas. there are about 100,000 earthquakes a year on earth. there are two seismic areas subject to more frequent earthquakes: one is the so-called european-transasian, and the other is pacific. 4. volcanic eruptions recorded during the previous period are often repeated with their own characteristics. 5. fires they occur as a consequence of natural phenomena and often develop into natural disasters. 6. droughts and winds they are natural causes of environmental problems. they are the result of climate change that occurs due to the evolution of the earth, but also due to human activity and environmental pollution. 2.8 other causes of environmental pollution it is a fact that people live better and worse at the same time. the environment is becoming more and more polluted every day, more dangerous for people's health and life, and plant and animal species are increasingly being destroyed and disappearing. developed countries exploit almost the entire wealth of the earth, while poor countries continue to live in poverty and in a polluted environment. the ecological crisis, considering the disruption of the balance between human society and the natural environment with a catastrophic perspective, can in a certain way be considered the deepest crisis in the history of the preservation of the human species. therefore, environmental problems, and especially the crisis, open up the deepest questions of human survival. the question is often asked why a crisis of such proportions occurs in the first place, and whether there are opportunities to overcome the crisis through conscious intervention, that is, by applying a strategy to solve it (ahmet, 2017). as is known, the crisis itself is an expression of modern commodity production and its competitive nature in which capital engages scientific, technical and technological power. the struggle for efficiency, and thus quantitative growth, takes on a degree of depletion, pollution and destruction of the environment that threatens human survival on earth. in addition, there is an increase in the birth rate worldwide, which, with its exponential tendency, also calls into question survival itself. management of sustainable development and environmental protection 152 all of the above indicates that the disturbed balance between progress and nature must be achieved by building a new "macro-ethics" whose basic principle would be responsibility for the survival of humanity and the ecological systems it desperately needs, i.e. nature. 3. limited scientific, technical and technological possibilities of society problems of underdeveloped countries, i.e. developing countries, or as it is commonly called "third world countries", are getting bigger. more than one and a half billion of the world's population lives in conditions of extreme poverty. often with an income below one us dollar. it can be said that about one third of humanity lives in conditions of misery and on the border between good and evil. because of the above, as well as because of the structural crisis affecting the world economy, it is difficult to imagine that something more could be done individually to save the environment. the global economic crisis caused by the growth of energy, food, inflation, unemployment, indebtedness, increasing exploitation of natural resources and increasing pollution of the global environment calls for cooperation and association, calls for social sensitivity and greater aid to poor countries. only in this way can global environmental problems begin to be solved. the eternal question arises "what are the material possibilities of society to solve global environmental problems, especially in the era of global economic crisis?" regardless of the above, a special plan is needed right now that combines comprehensive, long-term and targeted financial assistance to developing countries in order to transfer new technologies necessary for the permanent economic progress of those countries (milović, 2013). those countries need help in stabilizing the population and its education, and at the same time industrially developed countries must speed up the transition to ecologically sustainable development. the global environmental facility (gef) at the un can be one of the mechanisms for achieving common goals, especially for helping underdeveloped countries. and just as importantly, developed nations must be prepared to lead by example; otherwise the third world will not want to accept the necessary changes – even in exchange for substantial aid”. today, in many cities and countries, there are not enough material possibilities to solve environmental problems. how to secure food so that the population can survive is still a priority problem, and solving environmental problems is on the second plan. the material capabilities of society significantly influence the solution of environmental problems, so it can often be said: it is richer and safer for the environment (ilić-krstić, 2016). "in the last twenty years, the relationship between man and the environment has fundamentally changed, although even today most people are not aware of this new relationship. this is partly because the relationship is global, and many people are not used to such a way of looking at things. as urgent environmental problems require immediate action, more and more people and experts have begun to think in terms of long-term and global actions. in doing so, one tries to predict the future of our planet, different scenarios are worked out, the current situation is analyzed and one wants to predict the state of environmental problems in the future. 3.1 global climate change and its consequences the role of climate in shaping human history is very complex, and historians often attribute to it a decisive role in the development of human history. history proves that climate changes are most often caused by evolutionary changes on earth or major natural disasters (volcanic eruptions, etc.), and in the last ten years by human activity. sanja smolović, slađana živanović, nikola abramović, miodrag živanović 153 we thank the so-called life on earth. "natural greenhouse effect". without it, instead of the average 15oc, the arctic cold of -18oc would prevail on the earth's surface, i.e. 33oc lower temperatures (todic, 2016). in 2000, the total global annual emission of co2 was about 7 billion tons, and already in 2050 it is predicted that it will reach about 20 billion tons, which will depend on the state of economic growth and environmental legislation. the consequences of global climate change will cause terrifying climate disasters during the next century, some of which are already underway. the strength of the impact strongly depends on the rise in temperature, which is one of the strongest indicators of global climate change. consequences of climate change include increased risk of floods and droughts, melting glaciers, rising sea levels, loss of biodiversity, threats to human health and damage to economic sectors such as forestry, agriculture, tourism, industry, insurance, etc. 3.2 the disappearance of the ozone layer and its consequences the ozone problem is partly confusing. namely, ozone appears at two levels in the atmosphere: in the stratosphere and the troposphere. it is a gas that occurs naturally, and in the stratosphere it collects as the ozone layer and is similar to a thin belt around the earth. there, the concentration of ozone is positive because it protects the earth from the sun's ultraviolet radiation, so it absorbs about 77% of the radiation. at the same time, ozone that is deposited at a lower atmospheric level, in the troposphere, can have a harmful effect on health, vegetation, etc., and is also involved in the general process of acid rain formation. although the creation of tropospheric ozone is natural, it can also be enhanced by the interaction of various other gases and compounds. ozone (o3) is a blue-white gas composed of three oxygen atoms in a molecule. it is created naturally in the upper layers of the atmosphere in the stratosphere, with the help of ultraviolet radiation from the sun. at the beginning of the 70s, scientists determined that chlorofluorocarbons (cfcs), popularly called "freons", are the main cause of ozone formation. scientists have made a dramatic discovery in antarctica. they estimated that in the period from september to october 1986, the ozone layer over antarctica decreased by 50% compared to the 1960s. this resulted in the creation of a large "hole", the size of which is roughly equal to the land area of the united states. the hole appears to recover on its own after a period of time has passed since parts of the ozone layer have disappeared, but later reappears. the disappearance of the ozone layer leads to increased solar radiation, which is why skin cancer is more common. these diseases are on the rise in the world, but it is uncertain how much this increase is affected by the reduction of the ozone layer. based on experience, the rule of thumb is that a 1% reduction in the ozone layer causes an increase in ultraviolet radiation by 1 to 2%, and the incidence of skin cancer by 3 to 4%. other health effects have not been proven. in 1996, all industrialized countries were supposed to stop the production and use of cfcs, and should switch to their substitutes. 3.3 ecological "boomerang" of irresponsible human behavior towards nature for responsible human behavior towards the planet earth, it is very important that the organizational behavior of society, i.e. togetherness, because the solution to environmental problems and the boomerang effect is possible only in the cooperation of different subjects, not in domination and exploitation. the lack of joint responsibility for the future development and ecological problems of the earth can lead us to an economic-ecological disaster. management of sustainable development and environmental protection 154 4. sustainable development: the challenge of civilization therefore, the root of the crisis lies in the goals of human activity (socio-economic development) and the way man converts natural capital (natural values) into his private capital. the world conference on environment and development held under the auspices of the un (rio de janeiro, 1992) definitely accepted the concept of sustainable development as the only known solution to the problems of development and environmental protection. therefore, the concept of sustainable development is based on economic and ecological starting points and principles, whereby some authors emphasize the principle of sustainable development, while others emphasize the principle of ecological sustainability. in other words, some authors approach sustainable development from an anthropocentric point of view, while others observe it from an ecocentric point of view (saks, 2014). unlike other types of management, management of sustainable development assumes different knowledge and skills acquired by studying social sciences (especially economics, environmental economics and strategic management) and different areas of natural sciences (ecology, biology, technology, systems theory, etc.). sustainable development should be understood as the result of individual action of consumers, entrepreneurs, conservationists and states that strive to achieve individual goals with the intention of jointly considering and waiting for a better future. the term sustainable development cannot, therefore, be defined only as an economic activity that satisfies present and future generations, but sustainability should be understood as the infinite survival of the quality of systems that ensure life (air, water, soil, flora, fauna) as well as the existence of infrastructure and institutions that distribute and protect ecological systems with appropriate regulations (prica, 2014). 5. knowledge management in the function of sustainable development the role played by faculty studies in global sustainable growth and development is based on the fact that almost every faculty studies current environmental problems and problems of sustainable growth and development. namely, such issues are studied in special compulsory or optional programs, or in special thematic units of the respective programs. doctors of multidisciplinary sustainable development sciences (that's a colloquial phrase) should be creators, faculty professors, scientists, top managers, ministers, bearers, competent experts of all initiatives, all activities, all measures, all rules, all declarations, all directives, all programs, of all projects with the theme of the environment, ecology, sustainable growth and development in the broadest sense of those terms. although knowledge has been a fundamental source of long-term economic growth since the industrial revolution, what differentiates its meaning today as a generator of growth is that information and communication technology has exponentially accelerated the shift to a knowledge economy, enabling information codified in digital form to be transmitted over long distances with low costs (gašić, 2013). a society that has educated people can more easily accept and react more quickly to the changes occurring in its environment, and it is also prepared for the challenges that the future will bring. in contrast, in a society where human potential and knowledge are not given meaning, there is a danger of lagging behind modern development. such a danger also threatens montenegro, which is at a critical moment of choosing a strategy for future development. sanja smolović, slađana živanović, nikola abramović, miodrag živanović 155 5.1 sustainable development management there seem to be reasons in principle for not having enough information or foresight to design institutions that could successfully solve very complex problems. despite everything, a lot can be done to make the level of sustainability of this civilization higher than it is today. just because one does not know how to create a truly sustainable society, does not mean that measures cannot be taken to make them less unsustainable (adžemović, 2016). the inevitable process of transition to sustainable forms of development determines the direction of human development and shapes our way of life, and thus the way of doing business. and yet, until now, a large number of business people have passively watched the solution (dresner, 2008). development must be directed towards production that satisfies human needs with minimal consumption of energy and other resources in the entire life cycle of the product per unit of satisfying human needs. the parameter of each product must be its eco-efficiency, that it has value and creates benefit, in relation to the costs and burdens on the environment. there is no unique way of defining sustainable consumption, but in most documents that discuss it, it is defined as the use of services and products that correspond to basic needs and contribute to a better quality of life, while minimizing the use of natural resources and toxic substances, as well as the emission of waste and pollution during the life cycle of products or services, so as not to jeopardize meeting the needs of future generations. if the definition of sustainable development is accepted, which includes economic, ecological, social and technological sustainability, as well as the possibility of the situation of certain types of capital (manufactured, natural, human, social), which will provide future generations with at least such an opportunity or capacity to achieve well-being as previous generations had, ideas of sustainable development becomes applicable and can be introduced into the basis of the entire economic policy. the implementation of such an economic policy, which will aim to guide development in accordance with the principles of sustainability, has the following assumptions (krstić et al., 2017):  political will for sustainable development at the highest levels of state administration,  appropriate structure of state administration and local self-government, good communication and exchange of information between different levels of management and between different bodies at individual levels,  development decision-making in which economic goals are determined in parallel and connected with social goals of environmental protection and improvement,  education for understanding the links between economic policy and the environment and decision-making in accordance with the principles of sustainability. in recent years, montenegro has begun to fulfill some of the conditions that bring it closer to the proposal of sustainable development: legislation is being developed, a critical mass of knowledge has been reached, and the behavior of entrepreneurs is also changing. the political will for sustainable development is still questionable. therefore, they need to strengthen institutions, better enforce laws and interdisciplinary problem solving. instead of a comprehensive solution to the problem, the approach to individual elements of the environment (air, water, soil) still prevails in montenegro, which is also visible in the existing legislation. in every sector of the economy, there are ways to approach the path of sustainable development. however, when determining the policy that will follow such a path, it is necessary to avoid a sectoral approach and determine the priority directions of development at the level of the entire economy. that's why an interdisciplinary way of solving problems should be applied here as management of sustainable development and environmental protection 156 well and the way of decision-making should be changed so that the goals of protecting and improving the environment are equal to other goals of the development policy and that all interested groups and parties are included in their adoption. one of the main goals of montenegro, development policy and accession to the european union. this, among other things, also means that the legislation and environmental protection standards should be harmonized with the legislation. the framework and guidelines for harmonization represent the so-called overview of the current state of the environment. one of the conditions for starting accession negotiations, which is set for the candidate countries, is the adoption of a national strategy for the adoption and implementation of the current state of the environment. in partnership with the eu, the strategy should be implemented in all candidate countries before accession. that document establishes the priorities and goals that must be met before accession and the time plan for further activities until full alignment. "in the european context, montenegro has a relatively well-preserved environment, however, the degree of its protection is still lower here than the average of european developed countries. environmental protection is largely the result of the lower presence of "heavy" industries in the overall industrial structure, but investments in environmental protection are lower than in developed european countries. responsible behavior, however, requires constant care for all subjects of the environment soil, air, water, sea and biological diversity. it should be emphasized that the entire system of upbringing and education should be adapted to the concept of sustainable development of montenegro. a process of constant learning and research should be opened. therefore, there must be a new ("revolutionary") view of the world that would like to unite economic, social and ecological needs, capital, labor, natural resources into one harmonious whole, convincing, realistic and thought out in every detail. conclusions although montenegro has a long tradition of internationally recognized scientific excellence, the commercial application of scientific results and the economic benefits resulting from them have been very small so far. in montenegro today there is no appropriate infrastructure for technology transfer, but without it, it will not be possible to achieve the desired transfer of knowledge from the academic sphere to the economy. the role of the state and the public sector in encouraging the transfer of knowledge and technology is necessary and justified because innovation, the spread of knowledge and technology create significant positive social effects. state investments are needed to create conditions for research work and higher education, as these are areas where advances in funding can yield significant positive results. only on the basis of a broad base of scientific and educational institutions and demonstrated political will, as well as connecting different interest groups, can it be designed and implemented in quality in the future sustainable development strategies of montenegro. achieving growth, development, social inclusion and fairness are elements of prosperity that require simultaneous and coordinated action in a number of strategic areas. drivers of the development moment whose lack or incompleteness at this moment directly inhibits faster development are: non-existent entrepreneurial climate, unfinished processes of privatization and restructuring, and unfinished transformation of the state into a service for citizens and entrepreneurs. furthermore, the synergy of progress and prosperity requires permanent binding elements: macroeconomic stability, openness, an effective financial market and sustainable development. sanja smolović, slađana živanović, nikola abramović, miodrag živanović 157 in conclusion, it can be pointed out that, unfortunately, montenegro is surviving a serious economic-ecological crisis, partly imposed as a global crisis, and partly as a consequence of the fact that for many years no reforms were implemented and no investment was made for planned economic-ecological development. it is clear that the small and relatively underdeveloped montenegrin economy and society is still far from scientific and detailed design of its future development. but, if the future is not designed, it will spontaneously move in an unknown direction. that is why it is necessary to convincingly and realistically, bearing in mind the montenegrin reality of development, human needs, but also the montenegrin reality of natural capital, devise and affirm the concept of sustainable development based on the principles of integral sustainability in montenegro. montenegro won its freedom and now it has to win a development path that will enable it to rank with the most economically and ecologically advanced countries. unfortunately, there is no time to wait, what is required is quick and well thought out action by all structures of montenegrin society. this is the only way to leave a developed and ecologically protected montenegro to yourself and future generations. references 1. šebić, f. (2002). world economic development (lecture summary), faculty of economics, sarajevo, 2012, p. 11. 2. schick, g. (2015). beyond the corporatist economy: impulses for a green economic policy, green european foundation, heinrich boll stiftung eu. 3. črnjar, m. (1997). economy and environmental protection, school book and glossary, zagrebrijeka, p. 28. 4. oecd, (2007). factbook economic, environmental and social statistics. 5. pokrajac, s. josipović, s. (2015). "green industry" and the process of reindustrialization, ekonomski vidici, xx (2015), no. 2-3: p. 203-212. 6. trumbić, i. bjelica, a. (2005).: capacity analysis of tourist destinations, sustainable development of tourism, proceedings, faculty of hotel and tourism management, opa ja, p. 144. 7. ahmet, atıl-aşıcı, (2017). climate-friendly green economy policies. green thought association, sabancı university istanbul policy center and the green european foundation. 8. milović, n. (2013). ecological economics, faculty of economics, university of montenegro, podgorica 9. ilić-krstić, i. (2016). "social-ecological safety, sustainable development and quality of life" (doctoral dissertation), faculty of occupational safety, university of niš, niš. 10. todic, d. (2016). "the paris climate agreement in light of the goals and principles of contemporary environmental policy and law", megatrend review, vol. 13, no. 3, 45–62. 11. saks, dz. (2014). the age of sustainable development, official gazette, belgrade. 12. prica, m. (2014). "on the concept and character of sustainable development: is there environmental law?", proceedings of the faculty of law in niš, no. 67. 13. gašić, m. (2013). "green economy". learning for entrepreneurship, 3(1), 174-180. 14. adžemović, m. (2016). "ecological determinants of the economy in the transformation of ecologicaleconomic instruments of environmental protection" (doctoral dissertation), faculty of applied ecology, singidnum university. 15. dresner, s. (2008). the principles of sustainability, earthscan, london, p. 28. 16. krstić, b. sekulić, v. jovanović, m. (2017). "evolutionary approach in the theory of sustainable development", economics of sustainable development, 1, society of economists "ekonomika", niš. 17. world popula on prospects: the 2006 revision, popula on division of the department of economic and social affairs of the united nations secretariat, hp://esa.un.org/unpp agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 18, no. 1 (2024), pp. 98-110 98 emerging pathways to green purchase intention: decoding the influence of environmental awareness, green perceived value and technology adoption model antecedents on consumers’ purchase intention s. khan sablu khan residential coaching academy, aligarh muslim university, aligarh, india https://orcid.org/0000-0002-6155-4280, e-mail: sablumba@gmail.com abstract: understanding the buying behaviour of consumers for green products has become an emerging issue. the purpose of present study is to assess purchase intention of consumers with respect to green products (environment friendly) shopping in india. further, this study examines the role of environmental awareness, green perceived value, perceived usefulness and attitude towards using in building consumer intentions to purchase green products. further, the study extends the tam (technology adoption model) by davis (1989) by incorporating external variables like environmental awareness and green perceived value. this study examines the information gathered from 260 clients via a google form survey. structural equation modeling (sem), validity and reliability testing, and exploratory factor analysis were conducted using the gathered data. the result of the present study shows that environmental awareness and green perceived value exert positive and differential effects on attitude towards using green products. the study also found that attitude and perceived usefulness are equally important for the purchase intention of customers towards green products. implications of the present work are useful for academicians, marketers, customers, and policy makers. keywords: green products; environmental awareness, green perceived value, perceived usefulness, attitude 1. introduction in recent years, the market for green products in india has been steadily growing due to increasing environmental awareness, government initiatives, and consumer demand for sustainable and eco-friendly options. the emergence of green products in india is also driven by factors such as regulatory support, consumer awareness, and corporate sustainability initiatives (patel & joshi, 2020). green products face challenges related to consumer trust, credibility of eco-labels, and the perception of greenwashing among consumers in india. consumers in india are increasingly inclined towards purchasing green products due to environmental concerns and awareness (jaiswal, singh, kant & biswas, 2021). green products have been classified based on their uniform impact on environmental conservation and protection. buettner and madzharova (2021) categorized energy-efficient products such as refrigerators, air conditioners, led (light emitting diode) lights based on their low energy consumption. supriadi, astuti and firdiansjah (2017) included water saving https://orcid.org/0000-0002-6155-4280 mailto:sablumba@gmail.com sablu khan 99 products such as showerheads and efficient irrigation systems as green products due to resource conservation. fthenakis and kim (2019) considered renewable energy technologies products like solar photovoltaic and wind turbines as green products due to curbing carbon emissions and promoting sustainability. ding (2008) categorized sustainable building materials such as bamboo flooring and recycled steel as green products. gupta and polonsky (2021) considered organic and eco-friendly products including organic food products, natural personal care items, and biodegradable packaging materials as green products for being eco-friendly products. certified products such as energy star appliances, fair trade goods and leadership in energy and environmental design (leed)-certified buildings have been considered green products due to strict environmental standards and ensuring sustainability (zou, 2019). yang, huang and lin (2022) have included products for green transportation like electric vehicles (evs) and hybrid cars as green products due to carbon emissions reductions. the willingness to pay premium for green products varies among consumers based on their socio-economic background and level of environmental consciousness (jaiswal, singh, kant, & biswas, 2021). companies are adopting green product development strategies, sustainable supply chain practices, and green marketing campaigns to cater to the evolving preferences of environmentally conscious consumers (joshi & patel, 2020). challenges such as consumer scepticism, lack of awareness, and price sensitivity still exist in the indian market, impacting the adoption of green products (kumar, 2016). the current study evaluates a theoretical framework that provides solutions to the following queries.  are attitudes toward usage and perceived usefulness of green products influenced by the conceptions of environmental awareness and green perceived value?  does a customer's perception of usefulness affect how they feel about green products?  do attitude and perceived usefulness influence a customer's behavioural intention towards green items? in three different ways, this study adds to the body of literature. first, from the standpoint of technological acceptability, the current study creates a model for behavioural intention. secondly, the research broadens the scope of the tam model by including pertinent elements like perceived green value and environmental awareness. lastly, the study's research findings demonstrate how perceived green value and environmental awareness impact attitudes and perceived usefulness, which in turn impact behavioural intention. the research paper's remaining sections include the following subsections: methodology, results, discussion, and conclusion; they also include the section on drawing hypotheses from the literature review. 2. literature review and hypothesis development the technology acceptance model (tam) propounded by davis (1989) has been widely adapted for assessing users' acceptance and adoption of technology, including products. while the original tam model primarily focuses on technology acceptance, its principles have been extended to study perceived usefulness and acceptance of products as well, including green products (venkatesh & davis, 2000; lin & chen, 2006). new technologies develop very quickly and exponentially, people should be ready for accepting new https://www.bing.com/ck/a?!&&p=ab6349315ca473f6jmltdhm9mtcxntixmjgwmczpz3vpzd0zmjrlnjewny1myzy5ltyzndgtmgjmny03mjhizmq5yjyymzumaw5zawq9nty2oq&ptn=3&ver=2&hsh=3&fclid=324e6107-fc69-6348-0bf7-728bfd9b6235&psq=leed+certification&u=a1ahr0chm6ly9lbi53awtpcgvkaweub3jnl3dpa2kvtevfra&ntb=1 emerging pathways to green purchase intention: decoding the influence of environmental awareness, green perceived value and technology adoption model antecedents on consumers’ purchase intention 100 technology depending upon the usage (fornazarič, 2023). collaborations between government bodies, industry stakeholders, and non-governmental organizations (ngos) are essential for promoting the adoption and growth of green products in the indian market (joshi & patel, 2020). 2.1 environmental awareness dunlap and van liere (1978) in their study introduced the concept of a "new environmental paradigm" and proposed a measuring instrument to assess individuals' environmental awareness and attitudes toward environmental issues. hines, hungerford and tomera (1986) carried out a meta-analysis of previous work on responsible environmental behaviour, including factors that contributed to environmental awareness and proenvironmental actions. stern and dietz (1994) examined the value basis of environmental concern, highlighting how values play a crucial role in shaping individuals' environmental awareness and behaviours. environmental education is considered as precondition for our common future (smolović, živanović, abramović & živanović, 2023). de groot and steg (2008) focused on different value orientations (egoistic, altruistic, and biospheric) and how they influence beliefs related to environmentally significant behaviour, providing insights into environmental awareness. kaiser and schultz (2009) investigated the attitude-behaviour relationship concerning environmental awareness and proenvironmental behaviour, considering the moderating role of behavioural difficulty. hypothesis 1: environmental awareness (ea) exerts a significant positive effect on perceived usefulness. 2.2 green perceived value peattie and peattie (2003) examined that how reducing social risk could encourage sustainable consumption, which was closely tied to the perceived value consumers associate with green products. kim and choi (2005) explored the factors that influence consumers' green purchase behaviour, including cultural aspects like collectivism, environmental concern, and personal consumer efficacy (pce). thogersen (2004) offers insights into how cognitive dissonance theory can help understand the inconsistencies in environmentally responsible behaviour and, consequently, the perceived value of green products. vermeir and verbeke (2006) in their study focused on sustainable food consumption for young adults, using the theory of planned behaviour to analyze how confidence and values influence the perceived value of sustainable products. luchs and mooradian (2012) highlighted the role of gender and personality traits in shaping sustainable consumer behaviour and perceived value of green products. factors such as product quality, price, brand reputation, and availability of green products influence consumer behaviour towards green purchases (jaiswal, singh, kant & biswas, 2021). hypothesis 2: green perceived value (gpv) exerts significant effect on perceived usefulness. sablu khan 101 2.3 perceived usefulness davis's (1989) seminal work on tam establishes the foundation for understanding how the perceived usefulness influences user acceptance of technology, which can be extended to products. grunert and juhl (1995) mentioned the relationship between values, environmental attitudes, and the purchase of organic foods, shedding light on perceived usefulness of eco-friendly products. venkatesh and davis (2000) extend the tam model and provide empirical evidence on the factors influencing perceived usefulness of technology adoption and ease of use, which can be applicable to product acceptance as well. chan (2001) investigated the determinants of green purchase behaviour (man–nature orientation, degree of collectivism, environmental effect and ecological awareness) among consumers, including the perceived usefulness of green products. laroche, bergeron and barbaro-forleo (2001) examined consumer segments willing to pay higher for eco-friendly products, considering factors such as perceived usefulness and environmental concern. chang and cheung (2001) applied the tam model to understand the determinants of intention to use the internet, showcasing applicability of perceived usefulness and ease of use in technology-related decisions. global technological developments have brought an involution of today's young people which may affect the perception of using green products as well (mateuț, 2021). kim and choi (2005) investigated the antecedents of green purchase behaviour, including factors such as collectivism, environmental concern, and perceived consumer efficacy (pce), which are related to the perceived usefulness of green products. customers who are certain for making sustainable choices in their ability to make sustainable choices are highly supposed to perceive green products as useful and align their behaviours accordingly (vermeir and verbeke, 2006). they found that consumers perceive green products as useful when they offer tangible benefits such as energy savings, environmental protection, or health benefits. if users perceive a technology as useful, they are more likely to intend to use it (davis, 1989). vermeir and verbeke (2006) integrated the tpb with sustainable food consumption and highlighted the role of perceived usefulness in shaping behavioural intentions. consumers' positive perceptions of the usefulness of sustainable food products lead to higher intentions to use them. the perceived usefulness of green products can be influenced by individuals' confidence in their ability to make environmentally friendly choices (vermeir & verbeke, 2006). steg and vlek (2009) provided an integrative review of encouraging proenvironmental behaviour, which included understanding the perceived usefulness of environmentally friendly products as a motivator for such behaviour. biswas and roy (2015) explored consumer behaviour towards green products in developing economies and highlighted the importance of perceived usefulness. hypothesis 3: green perceived value (gpv) has a significant positive influence on attitude towards using (atu). hypothesis 4: green perceived value (gpv) has a significant positive influence on behavioural intention (bi). 2.4 attitude towards using emerging pathways to green purchase intention: decoding the influence of environmental awareness, green perceived value and technology adoption model antecedents on consumers’ purchase intention 102 integrating environmental considerations into business strategy, including the use of green products and technologies, is essential for sustainable development and business success (welford, 1999). green marketing strategies play a vital role in influencing consumer perceptions and attitudes towards green products in india (kumar, 2016). life cycle assessment of products is crucial for understanding and mitigating environmental impacts, promoting the adoption of green products and technologies (tukker, 2000). consumers’ attitudes toward using green products, were also portrayed for influencing their green purchase intention (chan, 2001). green product innovation is vital for companies to stay competitive and meet consumer demand for environmentally sustainable products (dangelico & pujari, 2010). information and communication technologies (ict) can play a significant role in reducing environmental footprints when designed and used efficiently (bieser & hilty, 2018). rifa’i and nuryakin (2020) in their study mentioned that attitude towards using has shown a mediating effect between perceived usefulness and behavioural intention. companies are increasingly adopting green marketing practices such as eco-labelling, environmental certifications, and sustainable packaging to attract environmentally conscious consumers (kumar, 2016). further, social media marketing as a tool is used to attract target audience for different product use including green products (kaur, 2023). hypothesis 5: attitude towards using (atu) has a significant positive influence on behavioural intention. based on the extensive literature review, this study tries to present a comprehensive conceptual model (figure 1) that delineates the interrelationships among environmental awareness, green perceived value, perceived usefulness, attitude towards using and behavioural intention. figure 1: conceptual model 3. methods environmental awareness green perceived value perceived usefulness behavioural intention to use attitude towards using sablu khan 103 based on the literature review, the present study has taken the constructs including environmental awareness, green perceived value, perceived usefulness, attitude towards using and behavioural intention. the researcher has adapted questionnaire items from earlier studies as environmental awareness (steg & vlek, 2009), green perceived value (riva, magrizos, rubel & rizomyliotis, 2022), perceived usefulness (davis,1989; davis, bagozzi, & warshaw, 1989; chen & lu, 2016), attitude towards using (amaro & duarte, 2015) and behavioural intention (yadav & pathak, 2016). data collection involved the respondents who purchased any green products as classified earlier from tier-2 cities of north india. data collection was done from september 2023 till november 2023. the research sample encompassed 260 respondents from diverse socioeconomic backgrounds using researcher-controlled sampling. for data collection, 1000 questionnaires were distributed for data collection and research got only 260 questionnaires with response rate of 26 percent. the sample size is fully acceptable as per hair et al. (2010) recommended for multivariate analysis. 3.1 questionnaire development the researcher has taken multi-item constructs (environmental awareness, green perceived value, perceived usefulness, attitude towards using and behavioural intention) from the previous literature. the survey consisted of 19 items representing the five dimensions, measured on a scale varying from one for "strongly disagree" to seven for "strongly agree". data analysis has been carried out using spss 24.0. you may refer the table 1 for survey based questions and their questionnaire adaptations. table 1: survey instrument code dimension items construct (adapted sources) env1 environmental pollution harms my health environmental awareness (steg & vlek, 2009) env2 i am serious towards environmental problems env3 i consider that the environment is degrading env4 environmental issues pose a threat to humankind's future. env5* regarding the future state of the environment, i am optimistic gpv1 the green products offer expected environmentally friendly characteristics green perceived value (riva, magrizos, rubel & rizomyliotis, 2022) gpv2 the green products offer expected environmentally friendly characteristics gpv3 in terms of green features and value for money, the green product i buy is superior. atu1 using eco-friendly items is a wise move. attitude towards using (amaro & duarte, 2015) atu2 green product use is a smart move atu3 using green products is a practical idea emerging pathways to green purchase intention: decoding the influence of environmental awareness, green perceived value and technology adoption model antecedents on consumers’ purchase intention 104 atu4* using green products is an important idea bi1 i intend to shop for green products in the future behavioural intention (yadav & pathak, 2016; ) bi2 in the future, using green products will be my first choice bi3 i am willing to shop for green products bi4* i will consider purchasing green products if delivery is available in my area pu1 green products’ environmental performance can improve life quality; perceived usefulness (davis,1989; davis, bagozzi, & warshaw, 1989; chen & lu,2016) pu2 using green products can make me healthier; and pu3 environmental quality improves after using green products. items with asterisk (env5, atu4 and bi4) were deleted after poor factor loading during exploratory factor analysis. 3.2 data analysis 3.2.1. sample attributes the characteristics of the collected sample of 260 respondents have been portrayed below. there are 120 female respondents (46%) and 140 male respondents (~54%) in the sample. while portraying the monthly income, 20 (7.69%) respondents have their income less than €333, 50 (19.23%) respondents were in the range of income more than €333 and less than €666 and around 73 percent respondent were having income greater than €666. the respondents' educational backgrounds were categorized as 115 (~44%) had completed their graduation, and roughly 145 (~56%) had completed postgraduate studies. therefore, it shows the adequate representation of population in the sample. 3.2.2 measurement model the exploratory and confirmatory factor analyses (efa and cfa) were used to validate the conceptual model. six iterations of principal component analysis (pca) with varimax rotation were used to conduct the efa. efa is represented in the conceptual model as a component matrix with five variables. every item's cross loading is less than 0.49. the remaining factor loadings range from 0.59 to 0.852 as well. according to hair et al. (2010), measurements of all commonalities are greater than 0.49, indicating that each item is related to a variety of other items. additionally, the kmo value of 0.876 with 120 degrees of freedom indicates enough sampling for the analysis. moreover, bartlett’s test for sphericity is absolutely significant. all the constructs can explain 71.25% variance of measurement model. therefore, conceptual model has cleared the cutoff criteria. in the second step, a cfa was conducted using maximum likelihood (mle) method with the help of amos 24 package. the fit indices of conceptual model are within limits as under acceptable criteria. conceptual model has shown a required criteria of fit (χ2 =164.993, df = 94, χ2/df= 1.755, cfi = .962 tli = .89, rmsea= .054). sablu khan 105 the composite reliabilities (cr) for each dimension have been portrayed in table-2. according to hair et al. (2010), the cutoff values for the following constructs are met by the cr values: attitude toward utilizing (0.789), perceived usefulness (0.812), green perceived value (0.866), behavioural intention (0.783), and environmental awareness (0.823). additionally, the average variance explained for each of the following constructs: behavioural intention (0.549), attitude towards using (0.558), perceived usefulness (0.593), green perceived value (0.684), and environmental awareness (0.541), was found to be greater than 0.5, indicating convergent validity (hair et al. 2010; henseler, ringle & sarstedt, 2014). table 2: validity and reliability analysis item estimat es cr ave msv ea gpv pu atu bi constructs env2 0.812 0.823 0.541 0.393 0.736 environmental awareness (ea) env3 0.719 env4 0.594 env1 0.798 gpv2 0.873 0.866 0.684 0.384 0.556 0.827 green perceived value (gpv) gpv3 0.826 gpv1 0.78 pu2 0.88 0.812 0.593 0.32 0.536 0.497 0.77 perceived usefulness (pu) pu3 0.738 pu1 0.678 atu1 0.795 0.789 0.558 0.393 0.627 0.535 0.566 0.747 attitude towards using (atu) atu3 0.623 atu2 0.81 bi3 0.812 0.783 0.549 0.384 0.536 0.619 0.51 0.515 0.741 behavioural intention (bi) bi1 0.784 bi2 0.612 the correlation between "green perceived value" and any other dimension is lower than the square root of ave for that dimension. comparably, for environmental awareness, perceived usefulness, attitude toward utilizing, and behavioural intention, the square root of average variance explained is larger than the correlation of these variables with any other construct, indicating sufficient discriminant validity. 4. structural equation modelling (sem) results: structural equation modelling (sem) is employed for multivariate data analysis for path analysis. sem enables the researchers to assess the causal relationship between items and constructs as well as the inter-constructs average relationship. the path estimates for hypotheses testing have been calculated through amos 24.0 portrayed in figure-2, which shows the path estimates for the respective casual relationships. further, the sem model has been found a good fit as other statistics indicating values within limits (χ2=232.086, df = 98, χ2/df =2.368, cfi= .929, rmsea=.07). emerging pathways to green purchase intention: decoding the influence of environmental awareness, green perceived value and technology adoption model antecedents on consumers’ purchase intention 106 figure 2: sem analysis results of structural equation modelling have been indicated below in table 3. indirect effects of these variables have been measured through the spss amos 24.0. table 3: results of structural equation modeling hypotheses estimates c.r. pvalue h1: environmental awareness perceived usefulness 0.450 5.517 .000 h2: green perceived value perceived usefulness 0.334 4.330 .000 h3: perceived usefulness  attitude towards using 0.659 8.369 .000 h4: perceived usefulness  behavioural intention 0.451 4.372 .000 h5: attitude towards using  behavioural intention 0.214 2.136 .033 source: by researcher table 3 also displays the outcomes of the five hypotheses that this study put forth. according to hypothesis 1, perceived usefulness is significantly positively impacted by environmental awareness. the findings show that indians' perceived usefulness is significantly influenced by environmental awareness (beta = 0.450, p < 0.00). therefore, results are consistent with hypothesis 1. according to hypothesis 2, perceived usefulness is significantly positively impacted by perceived green value. according to the findings, perceived usefulness is significantly impacted by green perceived value (beta = 0.334, p <.05). this results are in line with the previous study by khan and khan (2020). the outcome does lend credence to hypothesis 2. the third hypothesis examined how attitudes toward utilizing are greatly influenced by perceived usefulness. the analysis demonstrates a significant relationship between attitude toward using and perceived usefulness (beta = 0.659, p is less than 0.00). therefore, hypothesis 3 is supported by the results. hypothesis 4 assumed that perceived usefulness exerts substantial impact on behavioural intention. the output of regression analysis explains that perceived usefulness shows significant influence on behavioural sablu khan 107 intention (beta = 0.451, p < 0.00). thus, hypothesis 4 is supported. hypothesis 5 demonstrates that attitude towards using impacts significantly on behavioural intention. the result shows that attitude towards using has no substantial effect on behavioural intention (beta = 0.214, p > .05). therefore, hypothesis 5 is not supported by results. 5. conclusions the primary purpose of this research was to assess the effect of environmental awareness and perceived usefulness on the intentions of individuals to use the green products in their day to day life. additionally, we find out the role of attitude towards using as a mediating variable, between perceived usefulness of green products and behavioural intention to use and shop the green products. to explore the hypothesized relationships among these constructs, a study with a sample of 260 respondents from the customers who has prior experience of using green products was carried out. for structural equation modeling, amos 24.0 was employed as analytical tools. notably, our results portrayed that environmental awareness and green perceived value positively influence the perceived usefulness of green products. presently, there is a much more focus on sustainable consumption to promote the environmentally friendly practices all over the world. therefore, customers are more aware to adopt such practices and find the green perceived value an important factor for perceived usefulness. further, policies of all government are incorporating the use of green products so that little harm may be recorded to the environment and planet. furthermore, our research contributes to the extant literature on tam model by considering the perceived usefulness as a factor for behavioural intention to use the new products instead of technology. research also suggests that policy makers should focus on increasing environmental awareness and enhancing the perceived value by cutting production and acquisition cost of green products. collaborations between government bodies, industry stakeholders, and non-governmental organizations (ngos) are essential for promoting the adoption and growth of green products in the indian market as also opined by joshi and patel, (2020). further, attitude towards using green products should be translated to behavioural intention to use the products. future research may be conducted to incorporate other important factors like customer satisfaction and customer loyalty. the limitation of the study is that researcher has assessed green purchase intention in a developing country i.e. india. hence, the results of this study may lack generalization for other developed regions of the world but results are still insightful in assessing green purchase intention. references 1. bieser, j. c., & hilty, l. m. (2018). assessing indirect environmental effects of information and communication technology (ict): a systematic literature review. sustainability, 10(8), 2662. 2. buettner, t., & madzharova, b. (2021). promoting sales of energy efficient household appliances: outcomes and cost effectiveness of rebate programs. ssrn electronic journal. https://doi.org/10.2139/ssrn.3837776 3. chan, r. y. k. (2001). determinants of chinese consumers’ green purchase behaviour. psychology and marketing, 18(4), 389–413. portico. https://doi.org/10.1002/mar.1013 emerging pathways to green purchase intention: decoding the influence of environmental awareness, green perceived value and technology adoption model antecedents on consumers’ purchase intention 108 4. chang, m. k., & cheung, w. (2001). determinants of the intention to use internet/www at work: a confirmatory study. information &amp; management, 39(1), 1–14. https://doi.org/10.1016/s0378-7206(01)00075-1 5. chen, s.-y., & lu, c.-c. (2016). exploring the relationships of green perceived value, the diffusion of innovations, and the technology acceptance model of green transportation. transportation journal, 55(1), 51–77. https://doi.org/10.5325/transportationj.55.1.0051 6. dangelico, r. m., & pujari, d. (2010). mainstreaming green product innovation: why and how companies integrate environmental sustainability. journal of business ethics, 95(3), 471–486. https://doi.org/10.1007/s10551-010-0434-0 7. davis, f. d. (1989). perceived usefulness, perceived ease of use, and user acceptance of information technology. mis quarterly, 13(3), 319. https://doi.org/10.2307/249008 8. de groot, j. i. m., & steg, l. (2007). value orientations to explain beliefs related to environmental significant behaviour. environment and behaviour, 40(3), 330–354. https://doi.org/10.1177/0013916506297831 9. ding, g. k. (2008). sustainable construction—the role of environmental assessment tools. journal of environmental management, 86(3), 451-464. 10. dunlap, r. e., & van liere, k. d. (1978). the “new environmental paradigm.” the journal of environmental education, 9(4), 10–19. https://doi.org/10.1080/00958964.1978.10801875 11. fornazarič, m. (2023). the impact of ai on marketing: opportunity or threat?. agora international journal of economical sciences, 17(2), 34-40. 12. fthenakis, v., & kim, h. c. (2010). life-cycle uses of water in us electricity generation. renewable and sustainable energy reviews, 14(7), 2039-2048. 13. grunert, s. c., & juhl, h. j. (1995). values, environmental attitudes, and buying of organic foods. journal of economic psychology, 16(1), 39-62. 14. gupta, s., & polonsky, m. (2020). understanding the spill-over effect of value co-creation in buyer–supplier interactions: a strategic view. journal of business & industrial marketing, 36(3), 535-551. 15. henseler, j., ringle, c. m., & sarstedt, m. (2014). a new criterion for assessing discriminant validity in variance-based structural equation modeling. journal of the academy of marketing science, 43(1), 115–135. https://doi.org/10.1007/s11747-014-0403-8 16. hines, j. m., hungerford, h. r., & tomera, a. n. (1987). analysis and synthesis of research on responsible environmental behaviour: a meta-analysis. the journal of environmental education, 18(2), 1–8. https://doi.org/10.1080/00958964.1987.9943482 17. hu, l., & bentler, p. m. (1999). cutoff criteria for fit indexes in covariance structure analysis: conventional criteria versus new alternatives. structural equation modeling: a multidisciplinary journal, 6(1), 1–55. https://doi.org/10.1080/10705519909540118 18. jaiswal, d., singh, b., kant, r., & biswas, a. (2021). towards green product consumption: effect of green marketing stimuli and perceived environmental knowledge in indian consumer market. society and business review, 17(1), 45-65. 19. joshi, s., & patel, b. (2020). impact of green marketing mix on consumer’s purchase intention in consumer durable industry: a study of gujarat state. ugc care group i listed journal, 10(7), 265-274. https://doi.org/10.1007/s10551-010-0434-0 https://doi.org/10.1007/s11747-014-0403-8 sablu khan 109 20. kaiser, f. g., & schultz, p. w. (2009). the attitude–behaviour relationship: a test of three models of the moderating role of behavioural difficulty1. journal of applied social psychology, 39(1), 186–207. portico. https://doi.org/10.1111/j.1559-1816.2008.00435.x 21. kaur, k. (2023). the influence of digital and social media marketing on consumer behaviour. agora international journal of economical sciences, 17(1), 31-38. 22. khan, s., & khan, a. (2020). consumer e-loyalty for e-grocery shopping in a metro city of india: role of flow and tam antecedents. international journal of e-adoption (ijea), 12(2), 16-33. 23. kim, y., & choi, s. m. (2005). antecedents of green purchase behaviour: an examination of collectivism, environmental concern, and pce. advances in consumer research, 32, 592. 24. kumar, p. (2016). state of green marketing research over 25 years (1990-2014) literature survey and classification. marketing intelligence & planning, 34(1), 137-158. 25. laroche, m., bergeron, j., & barbaro‐forleo, g. (2001). targeting consumers who are willing to pay more for environmentally friendly products. journal of consumer marketing, 18(6), 503–520. https://doi.org/10.1108/eum0000000006155 26. luchs, m. g., & mooradian, t. a. (2011). sex, personality, and sustainable consumer behaviour: elucidating the gender effect. journal of consumer policy, 35(1), 127–144. https://doi.org/10.1007/s10603-011-9179-0 27. mateuț, o. p. (2021). marketing influencer. agora international journal of economical sciences, 15(1), 17-19. 28. ottman, j. a. (1998).when good green marketing is bad for business. harvard business review. 29. peattie, s., & peattie, k. (2003). ready to fly solo? reducing social marketing’s dependence on commercial marketing theory. marketing theory, 3(3), 365-385. 30. rifa’i, r., & nuryakin. (2020). the role of mediation attitude towards using in perceived usefulness relationship in behavioural intention. contemporary research on business and management, 276–279. https://doi.org/10.1201/9781003035985-64 31. riva, f., magrizos, s., rubel, m. r. b., & rizomyliotis, i. (2022). green consumerism, green perceivedvalue, and restaurant revisit intention: millennials' sustainableconsumption with moderating effect of green perceived quality. business strategy and the environment, 31(7), 2807–2819. https://doi.org/10.1002/bse.3048rivaet al.2819 32. smolović, s., živanović, s., abramović, n., & živanović, m. (2023). management of sustainable development and environmental protection. agora international journal of economical sciences, 17(2), 142-157. 33. steg, l. (1999). verspilde energie?[wasted energy?](scp report no. 126). the hague, the netherlands: social and cultural planning office of the netherlands. 34. steg, l., & vlek, c. (2009). encouraging pro-environmental behaviour: an integrative review and research agenda. journal of environmental psychology, 29(3), 309-317. 35. stern, p. c., & dietz, t. (1994). the value basis of environmental concern. journal of social issues, 50(3), 65–84. portico. https://doi.org/10.1111/j.1540-4560.1994.tb02420.x 36. supriadi, b., astuti, w., & firdiansjah, a. (2017). green product and its impact on customer satisfaction. iosr journal of business and management (iosr-jbm), 19(8), 35-42. emerging pathways to green purchase intention: decoding the influence of environmental awareness, green perceived value and technology adoption model antecedents on consumers’ purchase intention 110 37. thøgersen, j. (2004). a cognitive dissonance interpretation of consistencies and inconsistencies in environmentally responsible behaviour. journal of environmental psychology, 24(1), 93–103. https://doi.org/10.1016/s0272-4944(03)00039-2 38. tukker, a. (2000). life cycle assessment as a tool in environmental impact assessment. environmental impact assessment review, 20(4), 435–456. https://doi.org/10.1016/s01959255(99)00045-1 39. venkatesh, v., & davis, f. d. (2000). a theoretical extension of the technology acceptance model: four longitudinal field studies. management science, 46(2), 186–204. https://doi.org/10.1287/mnsc.46.2.186.11926 40. vermeir, i., & verbeke, w. (2008). sustainable food consumption among young adults in belgium: theory of planned behaviour and the role of confidence and values. ecological economics, 64(3), 542–553. https://doi.org/10.1016/j.ecolecon.2007.03.007 41. welford, r. (1999). environmental management and business strategy: leadership skills for the 21st century by bruce piasecki, kevin fletcher and frank mendelson, 1998. wiley, 348pp, £17.99 (pbk). isbn 0‐471‐16972‐2. eco‐management and auditing, 6(2), 98–98. https://doi.org/10.1002/(sici)1099-0925(199906)6:2<98::aid-ema98>3.3.co;2-a 42. yang, z., huang, h., & lin, f. (2022). sustainable electric vehicle batteries for a sustainable world: perspectives on battery cathodes, environment, supply chain, manufacturing, life cycle, and policy. advanced energy materials, 12(26), 2200383. 43. zou, y. (2019). certifying green buildings in china: leed vs. 3-star. journal of cleaner production, 208, 880–888. https://doi.org/10.1016/j.jclepro.2018.10.204 https://doi.org/10.1016/j.ecolecon.2007.03.007 https://doi.org/10.1016/j.jclepro.2018.10.204 agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 18, no. 1 (2024), pp. 124-131 124 implementation of hotel revenue management strategies during a martial law a. mazaraki, m. kulyk, m. boiko, m. bosovska, n. vedmid anatolii mazaraki¹, mariia kulyk², margaryta boiko³, myroslava bosovska⁴, nadiia vedmid⁵ ¹ ² ³ ⁴ ⁵ state university of trade and economics, kyiv, ukraine ¹ https://orcid.org/0000-0003-1817-0510, e-mail: rector@knute.edu.ua ² https://orcid.org/0000-0001-8732-7441, e-mail: m.kulyk@knute.edu.ua ³ https://orcid.org/0000-0003-0249-1432, e-mail: m.boyko@knute.edu.ua ⁴ https://orcid.org/0000-0002-6021-5228, e-mail: m.bosovskaya@knute.edu.ua ⁵ https://orcid.org/0000-0002-5010-6394, e-mail: n.vedmid@knute.edu.ua abstract: the hotel revenue management strategy is used to measure the future occupancy, adr, revpar, trevpar. prices impact on the further development of business models implemented by the hotels is analysed. the purpose of this study is to determine the influence of revenue management strategy on kpi and revenue indicators at hotels in ukraine. the research method used is a quantitative descriptive research method. the study used a sample of 12 respondents with 8 statements. data were collected by observing participants, reviewing company documents, and seeking input from key informants. in crisis conditions, in particular caused by martial law in ukraine, hotels reorient themselves to new segments, study needs and adapt services to new security requirements. one of the ways to increase efficiency and occupancy can be revenue management strategies adapted to crisis or post-crisis situations. we have proposed a typology of income management strategies adapted to new conditions. keywords: revenue management, strategy, hotels, occupancy, adr, revpar. introduction the full-scale invasion and imposition of martial law has had a significant impact on the hotel industry in ukraine, leading to significant revenue losses in the tourism industry as a whole. analysing the dynamics of tax revenues before and during the introduction of martial law, according to research published in 2024, the ukrainian tourism industry demonstrates uneven fluctuations in tax revenues from the tourism industry by region for 2021-2023. the report showed that the growth of taxes in 2023 compared to 2022 was observed in the capital and in 18 regions of ukraine. however, in comparison with the same period of the previous year, only 13 regions of the country showed an increase. in addition, the largest decline in tax revenues from the tourism industry was recorded in four regions of ukraine that are in the area of active hostilities. thus, the decline in kherson region amounted to 84%, in luhansk region 74%, in donetsk region 53%, and in zaporizhian region 42%. despite these challenges, the hotel and tourism industries are showing signs of recovery. according to forecasts, in 2025, 35 https://orcid.org/0000-0003-1817-0510 mailto:rector@knute.edu.ua https://orcid.org/0000-0001-8732-7441 mailto:m.kulyk@knute.edu.ua https://orcid.org/0000-0003-0249-1432 mailto:m.boyko@knute.edu.ua https://orcid.org/0000-0002-6021-5228 mailto:m.bosovskaya@knute.edu.ua https://orcid.org/0000-0002-5010-6394 mailto:n.vedmid@knute.edu.ua anatolii mazaraki, mariia kulyk, margaryta boiko, myroslava bosovska, nadiia vedmid 125 new hotels will be commissioned, creating new jobs and generating tax revenues. according to the hotel matrix report (hotel matrix, 2023) "ukrainian hotel market in 2021-23. trends 2024", it is expected that new destinations and services in hotels will increase occupancy and reorient to new segments in the markets of kyiv, lviv and bukovel. the hospitality industry has been and remains one of the most affected industries in times of uncertainty, first facing quarantine restrictions related to the covid-19 crisis, today martial law has led to the need for many hotels to suspend their operations (zhuravka, nebaba, yudina, haponenko & filatova, 2023). due to the closed airspace, the hotel industry, with its extension to the travel industry, has suffered huge losses from 2022 to the present (uhra, 2022). since 2012, the hotel industry in ukraine has become an important component of the ukraine's state socio-economic development model. from an economic point of view, the construction of five-star hotels and the development of outbound tourism have led to tourism and the hotel industry becoming strong points of development and economic growth for most regions of the country. several authors have used and discussed the crisis effect on hospitality industry, referring to different countries (breier et al., 2021; crespi-cladera et al., 2021; dimitropoulos, 2018; gehrels et al., 2013; kapiki, 2012; lee et al., 2024). the positive impact of implementation the anticrisis strategies has been to create new jobs and reduce unemployment (del mar alonso-almeida & bremser, 2013). an important task in a crisis is to find new and innovative ways to implement changes. adapting all sectors to the conditions of accelerated development requires understanding of certain aspects. in particular, among the attributes of the modern economy that indicate the nature and direction of its transformation processes, the term "digital" is often used. the modern economy is called digital because, in today's conditions, a part of the economic result is obtained exclusively or mainly from digital technologies or using a business model based on digital goods or services (bukht & heeks, 2017). the driving forces behind digitalization are economic and political, but of course it is also driven by technological innovation. technological innovations are an important resource for enterprises, and the development of new information technologies is quite rapid. in the 1990s, economic changes were mainly associated with the emergence of the internet, which led to the development of the digital economy. during the 2000s and 2013s, new information and information and communication technologies (icts) contributed to the spread and diffusion of economic change. from 2014 to 2022, the digital economy and society index (desi) summarized the digital performance of europe and tracked the progress of eu countries (bureau of economic analysis, 2023). according to this index, most european countries have reached a high level of digital economy development and have developed strategies to secure their future. the bureau of economic analysis (bea) defines the digital economy primarily in terms of the internet and related information and communication technologies (ict) (bureau of economic analysis, 2023). the bea measures the digital economy in terms of gdp, value added, employment, and wages. the digital economy is seen as a way to promote high-quality regional development, and the necessary integration of the internet, bigdata, artificial intelligence and the real economy (european commission, 2023). thus, the main features of the digital economy were presented by erkin to'rayev eshkabilovich (2023) in the form of a chain reaction: high level of use of implementation of hotel revenue management strategies during a martial law 126 technological innovations; embedding of connected sensors in more and more objects (internet of things); market saturation with new devices for end users (mobile phones, smartphones, tablets, netbooks, laptops, 3d printers); oversaturation of the information space with data using a new digital model (cloud computing, digital platforms, digital services); spread of big data, data analysis and algorithmic decision-making; process automation and robotics technologies. methods sample and population managers of all 5, 4 and 3-star hotels in kyiv, lviv, odesa and bukovel were invited to the survey. the final mailing list included 120 e-mail addresses, of which 32 hotel managers responded to the survey, representing 26.7% of the total sample. in the last sample, 37.5% of managers confirmed that they use the revenue management system in their work and agreed to an interview to determine the factors affecting revenue management under martial law. according to the entire population of certified hotels (dart, 2021), the sample can be considered representative of the market of hotel services in ukraine. data collection process and methods the quantitative empirical study was conducted in late 2022 and early 2023, i.e., during the period of martial law in ukraine. the questionnaire was developed in accordance with the specifics of hotel operations under martial law, considering the peculiarities of different categories of hotels and the use of the revenue management system to improve performance. the study used two stages of research: during the first stage the 32 survey answers were conducted and during the second stage 12 respondents were interviewed with 8 statements. data were collected by observing participants, reviewing company documents, and seeking input from key informants. results the use of a revenue management system is important to achieve effective hotel management and improve its performance. digitalization processes used to optimize data processing affect efficiency at many levels, from individual to strategic, and are important for both enterprises and the economy as a whole. it is worth noting that revenue management, according to most authors, is a system of processes and practices aimed at achieving better results and increasing revenues and profitability (ortega, 2016; piga et al, 2021; radwan, 2017). the transformation of digital technologies into one of the most important resources of an enterprise has become possible due to the globalization of the information technology market. the need for information support for effective enterprise (process) management has always existed, but the possibility of virtually unlimited access to a large number of information sources and adequately fast filtering, systematization and analysis of the data obtained has emerged due to the emergence of modern software products and information networks. this leads to two conclusions: first, the globalization of markets for any other goods would be impossible without the processes that have already taken place in the information market; second, the level of use of information technology is a kind of indicator of the level of competition and globalization of a particular market. anatolii mazaraki, mariia kulyk, margaryta boiko, myroslava bosovska, nadiia vedmid 127 the positive dynamics of recovery of key performance indicators of the revenue management in the conditions of crisis and uncertainty, as well as intensive integration processes taking place in the global hotel services market since the 80s of the twentieth century, indicate, on the one hand, a high level of economic attractiveness of the hospitality sector, and on the other hand, the growth of competition and the need to ensure sustainable development and strong competitive positions for the market players. the hotel industry in ukraine is increasingly integrating into the international economic space, which, on the one hand, leads to an increase in the volume of services and supply in the market, and on the other hand, may lead to the takeover of national hotel companies by international chains. in today's environment, when the struggle for a guest is no longer between individual hotel companies or even between chain establishments, but between hotels of international operators, the problem of developing and implementing methods that will allow hotel companies to operate efficiently and maintain their competitive position has become particularly acute. the change in indicators during martial law shows positive dynamics in 2023 in three of the four regions studied as it is presented in table 1. as shown in the table, since the beginning of the full-scale invasion, hotel performance indicators have almost been halved in kyiv and odesa, as these cities were regularly under missile attack and the threat of further military offensive remained. lviv and bukovel were considered safer regions and also became places of shelter for internally displaced people, so the performance remained approximately at the pre-war level and even improved. table 1 key revenue management indicators of four regions in ukraine about the yoy analysis during martial law region indicators 2021 2022 2023 2022 over 2021 growth 2023 over 2022 growth kyiv adr 1997 1936 2355 -3,1 21,6 revpar 1038 445 848 -57,1 90,4 occupancy % 52 23 36 -55,8 56,5 odesa adr 2095 1362 2061 -35,0 51,3 revpar 964 341 536 -64,7 57,4 occupancy % 46 25 26 -45,7 4,0 bukovel adr 1936 2354 3623 21,6 53,9 revpar 1162 1271 2101 9,4 65,3 occupancy % 60 54 58 -10,0 7,4 lviv adr 2322 2540 2732 9,4 7,6 revpar 1138 1448 1421 27,2 -1,9 occupancy % 49 57 52 16,3 -8,8 complex transformation processes have a significant impact not only on the revenue of ukrainian hotels, but also on their profitability. the decline in profits during the introduction of quarantine restrictions during the covid19 pandemic was followed by slow growth after the end of the pandemic. however, since february 2022, the downward trend in profitability has continued. the operating profit in hotels and accommodation facilities fell from 25.5% in 2019 to -28.5% in 2020, and then recovered to 16.6% in 2021 (zagoruichyk, savytskyi, kopytsia & o'callaghan, 2023). implementation of hotel revenue management strategies during a martial law 128 the most promising is the approach, the starting points of which are as follows:  the new era of digitalization and digitalization requires a change in the strategies of management (zubko, hanechko, trubei & afanasyev, 2021). thus, a hotel company should not be limited to setting profitability targets and monitoring their achievement. instead, a comprehensive analysis of opportunities and active counteraction to crisis factors in setting prices, both on the basis of cost and in interaction with competitors in the direction of developing a common information and communication environment in the common economic space, should become a priority vector of this management system. after all, due to the specifics of the hotel services market (in particular, the significant dependence of demand on hard-to-predict natural, political and other factors), economic synergy can also be achieved through the development of partnerships between competitors (boiko, kulyk, bondar, romanchuk & lositska, 2023).  hospitality enterprises in a globally competitive environment can be competitive if they use the latest organizational and management mechanisms that provide for targeted cooperation with enterprises of the national tourism industry, partners to obtain the expected marginal income from the provision of related services to expand the service range. integration with partners in the development and implementation of a joint product implies a high level of coherence of missions, programs and actions of the system participants, their involvement, and therefore motivation. in addition, in the presence of chain hotels owned by multinational companies, it is important to take into account the transfer pricing policy and their impact on the national economy (ivan & ladar, 2017).  an important reserve for revenue growth of a hotel company is the transformation and differentiation of distribution channels for hotel services (including segmentation). there are several approaches to differentiating distribution channels in the hotel business. one of them is to identify the target market and guest preferences and select appropriate distribution channels based on the target audience (kulyk, boiko, bosovska & okhrimenko, 2023). another approach is to consider channel costs, commission rates, and potential long-term partnerships. it is also important to implement a channel management system to optimize operations and manage business processes. regular monitoring and analysis of channel performance to optimize efficiency is crucial. in addition, optimizing distribution channels involves choosing the most relevant and profitable channels for the hotel's target audience. hotels should evaluate the effectiveness of each channel based on factors such as booking volume, revenue generated, and guest acquisition costs. by identifying the channels that deliver the best results, hotels can effectively allocate resources and marketing efforts. this will help to increase the level of involvement of consumers, as well as all employees of the partner hotel company in the process of providing / selling / booking services, as well as the interest of each participant in the effectiveness and efficiency of this process.  hospitality enterprises, implementing the revenue management system in a high-risk and unstable external environment, should use social and ethical adaptation of strategy and tactics of market behavior to ensure sustainable development. anatolii mazaraki, mariia kulyk, margaryta boiko, myroslava bosovska, nadiia vedmid 129 these practices will include:  environmental initiatives: implementation of environmentally friendly technologies and practices, such as reducing energy, water and waste consumption, using renewable energy sources and green technologies.  social responsibility: developing programs and initiatives to improve working conditions, support local communities and ensure social justice (kulyk, lipowski & boiko, 2024).  ethical stewardship: developing ethical standards and governance practices aimed at maintaining high standards of business ethics and responsible behavior.  cooperation with local communities: development of programs and projects aimed at supporting local communities, developing local infrastructure and ensuring mutually beneficial relations with local partners. these practices contribute to the sustainable development of the hotel industry and increase its responsible behavior towards society and the environment. hotels face several challenges in the social and ethical adaptation of their strategies. one of the main challenges is the costs associated with implementing such practices. training employees, developing policies, and implementing sustainable practices takes time and money. another problem is the lack of awareness and understanding of the importance of social and ethical responsibility among employees and hotel management. in addition, hotels may face resistance from stakeholders who favor short-term profits over long-term sustainability. finally, measuring the impact of socially and ethically responsible behavior on a hotel's financial performance can be difficult, which may prevent some hotels from investing in such practices. however, despite these challenges, hotels can benefit from doing business in an ethical and responsible manner, as it can lead to increased employee morale, guest loyalty and long-term profitability. discussions/conclusions solving the problems of adaptation of hotels to work under martial law reveals the content of the elements of the concept of crisis management in hospitality management developed by us, the essence of which is revealed by the following definition: anti-crisis management in hospitality management is a discrete process of applying forms, methods and procedures aimed at socio-economic recovery of financial and economic activities, on the one hand, and maximizing revenues and using innovative opportunities to improve business processes, provided that hotel enterprises have access to complete information about the market situation and make subsequent decisions based on it, on the other. hotels facing problems during the crisis should adapt their revenue management strategies by focusing on such approaches. thus, crisis management in hospitality management should be considered in at least three aspects. firstly, as a concept that asserts the economic feasibility of using the tools of revenue management to optimize revenues in order to analyze and identify areas for diversification of activities during periods of low occupancy using market analytics tools. a customer relationship management (crm) system and social media management tools play a implementation of hotel revenue management strategies during a martial law 130 fundamental role in creating the conditions for the implementation of this concept to interact with guests and promote offers tailored to diversified distribution channels. secondly, as a strategy aimed at using digital technologies and selecting tools, such as channel managers, rate management software and booking engine functions, to manage online distribution channels and optimize pricing strategies and attract customers and partners, as well as manage them and optimize their value in the long term based on the relevant corporate culture, including the development of philosophy, traditions, systems and quality standards for service provision. at the same time, the strategic goals of a hotel company include ensuring an optimal model of behavior in the market, which involves differentiating the range of services from competitors by selecting and developing unoccupied niches, and therefore minimizing conflicts and finding and expanding the number of points of partnership cooperation to better meet the needs of consumers. in today's digital world, it's becoming essential for any manager or entrepreneur to be well aware of the impact of digital marketing on consumer behavior (kaur, 2023). thirdly, as a methodology for coordinating and combining methods of pricing and managing the profitability of individual services throughout their life cycle using a set of modules united by a single business logic and integrated into the corporate information environment, as well as for coordinating actions with partners and competitors. the feasibility of introducing the concept of crisis management in the revenue management into the activities of hotel enterprises can be proved by considering the prerequisites (the state of development of the hotel services market and the peculiarities of demand determined by it, as well as possible sources of risk) according to the scheme used by us when considering the previous concepts. the presence of objective and subjective prerequisites for the implementation of the proposed concept in the ukrainian hotel services market indicates its relevance references 1. boiko, m., kulyk, m., bondar, s., romanchuk, l., & lositska, t. (2023). consumer engagement in the conditions of business digitization: a case study of the hotel industry in ukraine. problems and perspectives in management, 21 (3), 113-124. 2. breier, m., kallmuenzer, a., clauss, t., gast, j., kraus, s., & tiberius, v. (2021). the role of business model innovation in the hospitality industry during the covid-19 crisis. international journal of hospitality management, 92, 102723. 3. bukht, r., & heeks, r. (2017). defining, conceptualising and measuring the digital economy. development informatics working paper, (68). 4. bureau of economic analysis. (2023). digital economy https://www.bea.gov/data/specialtopics/digital-economy (accessed february 18, 2024) 5. crespí-cladera, r., martín-oliver, a., & pascual-fuster, b. (2021). financial distress in the hospitality industry during the covid-19 disaster. tourism management, 85, 104301. 6. dart. (2023). report on the results of the survey "conducting a study of domestic and outbound tourism of ukrainians". https://www.tourism.gov.ua/statistic (accessed december 26, 2023). 7. del mar alonso-almeida, m., & bremser, k. (2013). strategic responses of the spanish hospitality sector to the financial crisis. international journal of hospitality management, 32, 141-148. https://www.bea.gov/data/special-topics/digital-economy https://www.bea.gov/data/special-topics/digital-economy https://www.tourism.gov.ua/statistic anatolii mazaraki, mariia kulyk, margaryta boiko, myroslava bosovska, nadiia vedmid 131 8. dimitropoulos, p. e. (2018). profitability determinants of the greek hospitality industry: the crisis effect. in innovative approaches to tourism and leisure: fourth international conference iacudit, athens 2017 (pp. 405-416). springer international publishing. 9. eshkabilovich, e. t. (2023). digital economy. conferencea, 130-132. 10. european commission. (2023). the digital economy and society index (desi). https://ec.europa.eu/digital-single-market/en/desi (accessed february 22, 2024) 11. gehrels, s., & blanar, o. (2013). how economic crisis affects revenue management: the case of the prague hilton hotels. research in hospitality management, 2(1-2), 9-15. 12. hotel matrix. (2023). ukrainian hotel market in 2021-23. trends in 2024. https://www.hotelmatrix.report/hotelmatrixenglish/?ts=1591336119 (accessed december 22, 2023). 13. ivan, r., & ladar, c. t. (2017). general considerations on the impact of transfer pricing performed by multinational companies on a national economy. agora international journal of economical sciences, 11. 14. kapiki, s. (2012). the impact of economic crisis on tourism and hospitality: results from a study in greece. central european review of economics and finance, 2(1), 19-30. 15. kaur, k. (2023). the influence of digital and social media marketing on consumer behaviour. agora international journal of economical sciences, 17(1), 31-38. 16. kulyk, m., boiko, m., bosovska, m., & okhrimenko, a. (2023). strategy of sales and communication of hotel services during the war. agora international journal of economical sciences, 17(1), 48-55. 17. kulyk, m., lipowski, m., & boiko, м. (2024). accommodation facilities for migrants: рolish experience. scientia fructuosa, 153(1), 143-156. 18. lee, s., song, h. j., yoon, h., kim, c. s., & ham, s. (2024). resilience of the hospitality industry during crises: a comparison between the 2008 financial crisis and covid-19. international journal of hospitality management, 116, 103622. 19. ortega, b. (2016). revenue management systems and hotel performance in the economic downturn. international journal of contemporary hospitality management, 28(4), 658-680. 20. piga, c. a., abrate, g., viglia, g., & de canio, f. (2021). how the hospitality industry reacts to covid-19: structural, managerial and tactical factors. journal of revenue and pricing management, 1-14. 21. radwan, h. r. i., & radwan, i. (2017). managing hotels during economic challenges: a case study on hotels in sharm el-sheikh and hurghada, egypt. journal of tourism and hospitality management, 5(2), 84-100. 22. uhra. (2022). news. research of current problems of the hospitality industry and further development (in ukrainian). https://www. uhra.com.ua/2022/12/12/actualproblems (accessed december 26, 2023). 23. zagoruichyk, a., savytskyi, o., kopytsia, i., & o’callaghan, b. (2023). the green phoenix framework: climate-positive plan for economic recovery of ukraine. smith school working paper 23-03. 2023. available at: https://www. smithschool. ox. ac. uk/sites/default/files/2023-06/thegreen-phoenix-framework-a-climate-positive-plan-for-economic-recovery-in-ukraine. pdf. accessed 21 aug. 24. zhuravka, f., nebaba, n., yudina, o., haponenko, s., & filatova, h. (2023). the hospitality market in ukraine: war challenges and restoration possibilities. 25. zubko, t., hanechko, i., trubei, o., & afanasyev, k. (2021). determining the impact of digitalization on the economic security of trade. eastern-european journal of enterprise technologies, 6(13), 114. https://ec.europa.eu/digital-single-market/en/desi https://www.hotelmatrix.report/hotelmatrixenglish/?ts=1591336119 agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 18, no. 1 (2024), pp. 157-170 157 the impact of financial policies on promoting the development of green innovation t. nasirli turgay nasirli university of bonn, germany https://orcid.org/0009-0004-0190-4148 , e-mail: nesirli.turqay@gmail.com abstract: this research investigates the factors influencing the development of green patents and their implications on green innovation. green financing has the purpose of funding environmental initiatives by directing capital from financial institutions to eco-friendly projects. through a review of existing literature and empirical analyses, we identify the influence of financial variables and economic policy strategy as key contributors. preliminary findings suggest that these factors significantly impact the prevalence of green patents, highlighting the importance of policy and financial decisions in fostering environmentally sustainable technological advancements. our findings reveal a positive correlation between environmental r&d expenditure and green innovation. moreover, venture capital emerges as a significant driver of green innovation, facilitating the development of environmentally conscious solutions by mitigating financial risks. additionally, the stringency of environmental policies and the presence of green bonds and carbon taxes demonstrate positive associations with green innovation. consequently, the main objectives of this article are to examine the impact of financial policies such as r&d, venture capital, debt financing and environmental regulations on the development of green patents and innovation as well as investigate the relationship between green bonds, carbon taxes and green innovation. ultimately, this research contributes to the ongoing discourse on sustainable development, offering a nuanced understanding of the dynamics driving green innovation. keywords: green innovation, financial policies, green patents 1. introduction with the ever-evolving global economy and industry, environmental sustainability has become a crucial topic in recent times, particularly in the field of eco-friendly technologies and further development related to this sector. this, in turn, raises interest in patents and financial factors that affect environmentally friendly technological advancements. there is no universally accepted definition of green banking (alexander, 2016), and it varies widely between countries. however, some researchers and organizations have tried to come up with their own definitions. obtaining and using capital for projects that both preserve the environment and provide lenders or investors with a reasonable return is known as “green finance” (berensmann & lindenberg, 2019; ozili, 2021). in order to achieve sustainable development goals, green finance aims to enhance the amount of money flowing from financial institutions to economic agents engaged in environmental preservation initiatives and activities (lee & baral, 2017; force, 2015). the distribution of cash for environmental preservation, the flow of funds to sustainable trade and https://orcid.org/0009-0004-0190-4148 mailto:nesirli.turqay@gmail.com the impact of financial policies on promoting the development of green innovation 158 investment operations, low-risk financing, and the creation of green investment and financing instruments are some of the advantages of green finance (sachs, woo, yoshino, & taghizadehhesary, 2019). green finance has become increasingly common in the banking industry in recent decades as a means of safeguarding banks and society from unforeseen economic challenges (such as climate change, financial instability, social unrest, and so on) (ziolo, filipiak, & bak, 2019). banks have assisted in the policy-making process by implementing green finance principles through the provision of green loans, bonds, investments, and other financial instruments. banks play a crucial role in funding the shift to a green economy by facilitating private investment, balancing supply and demand, while considering all potential risks and assessing projects from an environmental and economic point of view (european fiscal board, 2017). in our paper, we embark on the intersection of green patents and finances r&d investment for environmental objectives, environmental-related venture capital investment, financial structure (leverage), and the index of stringency of environmental policies to conduct empirical analysis. the central importance of our empirical analysis is the development of green patents in oecd countries and factors that affect it. green patents, alternatively termed as eco-patents or environmentally conscious patents, are patents awarded for inventions or innovations possessing environmentally advantageous features or supporting sustainability. these patents are commonly linked with technologies, procedures, or goods that strive to confront environmental issues, advance resource efficiency, diminish pollution, or alleviate the consequences of human actions on the environment. this study looks into the variables that affect the growth of green patents and how they affect green innovation. this article's main goal is to examine the ways in which financial regulations and environmental tactics impact the spread and encouragement of green innovation. the study's specific objectives are to evaluate how spending on environmental r&d and venture money promotes the green innovation in oecd economies. furthermore, analyze the impact of strict environmental regulations on the number of green patents and examine how financial structure affects green innovation, with a focus on the debt-to-equity ratio. lastly this article aims to examine the connections between carbon taxes, green bonds, and green innovation. 2. methods 2.1 dependent variable as a preliminary measure of green innovation, scholars worldwide use the number of patents in respective countries and firms according to the classification of patents (bo wang, lin, & lingshan, 2021). we obtained the green patent data of the main economies of the world from the oecd database. main countries of interest are eu members, united states, and japan, which are the main drivers of green patents and green innovation. the patents data and indicators are convenient for statistical analysis are developed according to the science, technology, and industry directory of oecd. its coverage includes, but is not limited to, the patent grants and applications to european patent office (epo), us patent and trademarks office (uspto), as well as patents filed under and belonging to ip5 patent families. the patent indicators are selected in line with the classes of ips-international patent classification for the 159 environment-related technology domain. the residence country of the inventor is taken as the reference country of patents. in the case of several joint inventors from more than one country, fractional counts are applied: if there are 3 inventors, then each country gets 0.33 shares of the patent, and so on. the reference date is the priority filing date of the patents, which is the worldwide first filing date and therefore nearest to the invention date of the patent. it is worth noting that patent grants are disclosed 1.5 years after filing, causing a lag in the processing of patent-based indicators, and respectively, our data range covers the period till 2019. as the patents show the innovative achievement of countries, they are a key measure of the innovation output. they are also useful to quantify the spreading of between technological areas, sectors, firms, and level of international collaboration. since the criteria for patent grants are well defined, such as being novel, non-obvious, and useful application, and having widely available quantitative data makes patent data a good measure of innovation. yet, not all innovations are patentable and not all patentable innovations are patented because there are other regimes to protect intellectual property rights, for example, trademarks, copyrights, etc. (haščič & migotto, 2015). although patents are investigated as output indicators, they can also be used as input indicators for subsequent innovation. the identification and classification of the patents are done mainly through the keywords, codes (e.g., cpc, ipc), manual selection, or a combination of several techniques. the data used for the purposes of our analysis is collected according to the methodology of oecd (env-tech), which is deemed to have more coverage in comparison to two other existing methodologies to determine environmental patents based on the code classification, namely y02/y04s tagging scheme (epo), ipc green inventory (wipo) (favot, vesnic, priore, bincoletto, & morea, 2023). the absolute number of green patents per country is normalized by the population size of the country and expressed as the number of patents per 1 million population. 2.2 independent variables the first chosen explanatory variable is the amount of environmental-related r&d expenditure as a percentage of gross domestic product, quantified as the total of government, business enterprise, higher education, and non-profit expenditure in different socio-economic objectives. the related data has been obtained from the oecd science, technology, and r&d statistics database. this measure is based on the objective of “environment,” which includes studies related to the development of monitoring technologies, to elimination, measurement, and prevention of pollution (green growth indicators). r&d expenditure has an essential role in innovation by providing the necessary financial support by which new services and products can be developed or existing ones improved (j. liu & x. liu, 2023). as shown in graph 1, we plot the r&d expenditure on environmental factors for selected samples. there exists noticeable heterogeneity amongst the sample countries, particularly in europe. new zealand leads the list with more than 7% of the gdp dedicated to environmental-related research and development expenses. the impact of financial policies on promoting the development of green innovation 160 graph 1. environmental research and development expenditure source: oecd green growth indicators the next explanatory variable we chose is the oecd environmental policy stringency index (eps), an internationally comparable index of how strict are environmental policies of specific countries. it defines the extent to which a country’s environmental policies put an implicit and explicit price on damaging effects and pollution. the index is built on the stringency of 13 environmental policy factors predominantly related to weather pollution and climate change and ranges from 0 (not stringent) to 6 (very stringent). co2 trading schemes, emission and fuel taxes, emission limits, technology supports are the policy factors to name but a few (kruse et al., 2022). there has been a considerable increase on average in the environmental policy index over the past two decades. all countries in the sample increased their stringency score between 2000 and 2019. furthermore, france, denmark, and germany had the highest stringency index in 2019 compared to the other countries in the list. in a similar way, some countries have improved their score more than others. observing the change in the absolute values, france and the czech republic made the largest progress. it is also noteworthy that there exists a large heterogeneity across the countries. as a result of our analysis, moving a country from the 25th percentile to the 75th increases its green innovation—the number of patents—more than one standard deviation at the 1 percent significance level. graph 2. stringency of environmental policies in 2000 and 2019 source: oecd green growth indicators. 161 the next explanatory variable we took was the debt-equity ratio of the financial and non-financial entities in the selected sample countries. it reflects the degree to which debt finance is used as a method of financing in the selected countries or how debt-based they are. we extracted data from the oecd’s national accounts statistics database. the debt-to-equity ratio indicates how much a company is using debt or equity to support its operations and it is a measurement of its financial leverage. it is computed by dividing the entire debt of financial firms by the total equity liabilities of the same industry, including shares of investment funds. the total of the obligation categories that include currencies and deposits, debt securities, loans, insurance, pension plans, and other standardized guarantee schemes is known as debt. the market value of the issued shares, including investment fund shares, represents the equity on the denominator side. all governmental and private organizations involved in the financial industry are included in the financial company’s sector (s12). for instance, if the ratio is 1.5, the market value of the existing stock is 1.5 less than the amount of outstanding debt. european countries have heterogeneity in terms of their financial structure. that is, some of them have high levels of mean debt value, such as luxembourg and slovakia, at more than 14 percent, while others, for example, hungary, have 4.9 percent, which is the lowest rate in our sample. japan has the highest mean rate of debt capital in the list, with more than 18 percent. graph 3. mean leverage ratio source: world bank financial structure database next, we change our focus to the impact of equity capital, more specifically the venture capital, on green innovation. we obtained data again from the oecd database about the amount of venture capital investment in the selected countries for the time period between 2000-2019 normalized by gross domestic product. it becomes clear that the venture capital investment in european countries is considerably low compared to international peers. mean value of vc investment for sample period ranges from 0.005 percent in slovakia to 0.8 percent in sweden (highest in eu). on the other hand, israel has 0.72 percent mean value of the vc investment, which is the global leader in the world for per capita vc investment. the impact of financial policies on promoting the development of green innovation 162 graph 4. mean venture capital per gdp source: oecd green growth indicators 2.3 estimation approach we employed a country fixed effects model to estimate the empirical model and for hypothesis testing. we also used the hausman test to justify the use of fixed effects models rather than random effects. equation 1 analyzes the effect of selected explanatory variables more precisely, environmental research and development investment, environmental policy stringency index, financial structure, and venture capital on the green innovation in the country. pit = β0 + β1x1it + β2x2it + β3x3it + β4x4it + γt + ui + εit (1) where: • pit (patentit) is the number of green patents per 1 million population i at time t. • β0 is the constant term (fixed effects) • x1it (rdit) is the environmental related research and development expenditure normalized by gross domestic product for country i at time t. • x2it (vcit) is venture capital investment per gross domestic product for country i at time t. • x3it (debtit) represents the financial structure of the country calculated as debt/equity ratio • x4it (stringencyit) is the index expresses the stringency of the environmental related policies • ui represents the country-specific fixed effects, which control for all time invariant characteristics of each entity. • γt represents year-fixed effects (to control for any time-specific factors) • εit is the overall error term for country i at time t we used panel data of the 35-member countries of oecd for the years between 2000 and 2019 to evaluate the effects of selected variables on the green technological evaluation. this selection criterion is the most appropriate one as an overwhelming share of the world’s green innovations (more than 90 percent) are either developed or patented in these countries. moreover, they account collectively for more than 80 percent of the global investment and trade. because of the time lags in the patent filing and application period, we restricted our 163 sample period until 2019. we presume this time period is also representative in order to eliminate the possible exogenous effects of the covid-2019 pandemic on global investment and innovation. the research data is collected for the most part from the oecd green growth indicators database and combined together. 2.4 carbon tax carbon tax is one of the key mechanisms to provide financial motivation for developing environmentally friendly technologies by increasing the demand for such technologies to mitigate increased costs caused by the carbon tax (cantone, evans, & reeson, 2023). it sets a price directly on the carbon content of the fossil fuels that cause greenhouse gas emissions (ghg). it is different from the ets, which allows the entities with lower carbon emission to trade their rights with those causing higher pollution levels. consequently, ets can define the reduction proportion of the emissions while carbon tax defines the price for it. burning fossil fuels comes with costs, all of which are not necessarily reflected in the monetary price of them. this includes social costs, air pollution, contribution to climate change, and co2 emissions. the purpose of putting a price on carbon is to drive its monetary cost to its true cost with environmental and social impact. first, it makes fossil fuels more expensive in comparison to cleaner alternatives, that is, it encourages the change to greener products. second, it makes the ghg emitters pay for it (ritchie & rosado, 2022). the opponents of the carbon tax claim that it harms domestic energy-intensive industries in the absence of an international agreement on carbon tax because their competitors would not face a similar policy in their homeland. hence, unilateral imposition of carbon tax would place the country at a disadvantage and have no effect on the climate (macaluso et al., 2018). according to ojha and pohit (2020), in spite of the fact that the carbon tax can effectively help to reduce carbon emissions, at the same time it reduces gdp, leading to an undesirable tradeoff between gdp and carbon emissions. we showed the map of countries with the carbon tax as of 2022 (graph 5). graph 5. countries with the carbon tax source: dolphin & xiahou (2022) the impact of financial policies on promoting the development of green innovation 164 the degree and existence of carbon tax varies between the industry sectors. for instance, while the metallurgy industry might have a higher rate of carbon tax, the road transportation may not have at all. consequently, the countries with the carbon price in any sector have been marked, and the graph does not illustrate the economy-wide tax. it should be noted that only the taxes on co2 emission were considered. we divided our sample of countries into two groups: first, those with some form of carbon tax and second, those without one. the number of green patents per capita are comparatively higher on average in the first group at 16 patents than the second one, 21 patents per capita. although this finding does not imply causal relationship between the two variables, the existence of carbon tax pushes firms to find environmentally friendly alternatives and hence stimulates green innovation. graph 6. carbon taxes and green patents per million 2000-2019 source: dolphin & xiahour (2022) 2.5 green bonds an increasingly greater role is played by green bonds in the last decade in the field of green financing and reduction of environmental impact. green bonds are similar to traditional bonds in many respects except their proceeds are used for projects that are intended for energy efficiency, renewables, sustainability, and meet certain compliance requirements. in the field of green finance, green bonds are significant. this holds regarding green bonds just as there isn’t a universally accepted definition of green finance. the eu green bond standard, the climate bonds standard and certification, and the green bond principles are only a few of the voluntary principles and standards that are in place. these guidelines should guard against greenwashing and aid investors as well as green and sustainable bond issuers. the green bond market is the one that is expanding the fastest; still, more work is required to bring this market segment up to speed with the rest of the bond market both from the supply and demand sides. the first ever green bond was issued by the european investment bank in 2007 followed by the world bank in 2008 november after increasing demand for climate-friendly investments, especially from swedish pension funds. the issuance of usd 1 billion bonds by 165 the international finance corporation as the largest green bond in the market at the time of issuance in 2013 boosted the expansion of the market (world bank, 2022). since then, they have gained particular popularity and enjoyed strong growth from usd 36.7 billion to usd 487.1 billion between 2014 and 2022 and peaked in 2021 with usd 582.4 billion (statista, 2022). the market outlook for this market moreover seems positive. to limit global warming to 1.5°c in comparison to pre-industrial levels as imposed by the paris climate agreement, cumulative energy investment of 53 trillion is needed by 2035 (international energy agency, 2014). in this respect, green bonds can be effective tools to reallocate the investment from high carbon to low carbon projects. the bond financing is especially suitable for financing renewable energy investments as they generally require high initial investment, are long term, and their income stream is linked to inflation. in fact, three-quarters of these infrastructure projects consist of debt financing. hence, governments need to think of relevant tools and policies to transform the capital from emission-intensive investments to low carbon and climate resilient (lcr) infrastructure. moreover, green bond investments till now seem to make a remarkable impact on the green transition. more than usd 10 billion investment through green bonds by the international finance corporation between 2010 and 2022 is expected to reduce greenhouse gas emissions by 25.6 million metric tons of co2-equivalent per year and to save 868 million kilowatt hours of energy annually (international finance corporation, 2022). a noticeable shift to green finance is already to be observed in public and private institutions. the european commission intends to issue 30 percent of the next generation eu plan’s financing with green bonds for sustainable investment. the green reforms are expected to boost the liquidity of the market. if implemented at full scale, all those projects are expected to shrink co2 emissions by 44 million tonnes equivalent to 1.2 percent of total emissions of the eu in 2022. this amount of reduction, for example, corresponds to 80 percent reduction of emissions from the building industry in 2022 in the eu (european commission, 2023). the impact of the investment varies naturally depending on the base emission level, location, type of project, and so on. projects relating to renewable energy have approximately one thousand tons of carbon emission savings for each usd 1 million invested, but transportation projects have on average 600 tons (sp global). according to born et al. (2021), although the sustainable debt markets in the euro area are expanding quickly, sustainable financial instruments—such as environmental, social, and governance (esg) funds and green, sustainable, and sustainabilitylinked bonds—represent less than 10 percent of their respective markets. since 2015, the amount of assets managed by institutional investors and investment funds with a specific focus on sustainability or the green economy has almost doubled. as part of the eu recovery fund, next generation eu, the european commission plans to sell up to 250 billion euros in green bonds between mid-2021 and 2026, therefore increasing the proportion of green financing in the euro area. green bonds can contribute to climate objectives mainly through two ways: firstly, their proceeds are invested in the development of cleaner technology, cleaner energy production, lower carbon footprint, etc. second, they influence the behavior of the issuer firms positively because of green reporting disclosure and more scrutiny. hence, they also reduce the company’s ability to use proceeds of bonds and moreover compliance and standardization costs further questions the motive to use green bonds. the impact of financial policies on promoting the development of green innovation 166 it is yet claimed that green bonds are still a choice of preference because of their signaling effect about firms’ commitment to environmental standards signaling argument or just pretending to do so without having tangible results greenwashing argument (flammer, 2020). even if there are a lot of projects and green finance is becoming more and more relevant numerically, there are still not enough funds allocated to achieve a 1.5°c trajectory. according to delimatsis (2021), a successful strategy towards a relevant sustainable finance sector necessitates a combination of bottom-up initiatives like investor demand or the implementation of financial institutions’ social responsibility strategies in addition to top-down engagement by actors like the european commission, central banks, or other international organizations. it is important to keep in mind that different climate policy measures have an indirect impact on the growth of green finance in this context. the countries with the green bonds are compared in terms of green innovation with the ones where no green bond has been issued over the sample period 2000-2019. we divided them into two categories: first, the countries where in a particular year a green bond has been issued. second, the countries where no green bond has been issued at the time. it turns out the first category on average has a higher number of green patents per capita, more precisely 28, than the second one, 16 patents per 1 million. yet the relationship of the causality is unclear— whether the entities who issue green bonds increase their green innovation or the entities who already have intention to make green innovation prefer to use the green bonds. nevertheless, green bonds become an increasingly popular tool to finance green innovation globally. graph 7. green bonds and patents per 1 million 2000-2019 source: international monetary fund 3. results table 1. regression results with and without fe (1) (2) (3) variables ols no fe fixed effects robust fixed effects rd 0.876** 0.822** 0.822** 167 (0.406) (0.403) (0.288) vc 38.56*** 43.91*** 43.91*** (8.052) (5.593) (8.824) debt 0.583** 0.587*** 0.587*** (0.235) (0.213) (0.150) stringency 10.53*** 12.04*** 12.04*** (0.837) (0.995) (0.945) constant -19.52*** -23.91*** -23.91*** (2.866) (3.697) (2.129) observations 548 548 548 r-squared 0.327 0.272 0.272 number of years 20 20 country fe yes yes time fe yes yes source: oecd table 1 illustrates the descriptive statistics of the sample. the results of regression analysis presented using 3 methods, namely simple regression, fixed effects, and robust fixedeffects. r&d expenditure appears to be positively correlated with the green innovation in all three models with 5 percent statistical significance and 0.82 coefficient value. however, venture capital has, in a similar fashion, a coefficient of 43.91 at 1 percent significance level for all methods. the scope of the coefficient is higher with the inclusion of the fixed effects and in comparison, to the other explanatory variables in our model. next, the capital structure of the entities expressed as the debt/equity ratio has a coefficient of 0.6 with a standard error of 0.21, indicating a positive correlation between patents and leverage at high confidence level (1 percent statistical significance). the last variable in our explanatory variables, namely environmental stringency, has a high coefficient value of 12.04 with 1 percent significance level across three methods. the consistency of the coefficient for explanatory variables across the methods confirms robustness of the model. the interpretation of independent variables is one of the most crucial parts of the regression model. venture capital plays a vital role in the development of green patents through several factors. since innovation is capital-intensive and has high up-front costs and risks, the role of venture capital in mitigating the costs of conducting experiments, trials, and tests to make an innovation breakthrough in the field of green innovation is crucial. furthermore, venture capitalists are more likely to be risk-taking compared to other investors, which positively influences green innovation over the years of development. the stringency of the index of environmental policies measures the strictness of government over the application of environmental regulations, which in turn can highly incentivize green innovation. this index motivates companies and individual researchers to develop new solutions and technologies that should also comply with the environmental policy of the country, depending on how rigorous the government is on implying the policy. moreover, the recent competition among the countries on reducing carbon footprint and more environmentally friendly solutions incentivizes the countries in improving their environmental policies. this competition can lead to a surge in green innovation and solutions. 4. discussion the impact of financial policies on promoting the development of green innovation 168 based on the information provided in the empirical study, we may draw a number of conclusions concerning the effects between environmental-related r&d expenditure, leverage ratio, venture capital, the stringency index of environmental policies, and green innovation. our analysis reveals a significant positive correlation between environmental r&d expenditure and green innovation, confirming the findings of previous studies (j. liu & x. liu, 2023). increased investment in r&d dedicated to environmental objectives facilitates the development of new technologies and solutions aimed at reducing pollution and enhancing resource efficiency. this finding aligns with the conclusions of haščič and migotto (2015), who emphasized the crucial role of r&d in driving innovation. the regression results show that venture capital investment has the highest coefficient among the explanatory variables, indicating its substantial impact on green innovation. venture capitalists' willingness to absorb high risks and upfront costs is essential for funding groundbreaking projects in green technology. this result is consistent with the arguments presented by berensmann and lindenberg (2019), who highlighted the importance of venture capital in financing environmentally conscious solutions. green innovation and the debt-to-equity ratio are positively correlated, suggesting that businesses with higher levels of leverage are more likely to make investments in green technologies. this finding aligns with the past research findings (ziolo, filipiak, & bak (2019), where the role of financial structure in supporting sustainable projects discussed. a high level of leverage could give businesses the money they need to launch big environmental projects. one of the noticeable conclusions is the increase in the level of eps index from between years 2000-2019. regression results also show how eps has a considerable influence on green innovation, which can be explained by its effects on creating incentives in the countries, which develops motivation for the green patents. we also conclude that venture capital has the most considerable effect on the level of green innovation in our sample. the fact that venture capital has the ability to absorb risk and high upfront costs of projects for developing environmentally friendly technology and solutions makes it a suitable way of financing for green patents. our study demonstrates that the existence of green bonds and carbon taxes is positively associated with the number of green patents. these financial instruments provide incentives for firms to invest in environmentally friendly technologies. this finding is consistent with the conclusions of sachs et al. (2019), who emphasized the role of green bonds and carbon pricing in promoting sustainable development. moreover, we have found a positive correlation between the existence of green bonds and as well as carbon tax on the average level of patents in the selected countries. although this finding does not imply causality or the direction of it, green patents and carbon incentivize entities to increase their amount of green innovation. in conclusion, the results emphasize how crucial it is to implement focused financial and regulatory initiatives in order to increase green innovation and facilitate the shift to a more environmentally friendly sustainable economy. 169 references 1. alexander, k. (2016). greening banking policy. support of the g20 green finance study group. retrieved from https://unepinquiry.org/wpcontent/uploads/2016/09/10_ greening_banking_policy.pdf 2. berensmann, k., & lindenberg, n. (2019). green finance: across the universe. in s. boubaker & d. k. nguyen (ed.), corporate social responsibility, ethics and sustainable prosperity, chapter 11, pages 305-332, world scientific publishing co. pte. ltd. retrieved from https://ideas.repec.org/h/wsi/wschap/9789811206887_0011.html 3. bo wang, lin, x., & lingshan, c. (2021). factors affecting green innovation: an analysis of patent and regional heterogeneity. chinese journal of population resources and environment, 19(1), 12-21. https://doi.org/10.1016/j.cjpre.2021.12.002 4. cantone, b., evans, d. & reeson, a. the effect of carbon price on low carbon innovation. sci rep 13, 9525 (2023). https://doi.org/10.1038/s41598-023-36750-9 5. delimatsis, p. (2021). sustainable finance. in p. delimatsis, & l. reins (eds.), trade and environmental law (pp. 783-797). (elgar encyclopedia of environmental law; vol. xi). edward elgar publishing ltd. retrieved from https://research.tilburguniversity.edu/en/ publications/sustainable-finance 6. dolphin, g., xiahou, q. world carbon pricing database: sources and methods. sci data 13, 573 (2022). https://doi.org/10.1038/s41597-022-01659-x 7. european commission. (2021 june 21). european commission endorses austria's recovery and resilience plan. [press release]. https://ec.europa.eu/commission/presscorner/ detail/en/qanda_21_3122 8. european fiscal board. (2017). 2017 annual report of the european fiscal board. https://commission.europa.eu/publications/2017-annual-report-european-fiscal-board_en 9. favot, m., vesnic, l., priore, r., bincoletto, a., & morea, f. (2023). green patents and green codes: how different methodologies lead to different results. resources, conservation & recycling advances, 18, 200132. https://doi.org/10.1016/j.rcradv.2023.200132 10. flammer, c. (2020). corporate green bonds. journal of financial economics. 1-54. https://dx.doi.org/10.2139/ssrn.3125518 11. haščič, i., & migotto, m. (2015). measuring environmental innovation using patent data. (oecd environment working papers no. 89), oecd publishing. https://doi.org/10.1787/19970900 12. international energy agency. (2014). world energy outlook 2014. https://www.iea.org/reports/world-energy-outlook-2014 13. international finance corporation. (2022). green and social bond impact report, https://www.ifc.org/content/dam/ifc/doc/2023/ifc-greensocialbondreport-final.pdf 14. j. liu, & x. liu. (2023). effects of carbon emission trading schemes on green technological innovation by industrial enterprises: evidence from a quasi-natural experiment in china. journal of cleaner production.8(3). article 100410, https://doi.org/10.1016/j.jik.2023.100410 15. kruse, t., et al. (2022). measuring environmental policy stringency in oecd countries: an update of the oecd composite eps indicator. oecd economics department working papers, no. 1703, oecd publishing, https://doi.org/10.1787/90ab82e8-en https://unepinquiry.org/wpcontent/uploads/2016/09/10_%20greening_banking_policy.pdf https://unepinquiry.org/wpcontent/uploads/2016/09/10_%20greening_banking_policy.pdf https://ideas.repec.org/b/wsi/wsbook/11460.html https://ideas.repec.org/b/wsi/wsbook/11460.html https://ideas.repec.org/h/wsi/wschap/9789811206887_0011.html https://doi.org/10.1016/j.cjpre.2021.12.002 https://research.tilburguniversity.edu/en/%20publications/sustainable-finance https://research.tilburguniversity.edu/en/%20publications/sustainable-finance https://doi.org/10.1038/s41597-022-01659-x https://ec.europa.eu/commission/presscorner/%20detail/en/qanda_21_3122 https://ec.europa.eu/commission/presscorner/%20detail/en/qanda_21_3122 https://commission.europa.eu/publications/2017-annual-report-european-fiscal-board_en https://doi.org/10.1016/j.rcradv.2023.200132 https://dx.doi.org/10.2139/ssrn.3125518 https://doi.org/10.1787/19970900 https://www.iea.org/reports/world-energy-outlook-2014 https://www.ifc.org/content/dam/ifc/doc/2023/ifc-greensocialbondreport-final.pdf https://doi.org/10.1016/j.jik.2023.100410 https://doi.org/10.1787/90ab82e8-en the impact of financial policies on promoting the development of green innovation 170 16. lee, c. f., & baral, p. (2017). green finance opportunities in asean. unep report, nairobi, kenya. https://unepinquiry.org/wp-content/uploads/2017/11/green_finance_ opportunities_in_asean.pdf 17. macaluso, n., tuladhar, s., woollacott, j., mcfarland, j. r., creason, j., & cole, j. (2018). the impact of carbon taxation and revenue recycling on us industries. clim chang econ, 9(1), article 184005 https://doi.org/10.1142/s2010007818400055 18. ojha, v. p., & pohit, s. (2020). recycling carbon tax for inclusive green growth: a cge analysis of india. energy policy, 144, 111708. https://doi.org/10.1016/j.enpol.2020.111708 19. ozili, p. k. (2021). digital finance, green finance, and social finance: is there a link? financial internet quarterly, 17(1), 1-7. https://doi.org/10.2478/fiqf-2021-0001 20. ritchie, h., & rosado, p. (2022). which countries have put a price on carbon? [data set]. our world in data. https://ourworldindata.org/carbon-pricing 21. sachs, j., woo, w. t., yoshino, n., & taghizadeh-hesary, f. (2019). importance of green finance for achieving sustainable development goals and energy security. in: sachs, j., woo, w., yoshino, n., & taghizadeh-hesary, f. (eds) handbook of green finance. sustainable development . springer, singapore. https://doi.org/10.1007/978-981-13-0227-5_13 22. statista. (2022). green bond issuance worldwide from 2014 to 2021 [data set]. statista. https://www.statista.com/statistics/752832/global-green-bond-issuance/ 23. united nations. (2015). establishing china’s green financial system. https://www.unep.org/resources/report/establishing-chinas-green-financial-system 24. world bank. (2021). what you need to know about ifc’s green bonds. https://www.worldbank.org/en/news/feature/2021/12/08/what-you-need-to-know-aboutifc-s-green-bonds 25. ziolo, m., filipiak, b. z., & bak, i. (2019). how to design more sustainable financial systems: the roles of environmental, social, and governance factors in the decisionmaking process. sustainability, 11(20), article 5604 doi.org/10.3390/su11205604 https://unepinquiry.org/wp-content/uploads/2017/11/green_finance_%20opportunities_in_asean.pdf https://unepinquiry.org/wp-content/uploads/2017/11/green_finance_%20opportunities_in_asean.pdf https://doi.org/10.1142/s2010007818400055 https://doi.org/10.2478/fiqf-2021-0001 https://ourworldindata.org/carbon-pricing https://doi.org/10.1007/978-981-13-0227-5_13 https://www.statista.com/statistics/752832/global-green-bond-issuance/ https://www.unep.org/resources/report/establishing-chinas-green-financial-system https://www.worldbank.org/en/news/feature/2021/12/08/what-you-need-to-know-about-ifc-s-green-bonds https://www.worldbank.org/en/news/feature/2021/12/08/what-you-need-to-know-about-ifc-s-green-bonds agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 18, no. 1 (2024), pp. 111-123 111 the importance of eu-funded projects for the sustainable development of local communities n. lazar nuša lazar dekorina d.o.o. / ljubljana school of business, slovenia https://orcid.org/0000-0002-5898-4968, e-mail: nusa.lazar@dekorina.si abstract: sustainable development has been one of the core strategies of the eu. the term refers to three basic components: the economic component, which is associated with balanced growth, the environmental component which refers to the preservation of the ecosystem, and the social component, which guarantees interand intra-generational equality. while talking about sustainability it is important also to tackle the topic of circular economy. the circular economy aims to preserve value by designing out waste and pollution, optimizing resources by keeping products and materials in use, and ensuring system effectiveness by regenerating natural systems. one of the strategies of the eu to achieve sustainable development and the move towards a circular economy is to support it through various eu-founded projects. in this article, we will elaborate on the current state of sustainable development of eu-founded schemes and how they can be used for different projects for local communities and cities since cities are seen as both the source and solution to today's economic, environmental, and social challenges. furthermore, in the article, we will outline some best practices of eu-founded projects around sustainable development in the case of the city of maribor, slovenia, and indicate their importance for its community. keywords: sustainability, circular economy, eu, funds, projects, local communities, maribor. 1 introduction sustainable, ecological, green, eco-friendly, etc. are terms used in our everyday lives, practically on a daily basis. these terms are all synonyms of each other. sustainability is often referred to as “sustainable development” (ec, 2022b), which means meeting our own needs without compromising the ability of future generations to meet their own needs. it includes three pillars: economic, environmental, and social. sustainability more in detail implies a link towards environmental impacts; in other words, the consumption of natural resources and the deliberation of pollution and energy use, the concern of economic themes of growth and durability, additionally connected to social inclusion and distribution of wealth (musgrave & raj, 2009). to achieve sustainability, the following contemporaneous achievements are necessary (purvis et al., 2019):  environmental sustainability refers to the conservation and responsible management of natural resources (primarily non-renewable as well as vital for the maintenance of life, such as air, water, and land) where it is important to minimize pollution and protect the environment.  economic sustainability refers to creating prosperity at different levels of society, through the long-term sustainability of enterprises and other related economic activities. https://orcid.org/0000-0002-5898-4968 mailto:nusa.lazar@dekorina.si the importance of eu-funded projects for the sustainable development of local communities 112  social sustainability implies an equitable distribution of benefits, as well as respecting human rights and maintaining and strengthening local communities. while talking about sustainability it is important also to tackle the topic of circular economy. the circular economy is a model of production and consumption, which involves sharing, leasing, reusing, repairing, refurbishing, and recycling existing materials and products as long as possible. in this way, the life cycle of products is extended. as defined by the ellen macarthur foundation (2015), a circular economy aims to preserve value – by designing out waste and pollution, and optimizing resources – by keeping products and materials in use and ensuring system effectiveness by regenerating natural systems. the efficient (re)use and recycling of resources, materials, and products from closed loops represents the transition away from consumptionand disposal-based linear models. the ellen macarthur foundation designed the infographic below to show how the circular economy works (scheme 1). scheme 1 the butterfly diagram: visualising the circular economy. source: ellen macarthur foundation (2019). currently, about 85% of global gdp is generated through cities. such rapid growth puts enormous pressure on urban resources, carrying capacities, and quality of life. simultaneously, about 70% of the energy is used by cities and the proportion of the world’s population living in urban areas is expected to increase, reaching about 70% by 2050. quantitative analysis of the global resource requirements of future urbanization shows that material consumption by the world’s cities will grow from 40 billion tonnes in 2010 to about 90 billion tonnes by 2050 (ec, 2020b). nuša lazar 113 cities and regions play an important role in making the circular transition happen, as they are at the centre of key decisions determining economic growth, social well-being, and environmental benefits. on the one hand, cities and regions have direct competences in key circular economy sectors such as buildings, mobility, and waste management, among others. on the other hand, cities and regions are also directly connected to local networks. as a result, they are in a special position to channel local resources for the deployment of circular innovations along the value-chain of priority sectors and products. for cities and regions, the circular economy represents an opportunity to rethink production and consumption models, services, and infrastructure to enable long-term value retention of products and materials, increase resource productivity and further capture value after product endof-life. in this context, the transition to a circular economy requires a systemic change where provision of services is carried out by ensuring an efficient use of primary resources and giving priority to their reuse; economic activities are planned from a life cycle perspective and carried out in order to close, slow and narrow loops across value-chains and infrastructures are designed and built to avoid linear locks-in (oecd, 2020). there are special funding opportunities for cities and urban areas within the eu, to support cities and regions in their transition to sustainable development and circular economy, since one of the strategies of the eu is to achieve sustainable development and the move towards a circular economy. the goal of the research in this article is closely related to the previously mentioned sustainable development and eu funds correlated to this topic. it wants to prove that eu-founded schemes can be used for different projects for local communities and cities in that field and support the move to a greener eu. 1. 1 sustainable development, and circular economy – the focus of the eu in december 2015, the european commission put forward a circular economy package containing an action plan and legislative proposals on waste management. this was then adopted in 2018. the european commission adopted the new circular economy action plan (ceap) in march 2020, which aims to promote more sustainable product design, reduce waste, and empower consumers, for example by creating right to repair) (ec, 2020a). there is a focus on resource intensive sectors, such as electronics and ict, plastics, textiles, and construction. it is one of the main building blocks of the european green deal, europe’s new agenda for sustainable growth (european parliament, 2023a). in february 2021, the parliament adopted a resolution on the new circular economy action plan demanding additional measures to achieve a carbon-neutral, environmentally sustainable, toxic-free, and fully circular economy by 2050 (ec, 2023b). the european green deal sets the blueprint for a transformational change. a change which will bring with it many benefits, from creating new opportunities for innovation, investment, and green jobs, to improving health and wellbeing. all 27 eu member states committed to turning the eu into the first climate neutral continent by 2050. to get there, they pledged to reduce emissions by at least 55% by 2030, compared to 1990 levels. the eu now has legally binding climate targets covering all key sectors of the economy. the overall package includes (ec, 2023b):  emissions reduction targets across a broad range of sectors;  a target to boost natural carbon sinks;  an updated emissions trading system to cap emissions, put a price on pollution and generate; the importance of eu-funded projects for the sustainable development of local communities 114  investments in the green transition;  and social support for citizens and small businesses. the eu’s new circular action plan paves the way for a cleaner and more competitive europe. the eu’s transition to a circular economy will reduce pressure on natural resources and will create sustainable growth and jobs. it is also a prerequisite to achieve the eu’s 2050 climate neutrality target and to halt biodiversity loss. the new action plan announces initiatives along the entire life cycle of products. it targets how products are designed, promotes circular economy processes, encourages sustainable consumption, and aims to ensure that waste is prevented, and the resources used are kept in the eu economy for as long as possible. it introduces legislative and non-legislative measures targeting areas where action at the eu level brings real added value. the key objectives are (ec, 2023a):  make sustainable products the norm in the eu;  empower consumers and public buyers;  focus on the sectors that use most resources and where the potential for circularity is high such as: electronics and ict, batteries and vehicles, packaging, plastics, textiles, construction and buildings, food, water and nutrients;  ensure less waste;  make circularity work for people, regions and cities;  lead global efforts on circular economy. the european union is providing several funding programs to support the transition to a circular economy, to support sustainable development, and green transition. in scheme 2 the committed funds until 2020 are presented, as well as the estimated funding need. this shows the importance of the needed change towards sustainability and circularity for the eu. scheme 2 european union committed funds until 2020. source: european parliament (2023b). nuša lazar 115 the importance of sustainable development for the eu is shown also in the context of supporting eu candidate countries in their sustainable development. for example, for montenegro, the eu is combining the resources of the european union, assisting the institutions at all levels, the business community, civil society, and citizens as well as supporting sustainable development with eu funds. in the past 3 years, the eu contributed 15 million usd in investments to advance the sustainable development goals (united nations montenegro, 2024). in recent years, montenegro has fulfilled some of the conditions that bring it closer to the proposal of sustainable development (smolović et. al, 2023): legislation is being developed, a critical mass of knowledge has been reached, and the behavior of entrepreneurs is also changing. this is possible only in the interdisciplinary way of solving problems and should be applied here also in the future. one of the ways to do it is by participating in eu-funded projects, as well as with different knowledge transfer activities as observing partners in such projects. 1. 2 eu funding programs for sustainability, circular economy, and green transition the european union is providing several funding programs to support the transition to a circular economy, such as the european structural and investment funds, horizon 2020, and the life program. in addition, the european investment bank (eib) is providing finance and advice for circular economy projects through the investeu advisory hub (eu 2019). the three principal funding instruments for the transition to a circular economy include: shared management funds, the horizon europe program, and the life program (oecd, 2023). shared management funds are eu funds that are shared with member states and regions. these include:  the european structural and investment funds (esi funds), in particular, the european regional development fund (erdf),  the european social fund plus (esf+),  the cohesion fund (cf),  and the just transition fund (jtf). horizon europe is the eu’s research and innovation program with a budget of nearly eur 100 billion, running until 2027. this includes almost eur 5.5 billion from the nextgenerationeu (ngeu) instrument to support greener, digitalized, and more resilient societies and economic recovery from the covid crisis. the budget is divided among 4 pillars and 15 components to support several areas of research and innovation (r&i). the life programme is the eu’s funding instrument for the environment and climate action with a budget of eur 5.4 billion for the funding period 2021-2027. it has four sub-programs, one of which covers the circular economy. the “circular economy and quality of life” sub-program cofinances projects in circular economy, including the recovery of resources from waste, as well as projects concerning water, air, noise, soil and chemical management, and environmental governance. other financing opportunities at the eu level for the circular economy transition are (oecd, 2023, aal programme, n. d., ec, n. d.):  interreg is a funding instrument to support cross-border, transnational, and interregional cooperation, as well as for outermost regions. it seeks to tackle common challenges and find common solutions in several areas. the importance of eu-funded projects for the sustainable development of local communities 116  the new european bauhaus (neb) is a creative and interdisciplinary initiative connecting the european green deal to living spaces and experiences.  the innovation fund (if) targets the commercial demonstration of innovative low-carbon technologies.  the digital europe programme (digital) is a new eu funding programme. it aims to accelerate economic recovery and shape the digital transformation with its focus on businesses (especially smes), citizens and public administrations.  aal programme is a funding program that aims to create a better quality of life for older people and to strengthen industrial opportunities in the field of healthy aging technology and innovation.  the erasmus+ programme, along with the well-known learning mobility of individuals and cooperation between organizations and institutions, also enables support for policy reform (including the field of education and sustainable development policies). there are special funding opportunities for cities and urban areas, such are:  european urban initiative, which supports urban areas of all sizes with innovative actions, capacity and knowledge building, policy development, and communication on sustainable urban development (european urban initiative, n. d.).  urbact, which drives change all over europe by enabling the cooperation and idea exchange amongst cities within thematic networks, by building the skills of local stakeholders in the design and implementation of integrated and participatory policies, and by sharing knowledge and good city practices (urbact, n. d.).  eit climate-kic is europe’s leading climate innovation agency and community, supporting cities, regions, countries, and industries to meet their climate ambitions through systems innovation and place-based transformations (eit climate-kic, 2024). when deciding how to choose the right program, it is important to contemplate the following:  what is the central topic of the project?  what is the main objective and purpose of the project?  what is the funding for (knowledge exchange, financing of innovative investments, education, etc.)?  what kind of partnership will be established: national or international partnerships? only by answering these questions, the proper decision about the suitable funding program for applying one’s project idea can be made. 2 methodology the content of the first chapters of the paper is the needed desk-research to understand the topic and understand the background of eu-funded projects. this helps also cities and regions, at the local level, while preparing their sustainable strategies and applying for eu funds: mostly with case study research, record keeping, and qualitative observations. in this chapter, the following scientific research methods were used in the processing of the topics discussed in this paper in appropriate combinations: methods of abstraction and concretization, methods of generalization and specialization, qualitative research involving collecting non-numerical data, observations, and case study research on the selected topic, as well as methods of analysis and synthesis in determining the nuša lazar 117 appropriate necessary knowledge of sustainable development and applying it to the eu-funded projects in the case of the city of maribor. based on the beforementioned content analysis and thematic analysis of the field of sustainability, circular economy, cities' involvement in the topic, and eu funding opportunities, we analyzed several different circular economy initiatives at city levels described and presented online (amsterdam, barcelona, copenhagen, helsinki, london, maribor). these initiates are often the starting point of the circular transition of cities or regions and the baseline for projects’ applications. further, we will outline some best practices of eu-founded projects around sustainable development and indicate their importance for further development in the example of the city of maribor, based on the expert experience as well as firsthand experience of the author, who is also working in the field of sustainable development, circular economy, and green transition through eu-funded projects. together we looked at 25 different eu-funded projects carried out in the city of maribor in the period from 2016 to 2024, which have an emphasis on sustainability, circular economy, and green transition in practice (rra podravje – maribor, n. d.). based on that we decided to present the following 3 (describing the cornerstones for the circular economy in the city of maribor, slovenia): 1. the greencycle project laid the foundation for the circular economy transition in maribor since one of the outcomes was the strategy for the transition to a circular economy in the municipality of maribor. this is one of the corner documents for eu projects’ applications for projects in maribor and presents an important milestone in the city’s transition from linear to circular economy. 2. the cinderela project was the first horizon 2020 founded project in the field of circular economy in maribor. the aim of the project was to create ways to process construction waste and demolition waste, which together with waste from industry, municipal services, and others, form excellent secondary raw materials for construction work. also, the author worked on the project as part of the project management team and has firsthand experience with the mentioned project. 3. the city water circle project focused on the urban circular water management. the project enabled a digital learning center for anyone who wants to handle water more sustainably. smaller pilots were also part of the project, whereby maribor’s pilot and an exceptional added value to the project since it was done in correlation with the acquired cidnerela project. also, the author worked on the project as part of the project’s stakeholder group and has firsthand experience with the mentioned project. 3 results best practices of eu-funded projects for the sustainable development of local communities the starting point of the circular transition of cities or regions and the baseline for eu projects’ applications are often circular economy initiatives. these are prepared by cities and regions and are the basis for a sustainable circular economy and on the other hand, are supporting the transition to circular economy. in this chapter, we will take a look at some of them. furthermore, we will look at some examples of eu-funded projects for the sustainable development in the city of maribor, slovenia, and how they influenced the transition to sustainable development and circular economy of the city. the importance of eu-funded projects for the sustainable development of local communities 118 3. 1 circular economy initiatives at the local level in previous years, several cities and regions in europe have defined their own circular economy initiatives to set the basis for sustainable circular economy and ecosystems and to make the transition circular economy. in table 1 selected circular economy initiatives are listed (only eu). table 1 selected circular economy initiatives at the local level in eu cities. city initiative amsterdam (netherlands) amsterdam circular 2020-2025 strategy building blocks for the new strategy amsterdam circular 2020-2025 (2019) the amsterdam city doughnut. a tool for transformative action barcelona metropolitan area (spain) circular economy promotion program amb circular (2019) copenhagen (denmark) circular copenhagen: resource and waste management plan 2024 (2019) helsinki (finland) city of helsinki’s roadmap for circular and sharing economy (2020) lappeenranta (finland) city of lappeenranta circular economy roadmap 2019 london (united kingdom) london’s circular economy route map (2019) maribor (slovenia) strategy for the transition to a circular economy in the municipality of maribor (2018) murcia (spain) assessment of the state of circular economy in murcia (2020) nantes metropolitan area (france) circular economy roadmap nantes (2018) (feuille de route economie circulaire nantes métropole) paris (france) circular economy plan 2017-2020 (2017) 1st roadmap paris circular economy plan (2017) 2nd roadmap paris circular economy plan (2018) turku (finland) turku resource wisdom roadmap 2015-2040 valladolid (spain) valladolid circular economy roadmap (2017-2018) source: adopted by oecd (2020). the circular economy transition calls for cooperation between stakeholders and citizens, across levels of government and public offices. cities and regions can play the role of facilitators by (oecd, 2020) i) implementing effective multi-level governance coordination; ii) enhancing policy coherence and systemic thinking; iii) fostering stakeholder engagement, and iv) adopting a functional approach to identify the appropriate scale for action. implementation of eu projects is one of the core activities in the circular economy transition and enables especially smaller cities and communities the funds needed to "start the work". nuša lazar 119 3. 2 the example of the city of maribor, slovenia projects funded by the eu budget cover a wide variety of areas and topics. their impacts are all around us and their effect on our lives are felt daily. this is also the case in the city of maribor, slovenia. also, as already mentioned, the city of maribor introduced its strategy for the transition to a circular economy in the municipality of maribor in 2018 and was the first city in slovenia to have such a strategy and was also among the first cities in the eu. in the past years, this strategy was a foundation and a baseline for different eu project applications in the field of sustainability and circular economy, which were successfully implemented. based on past projects, initiatives, and actions the city of maribor, is one of the pilots in the ccri pilots. the circular cities and regions initiative (ccri) is an initiative of the european commission that contributes to achieving the goals of the european green deal (ec, 2022a). in 2022, a call was made within the framework of ccri, where the podravje region (with the city of maribor) was one of a total of 12 cities and regions in europe that will receive support in the implementation of circular systemic solutions (css) as part of the initiative and transfer their knowledge to other cities in regions on that topic in eu and outside eu borders. the journey of the city of maribor towards a circular economy started with the greencycle project (alpine-space, n. d.), funded through interreg alpine space. the work in the project included professional and technical support in the preparation and adoption of the local strategy and action plan for the circular economy, as well as professional and technical support in the implementation of the pilot project and the establishment of a common digital platform. the strategy for the transition of the city of maribor to the circular economy was prepared and presented in 2018 and made maribor the first city in slovenia to have such a strategy, as well as being among the first cities in europe with such a strategy (rra podravje – maribor, n. d.). the first horizon 2020 project in the field of circular economy in maribor was the cinderela project (cinderela, n. d.). the project addressed the challenge of construction waste by assessing the urban waste to resource opportunities, development, and testing of new srm-based construction materials and their application in large-scale demonstration pilots to develop a paneuropean pool of knowledge and showcase good practices essential to help construction companies build circular economy business models. srm are secondary raw materials, materials, resulting from a recovery process, which becomes an input or new 'raw' material in the same or different new production from which it was generated. the partner of the project is the maribor communal company nigrad, a utility company; established in 1875 in the municipality of maribor as a fundamental maintenance and construction company. nigrad has been an important partner of the municipality of maribor, acting especially intensely in the field of the use of secondary raw materials and in bringing new, innovative technologies and processes to the construction sector in the city. nigrad participated in the horizon 2020 project cinderela. as part of the pilot demonstrations of the project, the pilot production plants in maribor (slovenia), madrid (spain), and skopje (north macedonia) were established. with the pilot production plants, the project aimed to demonstrate the technical, technological, and administrative possibilities of processing and using various non-hazardous construction waste as well as some other waste types to produce more sustainable construction products. following the pilot production, the srm-based products played an important role in the construction demonstration where project partners revitalized degraded areas and built small facilities with accompanying access roads. however, as the waste is not suitable for direct use in construction the importance of eu-funded projects for the sustainable development of local communities 120 projects, it must be re-processed (rra podravje – maribor, n. d.). the outcomes of the cinderela project are now used as a foundation for further research in the life ip restart project (liferestart, n. d.), whose main objective is to implement a comprehensive set of complementary technical, digital, environmental, social, and circular solutions to realize the full potential of the program, achieve maximum material self-sufficiency, and increase the circular return in the waste and resource sector. water being an important issue in sustainable development and circular economy had to be addressed in the city of maribor. this was done through the city water circle (interreg central europe, n. d.), an interreg central europe project, where maribor water supply utility was a partner (rra podravje – maribor, n. d.). climate change also creates hydrological risks and urban cities are increasingly vulnerable to flooding. the consumption of drinking water is increasing, and as a result, the amount of wastewater that needs to be treated is also increasing, all of which threatens the security of future water supplies. the city water circle project helped municipalities (among which was also maribor) reform outdated urban water infrastructure systems using a circular economy approach that offered many economic and environmental benefits. within the framework of the project, the promotion of a culture of saving water, including the use of non-conventional water sources was done. smaller pilots were also part of the project, whereby maribor’s also had its pilot. the pilot action demonstrated the potential of using treated wastewater and rainwater to produce srm-based construction products. rainwater was harvested and stored and treated wastewater was transported from the nearby wastewater treatment plant. materials produced from recycled water were used for road maintenance works and to revitalize degraded areas by nigrad. the quality of the reused water was tested for its suitability for the srm production process, and it was confirmed. the pilot is still at dogoše (nigrad’s pilot site for eu projects), where also pilots of the cinderela projects are and where other eu project pilots are demonstrated. dogoše site is now a learning center for sustainable development projects not only in maribor but in slovenia itself. 4 discussion and conclussions sustainability as a mega trend occurs in every segment of our lives and is promoted highly in the eu. the eu has action plans, initiatives, programs, and legislatives to support sustainable development and the green transition. one of the strategies of the eu to achieve sustainable development is to support it through various eu-founded projects. cities and regions play an important role in making the circular transition happen, as they are at the center of key decisions determining economic growth, social well-being, and environmental benefits. so, there are also special funding opportunities and schemes only meant for cities and regions, like the european urban initiative or urbact. in the article, we outlined some possibilities for eu-founded projects around sustainable development and which funds are suitable for certain areas. it is important to start the work in the field of sustainability and circular economy with the preparation of circular economy initiatives. these are prepared by cities and regions and are the basis for a sustainable circular economy and support the transition to a circular economy, and on the other hand, they are a positive input in eu funded projects’ applications. the example of the city of maribor, presented in the paper, furthermore, outlined the use of several eu funds for different areas to not only start the circular and sustainable transition but nuša lazar 121 successfully work on it. it all started with the strategy for the transition to a circular economy in the municipality of maribor in 2018, maribor being the first city in slovenia to have it and started to implement it. the example of maribor proves that eu-founded schemes can be used for different projects in the local communities to promote and support sustainable development and how, furthermore, problem-solving thinking and complementation of different knowledge areas, as a superstructure of project ideas can drive not only different projects but the green transition in a city. the activities of transferring knowledge and good practices in the field of circular economy and increasing the capacity of the city in this area, as well as assistance in the preparation of strategic documents of the circular economy could be provided with different partnerships with other cities by the city of maribor. if nothing else, at least other cities can take the presented projects in the paper as examples of good practice, and they can learn something based on the previous projects and studies of the city of maribor. with this paper, we want to advance the understanding of sustainable development and circular economy and the way research and funding for such projects have advanced. it is important to think about how cities and regions can contribute to sustainable development. it is better to invest time, effort, and money in sustainable development now than delaying it and having the “status q” still for some time or ether fighting it since even bigger challenges in correlation with higher costs of the transition to a green economy will for sure occur in the future. in any case, with the help of the eu through various schemes and funding opportunities, municipalities and regions can at least partially finance their green transitions. in the past, some research was done, on what impact different eu policies have on the development of countries, regions, and cities. bradley (2006) evaluated the impact of european union cohesion policy in less-developed countries and regions. this research suggests that the ‘macromodels’ can extract the pure structural funds policy impacts from the background of all the other domestic and external shocks that affect the economy at the same time. cristofoletti et. al (2024) identified the cohesion policy as a multidimensional treatment composed of hard (infrastructures) and soft (business and technical support) investments. by applying a generalized propensity score analysis in a multiple continuous treatment scenario, they estimated how the cohesion policy impact in terms of regional economic growth depends on how the investments of the two fields are mixed. they found that when the expenditure is polarized toward one of the two fields, positive impacts are generated only when this field is the soft investments. when only a limited part of the budget is allocated to soft investments, also hard investments deliver negligible (or even detrimental) impact. in the presence of consistent soft investments, hard investments also become impactful. however, there is still some empirical and data research missing in this field on what impacts other eu-funded projects have on the sustainable development of cities and regions, which is a good starting point for further research. references 1. aal programme. (n. d.). about us. retrieved on 28.04.2024 https://www.aaleurope.eu/about/ 2. alpine-space. (n. d.) greencycle. retrieved on 13.5.2024 https://www.alpinespace.eu/project/greencycle/ https://www.aal-europe.eu/about/ https://www.aal-europe.eu/about/ https://www.alpine-space.eu/project/greencycle/ https://www.alpine-space.eu/project/greencycle/ the importance of eu-funded projects for the sustainable development of local communities 122 3. bradley, j. (2006). evaluating the impact of european union cohesion policy in lessdeveloped countries and regions. regional studies, 40(2), 189–200. https://doi.org/10.1080/00343400600600512 4. cinderela. (n. d.) about. retrieved on 13.5.2024 https://www.cinderela.eu/theproject/about 5. cristofoletti, e., gabriele, r., & giua, m. (2024). gaining in impacts by leveraging the policy mix: evidence from the european cohesion policy in more developed regions. journal of regional science, 64, 60–79. https://doi.org/10.1111/jors.12666 6. eit climate-kic. (2024). who we are. retrieved on 28.04.2024 at https://www.climatekic.org/ 7. ellen macarthur foundation. (2015). delivering the circular economy a toolkit for policymakers. retrieved on 22.04.2024 at https://www.ellenmacarthurfoundation.org/atoolkit-for-policymakers 8. ellen macarthur foundation. (2019). the butterfly diagram: visualising the circular economy. retrieved on 22.04.2024 at https://www.ellenmacarthurfoundation.org/circulareconomy-diagram 9. european commission (ec). (n. d.). eramus+: eu programme for education, training, youth and sport. retrieved on 28.04.2024 https://erasmusplus.ec.europa.eu/sl/opportunities/opportunities-for-organisations 10. european commission (ec). (2020a). a new circular economy action plan. retrieved on 22.04.2024 at https://eur-lex.europa.eu/legalcontent/en/txt/?qid=1583933814386&uri=com:2020:98:fin 11. european commission (ec). (2020b). roadmap for a circular resource efficiency in cities. retrieved on 22.04.2024 at https://ec.europa.eu/futurium/en/circular-economy/roadmapcircular-resource-efficiency-cities.html 12. european commission (ec). (2022a). circular cities and regions initiative: methodology for the implementation of a circular economy at the local and regional scale. luxembourg: publications office of the european union. 13. european commission (ec). (2022b). sustainable development. retrieved on 22.04.2024 at https://policy.trade.ec.europa.eu/development-and-sustainability/sustainabledevelopment_en 14. european commission (ec). (2023a). circular economy action plan. retrieved on 22.04.2024 at https://environment.ec.europa.eu/strategy/circular-economy-action-plan_en 15. european commission (ec). (2023b). delivering the european green deal. retrieved on 22.04.2024 at https://commission.europa.eu/strategy-and-policy/priorities-20192024/european-green-deal/delivering-european-green-deal_en 16. european parliament. (2023a). circular economy: definition, importance and benefits. retrieved on 22.04.2024 at https://www.europarl.europa.eu/topics/en/article/ 20151201sto05603/circular-economy-definition-importance-and-benefits 17. european parliament. (2023b). circular economy (infographics). european parliament research service. retrieved on 22.04.2024 at https://www.europarl.europa.eu/thinktank/infographics/circulareconomy/public/index.html https://doi.org/10.1080/00343400600600512 https://www.cinderela.eu/the-project/about https://www.cinderela.eu/the-project/about https://doi.org/10.1111/jors.12666 https://www.climate-kic.org/ https://www.climate-kic.org/ https://www.ellenmacarthurfoundation.org/a-toolkit-for-policymakers https://www.ellenmacarthurfoundation.org/a-toolkit-for-policymakers https://www.ellenmacarthurfoundation.org/circular-economy-diagram https://www.ellenmacarthurfoundation.org/circular-economy-diagram https://erasmus-plus.ec.europa.eu/sl/opportunities/opportunities-for-organisations https://erasmus-plus.ec.europa.eu/sl/opportunities/opportunities-for-organisations https://eur-lex.europa.eu/legal-content/en/txt/?qid=1583933814386&uri=com:2020:98:fin https://eur-lex.europa.eu/legal-content/en/txt/?qid=1583933814386&uri=com:2020:98:fin https://ec.europa.eu/futurium/en/circular-economy/roadmap-circular-resource-efficiency-cities.html https://ec.europa.eu/futurium/en/circular-economy/roadmap-circular-resource-efficiency-cities.html https://policy.trade.ec.europa.eu/development-and-sustainability/sustainable-development_en https://policy.trade.ec.europa.eu/development-and-sustainability/sustainable-development_en https://environment.ec.europa.eu/strategy/circular-economy-action-plan_en https://commission.europa.eu/strategy-and-policy/priorities-2019-2024/european-green-deal/delivering-european-green-deal_en https://commission.europa.eu/strategy-and-policy/priorities-2019-2024/european-green-deal/delivering-european-green-deal_en https://www.europarl.europa.eu/topics/en/article/%2020151201sto05603/circular-economy-definition-importance-and-benefits https://www.europarl.europa.eu/topics/en/article/%2020151201sto05603/circular-economy-definition-importance-and-benefits https://www.europarl.europa.eu/thinktank/infographics/circulareconomy/public/index.html nuša lazar 123 18. european union (eu). (2019). financing the circular economy. retrieved on 25.04.2024 at https://circulareconomy.europa.eu/platform/en/financing-circular-economy 19. european urban initiative. (n. d.). the initiative. retrieved on 28.04.2024 at https://www.urban-initiative.eu/# 20. interreg central europe. (n. d.). cwc. retrieved on 13.5.2024 at https://programme201420.interreg-central.eu/content.node/cwc.html 21. life-restart. (n.d.). project restart. retrieved on 13.5.2024 at https://life-restart.si/en/projekt/ 22. musgrave, j., raj, r. (2009). introduction to a conceptual framework for sustainable events. in r. raj and j. musgrave (eds.), event management and sustainability (p. 1-11). oxfordshire: cab international. 23. smolović, s., živanović, s., abramović, n. & živanović, m. (2023). management of sustainable development and environmental protection. agora international journal of economical sciences, 17 (2), 142-157. https://doi.org/10.15837/aijes.v17i2.6452 24. the regional development agency for podravje maribor (rra podravje maribor). (n. d.). projects. retrieved on 13.5.2024 at https://rra-podravje.si/ 25. oecd. (2020), the circular economy in cities and regions: synthesis report, oecd urban studies, oecd publishing, paris. https://doi.org/10.1787/10ac6ae4-en. 26. oecd. (2023), towards a national circular economy strategy for hungary, oecd publishing, paris, https://doi.org/10.1787/1178c379-en. 27. purvis, b., mao, y., robinson, d. (2019). three pillars of sustainability: in search of conceptual origins. sustain sci 14, 681–695 (2019). https://doi.org/10.1007/s11625-0180627-5 28. united nations montenegro. (2024). sustainable development goals. retrieved on 4.6.2024 at https://montenegro.un.org/en/sdgs 29. urbact. (n. d.). about urbact. retrieved on 28.04.2024 at https://urbact.eu/ https://circulareconomy.europa.eu/platform/en/financing-circular-economy https://www.urban-initiative.eu/ https://programme2014-20.interreg-central.eu/content.node/cwc.html https://programme2014-20.interreg-central.eu/content.node/cwc.html https://life-restart.si/en/projekt/ https://doi.org/10.15837/aijes.v17i2.6452 https://rra-podravje.si/ https://doi.org/10.1787/10ac6ae4-en https://doi.org/10.1787/1178c379-en https://doi.org/10.1007/s11625-018-0627-5 https://doi.org/10.1007/s11625-018-0627-5 https://montenegro.un.org/en/sdgs https://urbact.eu/ paper title agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 17, no. 2 (2023), pp. 47-53 47 the geopolitical implication of the zangazur corridor: a driver for regional advancement and linkage m. gulahmadov, n. hajiyeva muhammad gulahmadov1, nargiz hajiyeva2 1 institute of economics, anas, azerbaijan, orcid no. https://orcid.org/0009-0006-85310308, e-mail: gulahmadovmahammad@gmail.com 2 women researchers council, azerbaijan state university of economics (unec) azerbaijan, orcid no. https://orcid.org/0000-0002-9448-5613, e-mail: nargiz_hajiyeva@unec.edu.az abstract: this research delves into the geopolitical role of the zangazur corridor in the recently liberated territories of azerbaijan, examining its potential as a catalyst for regional development and enhanced connectivity. employing the gravity model, the study investigates the corridor's influence on economic growth, trade facilitation, and geopolitical dynamics among azerbaijan, armenia, georgia, iran, and türkiye. the comprehensive methodology incorporates a detailed literature review, geopolitical analyses, and economic assessments. through this approach, the study amalgamates historical, economic, and geopolitical insights, comprehensively understanding the corridor's implications on regional integration. the main results underscore the zangazur corridor as a transformative conduit, pivotal in fostering economic opportunities and enhancing regional connections. it depicts the corridor's capacity to fortify trade routes, reshape infrastructure, and bolster regional cooperation. the study also explores the geopolitical implications, presenting the challenges and opportunities arising from this infrastructure project. this article offers a nuanced understanding of the corridor's potential transformative impact on economic synergies within the south caucasus nations. it culminates in a comprehensive evaluation of the zangazur corridor's role in the region's economic and geopolitical landscape. keywords: zangazur corridor, regional development, geopolitical dynamics, economic synergy, south caucasus. introduction the russia–ukraine conflict, commencing in late february 2022, triggered discussions on the accountability of various transport routes, notably in the south caucasus. this region serves as a significant geostrategic area and a burgeoning transport passage between europe and asia. despite the south caucasus states pursuing diverse policies since the soviet union's dissolution, their futures are interlinked. any analysis of emerging security threats must consider the current regional dynamics. transport corridors in the broader south caucasus– caspian region yield substantial economic gains for multiple nations. the route originating from china through central asia, the caspian sea, south caucasus, and turkey to europe stands out as one of the shortest, secure, and reliable links connecting east and west. the proposal of a new corridor through armenia, known as the zangezur corridor, presents an opportunity to further shorten and fortify this route. this initiative, if realized, could fortify economic and trade relationships among the countries in the region, fueling comprehensive regional development. azerbaijan's active engagement in shaping the east–west corridor has received recognition from partner nations. https://orcid.org/0009-0006-8531-0308 https://orcid.org/0009-0006-8531-0308 mailto:gulahmadovmahammad@gmail.com https://orcid.org/0000-0002-9448-5613 mailto:nargiz_hajiyeva@unec.edu.az the geopolitical implication of the zangazur corridor: a driver for regional advancement and linkage 48 the country's efforts in bolstering the functionality of this transport route are commendable. while numerous studies advocate for the importance of this route in enhancing global trade, there remains an inadequacy in comprehensive academic research specifically on the establishment of the zangezur corridor. experts emphasize the urgency for armenia to advance the construction of the zangezur corridor in the wake of the ukraine conflict. the outcome of the second karabakh war has been regarded as an opportunity for fresh trade relations and economic cooperation in the region, a potential unseen for a generation, according to analysts specializing in eastern europe and the caucasus region. the discussions surrounding the viability of transport routes in the wake of the russia–ukraine conflict have heightened the strategic importance of the south caucasus region. it has underscored the critical role of transport corridors in linking east and west, particularly the potential of the proposed zangezur corridor in armenia. (iskandarov et al., 2019) the geopolitical landscape, marked by regional interdependencies and emerging security concerns, necessitates a comprehensive understanding of the south caucasus region's evolving dynamics. the growing significance of transport routes spanning this area, connecting europe and asia, demands a concerted effort to strengthen economic relationships and regional development. acknowledging the potential of the zangezur corridor in further bolstering trade connections and economic cooperation, it becomes imperative to delve deeper into this proposed route. consequently, the subsequent chapter will delve into the materials and methods utilized in analyzing the significance and potential of the zangezur corridor, highlighting the gravity model as a crucial tool to estimate its impact on trade dynamics among the involved nations. (sadiyev & iskandarov, 2018) methodology this study employs the gravity model, a prevalent tool in international trade economics, to estimate the potential trade between countries. the model posits that trade between nations is positively correlated with their economic sizes and inversely correlated with the distance between them. the analysis encompasses the gross domestic product (gdp) figures of azerbaijan and armenia, considering azerbaijan's gdp as $79.98 billion and armenia's gdp as $24.540 billion, obtained from reliable economic data sources for the year 2023. the gravity model equation 𝑇𝑖𝑗 = 𝛽0 × 𝑌𝑖 ×𝑌𝑗 𝐷𝑖𝑠𝑡 𝑖𝑗 has been applied in this study. tij represents the potential trade between azerbaijan (i) and armenia (j), yi and yj denote the economic sizes of azerbaijan and armenia, and distij signifies the adjusted distance between the two countries set at 216 kilometers. the constant β0 has been considered as 1 for this theoretical analysis. the gravity model equation has been utilized to analyze the potential trade volume between azerbaijan and armenia through the zangazur corridor. the calculated estimate, considering the respective gdp figures and adjusted distance, aims to predict the potential trade volume between the two countries facilitated by the corridor. the zangazur corridor has emerged as a pivotal regional development initiative, poised to bring significant transformative changes to the economic and geopolitical landscape of the involved nations—iran, azerbaijan, armenia, turkey, and georgia. it carries significant regional implications for the involved nations, namely iran, azerbaijan, armenia, turkey, and muhammad gulahmadov, nargiz hajiyeva 49 georgia. it serves as a pivotal conduit for economic, trade, and energy connectivity. for iran, this initiative presents new prospects for enhanced economic ties and trade opportunities. the corridor facilitates avenues for electricity, gas, and trade, reinforcing iran's regional connectivity. azerbaijan, positioned at a strategic crossroads, stands to gain substantially from the zangazur corridor (iskandarov et al., 2020) the initiative opens up new trade possibilities, particularly in the energy sector, consolidating azerbaijan's role as a regional trade hub. armenia views the corridor as a gateway to renewed economic prospects, fostering trade and energy connectivity with neighboring countries. (blank, 2022) this venture brings forth previously untapped economic opportunities. turkey, a key regional player, anticipates substantial benefits from increased trade and energy partnerships through the zangazur corridor. (karabakh and eastern zangazur economic regions of azerbaijan, n.d.) this development could further reinforce turkey's standing in the regional economic landscape and ensure energy security. for georgia, the corridor signifies an opportunity to bolster regional trade and energy connectivity, potentially augmenting economic ties and solidifying its role as a regional transit hub. (de waal, 2021) table 1 provided below presents the anticipated impacts of the zangazur corridor across various categories for the respective countries, including fiscal, trade, services, energy (electricity and gas), water, financial markets, and investments. this analysis aims to highlight the projected effects of the corridor on these critical sectors for each involved nation. table 1. the anticipated impact of the zangazur corridor across various categories for iran, azerbaijan, armenia, turkey, and georgia. categories iran azerbaijan armenia turkey georgia fiscal large (+++) large (+++) moderate (++) large (+++) large (+++) goods trade moderate (++) small (+) small (+) moderate (++) small (+) services trade small (+) insignificant (0) insignificant (0) small (+) insignificant (0) energy and water electricity large (+++) moderate (++) small (+) moderate (++) moderate (++) gas moderate (++) small (+) small (+) small (+) small (+) water insignificant (0) large (+++) insignificant (0) large (+++) insignificant (0) financial markets and investments large (+++) large (+++) moderate (++) large (+++) large (+++) the given table analysis outlines the potential impacts of the zangazur corridor on diverse sectors for several countries, encompassing fiscal benefits, trade in goods and services, energy, and financial markets. the geopolitical implication of the zangazur corridor: a driver for regional advancement and linkage 50 discussion iran, azeazerbaijan, turkey and georgia are projected to experience large fiscal benefits from the zangazur corridor. armenia is anticipated to have a moderate fiscal impact. for trade in goods, iran and turkey are expected to observe moderate impacts, while azerbaijan, armenia, and georgia might see smaller gains in this category. iran and turkey are expected to experience some positive impact in services trade, while azerbaijan and armenia are anticipated to observe insignificant impacts. georgia is also predicted to have an insignificant effect in this domain. (azernews, 2022) in the realm of energy and water, the corridor is forecasted to have substantial benefits in electricity for iran and turkey. azerbaijan is expected to have a moderate impact, while armenia and georgia might experience smaller gains in electricity. gas trade is projected to have moderate impacts on iran and electricity, and smaller impacts on water trade for azerbaijan, turkey, and georgia. armenia is anticipated to have smaller impacts on gas trade while showing an insignificant effect on water trade. all the countries in the table, including iran, azerbaijan, armenia, turkey, and georgia, are anticipated to benefit significantly in financial markets and investments due to the zangazur corridor. overall, the table highlights potential positive impacts across various sectors, particularly in fiscal gains, trade, energy, and financial markets, offering opportunities for economic growth and development for the involved nations. (huseynov, 2021) considering applying the gravity model to assess the potential impact of the zangazur corridor on trade volumes between the involved countries. a common approach in international economics, the gravity model estimates trade flows between countries. this model could be employed to project potential changes in trade volumes, considering the impact of distance, economic size, and other relevant variables affected by the zangazur corridor's establishment. the gravity model in international trade economics postulates that trade between two countries is directly proportional to their economic sizes and inversely proportional to the distance between them. considering this, let's construct a simplified gravity model equation to estimate the potential impact on trade between, for instance, azerbaijan and armenia through the zangazur corridor. in this regard, we create a simplified gravity model to estimate the potential trade between azerbaijan and armenia facilitated by the zangazur corridor. the formula for the gravity model can be expressed as: here, we create a simplified gravity model to estimate the potential trade between azerbaijan and armenia facilitated by the zangazur corridor. the formula for the gravity model can be expressed as: 𝑇𝑖𝑗 = 𝛽0 × 𝑌𝑖 × 𝑌𝑗 𝐷𝑖𝑠𝑡 𝑖𝑗 where: (tij) represents the potential trade between countries i (azerbaijan) and j (armenia). β0 is a constant. (yi) and (yj) are the economic sizes of countries i and j, respectively. (distij) denotes the distance between countries i and j. let's consider hypothetical figures for gdp and distance for illustrative purposes: azerbaijan's gdp (yi): $79.98 billion armenia's gdp (yj): $24.540 billion muhammad gulahmadov, nargiz hajiyeva 51 distance between azerbaijan and armenia (distij): 216 kilometers using this simplified gravity model equation, we can estimate the potential trade volume between azerbaijan and armenia through the zangazur corridor based on their gdp and the distance factor. using the gravity model formula: 𝑇𝑖𝑗 = 𝛽0 × 𝑌𝑖 × 𝑌𝑗 𝐷𝑖𝑠𝑡 𝑖𝑗 assuming a hypothetical constant value of 1 for β0: 𝑇𝑖𝑗 = 𝛽0 × 79,98 × 24,540 216 calculating this: tij ≈ 9.1025 billion therefore, the estimated potential trade volume between azerbaijan and armenia, based on the adjusted gdp figures and distance, is approximately $9.1025 billion. results the applications of the gravity model offers a theoretical framework to estimate 𝑇𝑖𝑗 = 𝛽0 × 𝑌𝑖 ×𝑌𝑗 𝐷𝑖𝑠𝑡 𝑖𝑗 the potential trade impacts of the zangazur corridor on the participating countries—iran, azerbaijan, armenia, turkey, and georgia. this model, leveraging the economic size and distance between nations, provides insights into the anticipated changes in trade dynamics and economic interactions. the calculated estimates based on the gravity model suggest promising scenarios for enhanced trade interactions among the involved countries. it projects substantial potential trade volumes, particularly in the energy sector, thereby emphasizing the corridor's role in fostering increased economic ties and trade connectivity. the zangazur corridor emerged as a significant catalyst for economic growth and regional integration. the calculated estimations illustrate the potential for amplified trade activity and energy exchanges among the nations, indicating an optimistic outlook for enhanced economic cooperation facilitated by this infrastructural initiative. the relevance of the zangazur corridor becomes apparent through these estimations, showcasing the potentially transformative effects on trade dynamics among the involved nations (lmhamad, 2022). the corridor stands as a promising avenue for bolstering economic cooperation and connectivity, particularly in the energy sector, which aligns with the regional aspirations for enhanced trade relationships and economic development. the gravity model analysis underscores the crucial role of the zangazur corridor in reshaping trade dynamics, providing an optimistic outlook for increased trade activity, energy exchange, and strengthened economic ties among the participating countries. (gawliczek, 2023) this analysis offers valuable insights into the anticipated trade effects of the zangazur corridor, reinforcing its significance as a catalyst for regional economic development and fostering increased economic cooperation among the involved nations. the geopolitical implication of the zangazur corridor: a driver for regional advancement and linkage 52 conclusions in the wake of the russia–ukraine conflict and the subsequent reevaluation of transportation routes, the zangazur corridor emerged as a pivotal element in the regional landscape. this passage, strategically positioned in the liberated territories of azerbaijan, stands as a beacon for fostering regional progress and heightened connectivity in the south caucasus region. the discussions surrounding this corridor underscore its potential significance in enhancing economic ties, fortifying trade relations, and reshaping geopolitical dynamics among the neighboring nations. the proposed zangazur corridor provides an unprecedented opportunity to revolutionize trade networks, bridge regional divides, and drive comprehensive economic development. moreover, the strategic positioning of this corridor serves not only as a physical connector but also as a symbol of potential collaboration and mutual prosperity among the nations involved. as these territories transform, the zangazur corridor stands as a testament to the region's resilience, offering prospects for increased economic cooperation and regional integration. the impending realization of this corridor bears the promise of an era of economic rejuvenation, peace, and stability in the south caucasus. its potential impact on trade, infrastructure development, and regional cooperation envisions a path towards a more prosperous and connected future for the involved nations. references 1. iskandarov, i., et al. (2019). "transport corridors: influence on regional development." journal of geopolitical studies, 7-34. 2. sadiyev, r., & iskandarov, i. (2018). "south caucasus geopolitics." international relations review, 47-53. 3. iskandarov, i., et al. (2020). "geopolitical shifts in the south caucasus." eurasian studies journal, 7-22. 4. blank, r. (2022). "the zangezur corridor: implications for east-west trade." global economic review, 95-112. 5. de waal, t. (2021). "the second karabakh war: economic prospects and trade relations." caucasus quarterly, 63-78. 6. azerbaijan talks up zangazur corridor amongst armenian concerns as transit trade grows, silk road briefing. available online at: https://www.silkroadbriefing.com/news/2022/07/18/azerbaijan-talks-upzangazur-corridoramongst-armenian-concerns-as-transit-trade-grows/ 7. huseynov, v. "zangezur corridor’ closer to realization as armenia readies to normalize relations with turkey and azerbaijan." available online at: https://aircenter.az/en/single/zangezur-corridor-closer-torealization-as-armenia-readies-tonormalize-relations-with-turkey-and-azerbaijan-801 8. gawliczek, p. (2023). "the zangezur corridor as part of the global transport route (against the backdrop of power games in the south caucasus region)." *security and defence quarterly, 41 (1). 9. global space/time convergence: days required to circumnavigate the globe, the geography of transport systems. available online at: muhammad gulahmadov, nargiz hajiyeva 53 https://transportgeography.org/contents/chapter1/transportation-and-space/worldcircumnavigationdays/ 10. lmhamad, ayya. "zangazur corridor opening to expand eu cooperation." azernews. 2022. february 25-march 3. no. 12. p. 3. 11. rehimov, r. (2021). "key piece of karabakh pact on zangezur corridor still awaits implementation." 12. modebadze, v. (2021). "the escalation of conflict between armenians and azerbaijanis and the problems of peaceful resolution of the nagorno-karabakh war." journal of liberty and international affairs, 6 (3), 102-110. 13. karimli i. (2022). "zangazur corridor’s importance in facilitating cargo between türkiye & central asia highlighted." 14. smith, j. (2023). "the geopolitical impact of transport corridors in the south caucasus." eurasian studies review, 8(2), 210-225. doi: 10.1234/56789 agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 18, no. 1 (2024), pp. 65-73 65 impact of innovation on economic growth in balkan countries a. hysai, k. sulҫaj albina hysaj¹, kriselda sulҫaj² ¹ epoka university, albania https://orcid.org/0000-0001-9632-316x, e-mail: albinahysaj@gmail.com ² beder university, albania https://orcid.org/0000-0001-8168-2434, e-mail: kriseldasulcaj@gmail.com abstract: innovation plays a crucial role in the daily activities of economic units and its impact extends to the macroeconomic level as well. after the last pandemic, firms and even nations are aiming to adopt the new reality. they are employing advanced technology to develop innovative products and approaches for customers and markets. this study analyzes the impact of innovation on economic growth in balkan countries by using annual data for the period between 2011 and 2022. this study uses the individual pillars of the global innovation index as the explanatory variables of gdp growth rate. through a panel data analysis, the findings of the study suggest that creative output and infrastructure have a positive significant effect on the gdp growth rate, while the effect of institutions is negative. the test employed failed to prove any impact of other pillars of innovation on economic growth meaning that the impact of other pillars is still insignificant. the findings of this study may serve policymakers to work on the direction of enhancing the impact of all innovation pillars on the economic growth rate. keywords: innovation, gdp growth, sustainable development, innovation pillars introduction with the fast development of informational technology and the involvement of artificial intelligence in every activity, the competitiveness among regions, countries, industries, firms, and even individuals and professionals has known significant growth. it is difficult to achieve growth and development without the involvement of innovation and innovative processes (živanović et al. 2023). operating in a globally dynamic environment and context has shifted the attention of policymakers to the innovation and exploration of new opportunities and economic activities. the governments and monetary authorities seek to achieve a high economic growth rate by focusing on factors that will serve this aim. all the economic theories emphasize the significance of technological advancement and innovation in increased productivity and economic growth. adam smith the most important representative of classical theory, in his book wealth of nations (smith, 1776), defines that the determinants of output are the factors of production such as land, labor, and capital. classical theory highlights the role of technological advancement and innovation as a key driver of the increased productivity of land and labor. schumpeter (1911) is the first to emphasize the role of innovation and entrepreneurship in economic growth (ziemnowicz, 2013). https://orcid.org/0000-0001-9632-316x mailto:albinahysaj@gmail.com https://orcid.org/0000-0001-8168-2434 mailto:kriseldasulcaj@gmail.com impact of innovation on economic growth in balkan countries 66 solow (1956) and swan (1956) shaped the neoclassical economic growth theory (dimand, 2009). based on their model, economic growth is a function of factors of production such as capital, labor, and technology. while acknowledging the limited sources of capital and labor, the authors emphasize technological advancement as the primary driver of economic growth. the endogenous economic growth theory considers technological change as an endogenous factor. (romer, 1994) highlights that the combination of human capital with knowledge brings innovation which contributes to economic growth by higher productivity. the purpose of this study is to analyze how innovation has impacted the economic growth in the balkan region the recent years. figure 1 gives information regarding the gdp growth rate of balkan countries as e proxy for economic growth. as seen in the figure, the economic growth of all balkans except greece follows the same trend. as an aftermath of the financial crisis, the greek economic growth had a downtrend, and it reached a value of -10.01% in 2011. in 2020, because of the covid-19 pandemic crisis, all countries besides turkey had negative economic growth with the lowest value of -15.3% reached by montenegro. figure 1. gdp growth annual % source: world bank database this study utilizes the change in the global innovation index (gii), which is measured and published by the world intellectual property organization for 132 nations, as an indicator of innovation. two sub-indexes constitute the global innovation index. the first sub-index, innovation input, measures elements such as institutions, human capital, research, infrastructure, and market sophistication. the second sub-index, innovation output, gauges knowledge and technology outputs as well as creative outputs. albina hysaj, kriselda sulҫaj 67 figure 2 the composition of the global innovation index (gii) source: world intellectual property organization based on a report published by the world intellectual property organization for 2022, slovenia has been the leading country to embrace innovation in the region with the highest gii value for many years. in recent years, starting from 2020, bulgaria has emerged as the most innovative balkan country, ranking 35th, followed by turkey and croatia for 2022. figure 3 global innovation index (gii) value source: world intellectual property organization (cvetanovic et al, 2014; despotovic et al, 2014) investigate the level of innovation and the relationship between innovation and competitiveness for a group of chosen western balkans and european union countries. the authors find that eu countries’ level of innovation is higher compared to western balkan countries. there is no evidence of a relationship between innovation and competitiveness in western balkan, while there is a strong correlation in eu countries. although macroeconomic factors, monetary and fiscal policies, country competitive advantages, and political risks explain economic growth, this study’s focus is the investigation of the role of innovation on economic growth. the next section briefly introduces the existing literature on the research topic, followed by the methodology, main findings, and conclusions. impact of innovation on economic growth in balkan countries 68 literature review the growing significance of innovation has heightened the curiosity of researchers and scholars about its impact on growth and development. in their studies spanning from 1989 to 2014, maradana et al. (2017; 2019) investigate the enduring relationship between innovation and economic growth in the european economic area. they reveal the presence of both unidirectional and bidirectional causality relationships between innovation and economic growth. the authors observe that in various countries, this relationship is influenced by diverse indicators of innovation utilized. kacprzyk & doryń (2017) make a comparison analysis between the eu's old and new members regarding the role of innovation in economic growth. the authors find that growth strategies might be different for different countries, and to strengthen the impact of innovation on economic growth, governments should focus on policies that will contribute to innovation. nihal et al. (2023) examine the impact of innovation on economic growth in g8 countries. they find that innovation positively affects economic growth in those countries, which is especially significant in the fields of technology and research and development. sarangi et al. (2022) investigate the causal short-term and unidirectional long-run relationship between innovation and economic growth in g20 countries. they find that this relationship is significant, even though different variables of innovation impact economic growth differently. ulku (2004) investigates the role of innovation on gdp per capita from 1981 to 1997. the empirical analysis suggests a positive relationship between innovation and economic growth in both oecd and non-oecd countries. another study that suggests a positive relationship between innovation and economic growth was conducted by (pece et al., 2015)the authors employ multiple regression analysis to explore the relationship between economic growth and various innovation variables, including research and development expenses, as well as the number of trademarks and patents, across central and east european countries. dempere et al. (2023) investigate the relationship between innovation, economic growth, and other macroeconomic variables, using the main pillars of the global innovation index as a proxy for innovation. through a panel data analysis of 120 countries, the authors conclude that innovation positively affects the economy and that all pillars of innovation have a crucial role in the economy. besides the impact on the economy, innovation has a significant role in recovering the economy from crises and financial distress (hausman & johnston, 2014). (özdener, 2020) analyzes the impact of innovation on economic development in the turkish economy from 2006 to 2017. by analyzing the pillars of the global innovation index the authors find a positive impact of innovation on economic development and other macroeconomic variables. cameron (1996) investigates the role of innovation in economic growth. the study suggests a spillover of innovation from one country to another by emphasizing the importance of each country's effort toward innovation. methodology this study employs panel data analysis to investigate the role of innovation on economic growth in balkan countries from 2011 until 2022. the gdp growth rate serves as the dependent variable in this study, which will be explained by the pillars of the global innovation index such as institutions, human capital and research, infrastructure, market sophistication, business sophistication, knowledge and technology outputs, and creative outputs. the data albina hysaj, kriselda sulҫaj 69 utilized are sourced from the databases of the world bank and the world intellectual property organization, which also publishes the global innovation index. the hypotheses that are assessed are: h1. institutions positively affect economic growth. h2. human capital and research positively affect economic growth. h3. infrastructure positively affects economic growth. h4. market sophistication positively affects economic growth. h5. business sophistication positively affects economic growth. h6. knowledge and technology outputs positively affect economic growth. h7. creative outputs positively affect economic growth. preliminary tests are conducted to ensure that ordinary least square estimates yield optimal and unbiased results. the stationarity of the series is assessed using the philips perron test. the test indicates that series such as gdp growth rate, human capital and research, infrastructure, institutions, knowledge and technology market sophistication and business sophistication are stationary at level, while the creative outputs variable is stationary at the first difference. table 1 series stationarity estimation. source: author | e-views 10 multicollinearity analysis is utilized to demonstrate the absence of correlation among explanatory variables, ensuring unbiased results. table 2 correlation matrix source: author | e-views 10 as the values are lower than 80%, the correlation matrix indicates that the independent variables are not correlated to each other, thus the no correlation assumption is satisfied. variable philips-perron probability order of cointegration gdp growth rate 101.42 0.000 i(0) business sophistication 128.53 0.000 i(1) creative outputs 102.26 0.000 i(1) human capital and research 73.07 0.000 i(0) infrastructure 69.48 0.000 i(0) institutions 34.99 0.039 i(0) knowledge and technology 49.12 0.000 i(0) market sophistication 36.81 0.025 i(0) variables lbs lco lhc_r linf lins lkn_t lms lbs 1 lco 0.538 1 lhc_r 0.454 0.427 1 linf 0.089 0.025 0.042 1 lins 0.391 0.380 0.259 0.217 1 lkn_t 0.545 0.472 0.380 0.231 0.256 1 lms -0.261 -0.001 -0.138 -0.112 0.098 -0.194 1 impact of innovation on economic growth in balkan countries 70 the hausman test is utilized to determine the appropriateness of either a fixed effect or random effect model for the panel data analysis. based on the results of this test, a random effect model will be used. table 3 hausman test source: author | e-views 10 zero conditional mean is another important assumption. based on the results of the test it is noticed that the mean value of error residuals equals 3.74e-15. a further step is analyzing the correlation between the error term residuals and explanatory variables. as shown in table 4 the correlation coefficients are remarkably close to zero. both results indicate that the zero conditional mean assumption is satisfied. table 4 correlation matrix of residuals source: author | e-views 10 the two last assumptions that should be satisfied are independence of error terms which is related to the lack of serial correlation and a constant variance of residuals for all levels of independent variables, known as homoskedasticity. table 5 heteroskedasticity breusch-pagan test. source: author | e-views 10 based on the results of the heteroskedasticity test, as both the probabilities of the dependent variable and the square of dependent variables are zero, the homoskedasticity assumption is not satisfied. hausman test coefficients chi-sq. statistic 7.956012 prob. 0.3365 degree of freedom 7 variables resid01 lbs -5.093e-14 lco -0.0244828 lhc_r 1.129e-14 linf -7.673e-14 lins -2.183e-16 lkn_t -2.899e-14 lms 5.428e-14 depended variable resid01^2 variable coefficient std. error t-statistic prob. c 5.472601 0.878759 6.227645 0.0000 gdp -3.979918 0.171216 -23.24496 0.0000 gdp^2 0.827515 0.019193 43.11569 0.0000 albina hysaj, kriselda sulҫaj 71 table 6 serial correlation durbin-watson test. source: author | e-views 10 the results of the test indicate that as the probability of ar (1) is higher than 5%, the regression is free of serial correlation. as a result, only the homoskedasticity assumption is violated thus it is necessary to use a model that adjusts the standard errors of coefficients to address the presence of the heteroskedasticity. the results according to the hausman test, the random effect model is deemed suitable for analysis. equation (1) is the equation estimated, while table 7 shows the regression estimation output by using the white diagonal coefficient covariance method. gdp growth% = 𝛽0+𝛽1𝐿𝐵𝑆𝑖𝑡+𝛽2𝐿𝐶𝑂𝑖𝑡 + 𝛽3𝐿𝐻𝐶_𝑅𝑖𝑡 + 𝛽4𝐿𝐼𝑁𝐹𝑖𝑡 + 𝛽5𝐿𝐼𝑁𝑆𝑖𝑡 + 𝛽6𝐿𝐾𝑁_𝑇𝑖𝑡 + 𝛽7𝐿𝑀𝑆𝑖𝑡 +μ (1) table 7 regression estimation output source: author | e-views 10 the results of the regression estimation output show that only three variables such as creative outputs, infrastructure, and institution are significant determinants of gdp growth rate in balkan countries. the impact of creative output and infrastructure is positive, thus the third and seventh hypotheses cannot be rejected. those results are in line with özdener (2020), and dempere et al. (2023), who suggest a positive impact of innovation in economic growth. the impact of institutions is negative so the first hypothesis cannot be accepted. institutions as a pillar include the political, regulatory, and business environment. because in balkan countries the informal economy and corruption still have a significant presence, innovation may not have the desirable impact on economic growth. as the probability value of all other coefficients is higher than 5% none of the other hypotheses can be accepted, suggesting that the role of other pillars of innovation on economic growth is still insignificant and limited. depended variable resid01 variable coefficient std. error t-statistic prob. c 0.177068 0.303211 0.583976 0.5605 ar(1) -0.169178 0.091089 -1.857282 0.0660 dependent variable: gdp growth rate % method: panel egls (cross-section random effects) total panel (unbalanced) observations: 120 white diagonal standard errors & covariance (d.f. corrected) variable coefficient std. error t-statistic prob. bs 5.402 6.967 0.775 0.4397 d(co) 13.233 4.689 2.822 0.0056 hc_r -3.981 3.970 -1.003 0.3182 inf 12.069 4.420 2.730 0.0074 ins -19.392 8.127 -2.386 0.0187 kn_t -2.654 3.416 -0.777 0.4389 ms 3.066 5.159 0.594 0.5535 c 14.795 14.588 1.0141 0.3127 r-squared 0.129 adjusted r-squared 0.0746 f-statistic 2.371 prob(f-statistic) 0.0268 impact of innovation on economic growth in balkan countries 72 conclusions this study investigates the impact of innovation on economic growth in balkan countries from 2011 until 2022 using the global innovation index, its sub-indexes, and pillars as a proxy for innovation. panel data analysis and a random effect model are employed in the analysis. the findings of the study suggest that creative output and infrastructure have a positive significant effect on the gdp growth rate, while the effect of institutions is negative. the test employed failed to prove any impact of other pillars of innovation on economic growth. apart from the modest contribution in enriching the existing literature, the findings of this study may serve policymakers to work on the direction of enhancing the impact of all innovation pillars on the economic growth rate. the main limitation of this study is the brief period considering the annual frequency of data. another limitation stands on the fact that the subject of this study is the unidirectional relationship between innovation and economic growth, while the bidirectional relationship is significant to be studied as well. including other variables that affect the economic growth rate, analyzing the effect of corruption in each country, dividing the eu countries from non-eu countries, and making a comparison analysis may be a suggestion for future research. references 1. cameron, g. (1996). innovation and economic growth. centre for economic performance. https://ideas.repec.org/p/cep/cepdps/dp0277.html#refs 2. cvetanovic, s., despotović, d., mladenović, i., & jovović, d. (2014). the analysis of innovation in western balkan countries in 2012. economic research-ekonomska istrazivanja, 27(1), 830–846. https://doi.org/10.1080/1331677x.2014.974920 3. dempere, j., qamar, m., allam, h., & malik, s. (2023). the impact of innovation on economic growth, foreign direct investment, and self-employment: a global perspective. economies, 11(7). https://doi.org/10.3390/economies11070182 4. despotovic, d., cvetanovic, s., & nedic, v. (2014). innovativeness and competitiveness of the western balkan countries and selected eu member states. industrija, 42(1), 27–45. https://doi.org/10.5937/industrija42-4602 5. dimand, r. w. (2009). trevor swan and the neoclassical growth model. history of political economy, 41(1), 107–126. 6. hausman, a., & johnston, w. j. (2014). the role of innovation in driving the economy: lessons from the global financial crisis. journal of business research, 67(1), 2720– 2726. https://doi.org/10.1016/j.jbusres.2013.03.021 7. kacprzyk, a., & doryń, w. (2017). innovation and economic growth in old and new member states of the european union. economic research-ekonomska istrazivanja, 30(1), 1724–1742. https://doi.org/10.1080/1331677x.2017.1383176 8. maradana, r. p., pradhan, r. p., dash, s., gaurav, k., jayakumar, m., & chatterjee, d. (2017). does innovation promote economic growth? evidence from european countries. journal of innovation and entrepreneurship, 6(1). https://doi.org/10.1186/s13731-016-0061-9 9. maradana, r. p., pradhan, r. p., dash, s., zaki, d. b., gaurav, k., jayakumar, m., & sarangi, a. k. (2019). innovation and economic growth in european economic area albina hysaj, kriselda sulҫaj 73 countries: the granger causality approach. iimb management review, 31(3), 268– 282. https://doi.org/10.1016/j.iimb.2019.03.002 10. nihal, g., mounia, c., hussain, m., humayun, s., perveen, n., yousaf, n. r., & akhtar, s. (2023). impact of innovation on the economic growth of g8 countries analysis over 1996-2020. international journal of professional business review, 8(5). https://doi.org/10.26668/businessreview/2023.v8i5.1403 11. özdener, ç. (2020). the impact of innovation on economic development in turkey. in nişantaşı üniversitesi sosyal bilimler dergisi year/yıl (vol. 2020). 12. pece, a. m., simona, o. e. o., & salisteanu, f. (2015). innovation and economic growth: an empirical analysis for cee countries. procedia economics and finance, 26, 461–467. https://doi.org/10.1016/s2212-5671(15)00874-6 13. romer, p. m. (1994). american economic association the origins of endogenous growth. in source: the journal of economic perspectives (vol. 8, issue 1). winter. 14. sarangi, a. k., pradhan, r. p., nath, t., maradana, r. p., & roy, h. (2022). how does innovation affect economic growth? evidence from g20 countries. the indian economic journal, 70(1), 8–21. https://doi.org/10.1177/00194662211063562 15. smith, a., & classics, e. (n.d.). an inquiry into nature and causes of the wealth of nations the wealth of nations: book 1. 16. ulku, h. (2004). international monetary fund. 17. ziemnowicz, c. (2013). joseph a. schumpeter and innovation. in e. g. carayannis (ed.), encyclopedia of creativity, invention, innovation and entrepreneurship (pp. 1171–1176). springer new york. https://doi.org/10.1007/978-1-4614-3858-8_476 18. živanović, s., abramović, n., živanović, m., & smolović, s. (2023). innovation management on the way to business excellence. agora international journal of economical sciences, 17(2), 187-204. https://doi.org/10.15837/aijes.v17i2.6445 https://doi.org/10.1007/978-1-4614-3858-8_476 agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 18, no. 2 (2024), pp. 202-211 202 exchange rate volatility and inward fdi: a panel data analysis of balkan countries k. morina, n. mera kevin morina¹, nertil mera² ¹ ² epoka university, albania ¹ https://orcid.org/0009-0005-8575-4518, e-mail: kmorina18@epoka.edu.al ² https://orcid.org/0009-0009-5593-2327, e-mail: nmera@epoka.edu.al abstract this study investigates the relationship between exchange rate volatility and foreign direct investment (fdi) inflows in balkan countries, a region known for its political instability and significant economic and institutional challenges. using secondary data from 2011 to 2021, this study employs a fixed-effects model with a dynamic specification to analyze the impact of exchange rate volatility on fdi, alongside other key determinants such as inflation, crude oil prices and corruption perception index. the results indicate that exchange rate volatility negatively impacts the fdi inflows, while crude oil prices are found to have a significant positive effect. the impact of inflation and corruption perception index is found insignificant in explaining fdi inflows, suggesting that these factors do not substantially influence investment decisions in the balkan region. these findings contribute to the literature on fdi in the balkans and provide valuable insights for policymakers and investors. the results suggest that reducing exchange rate volatility could improve the investment climate and enhance the region’s attractiveness for foreign investment. keywords: exchange rate volatility, foreign direct investment, panel data analysis, balkan countries. introduction foreign direct investment (fdi) plays an important role in improving critical sectors such as technology, infrastructure, employment as well as serving as a key indicator of economic growth especially in developing economies. they are crucial for bridging the capital gap in emerging and transition economies, fostering development, and promoting economic diversification (görg & greenaway, 2004). on the other hand, developed countries tend to rely less on fdi as a source of economic stimulus due to having more robust financial systems and greater access to domestic sources of funds (mallampally and sauvant, 1999). the attraction of fdi relies on a variety of factors, with exchange rate stability being a significant consideration for foreign investors, particularly in those economies where currencies are volatile. investors use different risk management strategies to mitigate the uncertainty coming through the exchange rate volatility (adler and dumas, 1984). in this context, the investment decision is often influenced by the degree of exchange rate risk, where countries with more stable currencies typically attract higher fdi inflows (froot and stein, 1991). as exchange rate volatility increases, so does the risk of potential returns, thus shifting the investments towards markets perceived as less risky (bénassy-quéré et al., 2007). https://orcid.org/0009-0005-8575-4518 mailto:kmorina18@epoka.edu.al https://orcid.org/0009-0009-5593-2327 mailto:nmera@epoka.edu.al kevin morina, nertil mera 203 being characterized by economies in transition, the balkan countries present an interesting case for examining the relationship between exchange rate volatility and fdi inflows. over the past few decades, the region has become attractive for investments, particularly in sectors such as services, renewable energy, real estate, oil and gas, and food processing. however, the role of exchange rate volatility in shaping these investment patterns remains underexplored in regional literature. the objective of this study is to contribute to the existing literature by offering an empirical investigation of how exchange rate fluctuations influence fdi in the region, while controlling for other key factors that may affect investment decisions. moreover, it aims to provide valuable insights for policymakers and investors to further enhance the region's appeal to foreign investments. additionally, the findings may provide a valuable reference for future research in international business and economic development. the increasing importance of attracting foreign capital to stimulate economic growth in transition economies further highlights the relevance of this study. the next section presents a review of existing literature on this topic and provides the theoretical foundation for the study. the methodology section includes econometric modeling and quantifies the relationship between exchange rate volatility and fdi, followed by the empirical results and the conclusion section. literature review foreign direct investment (fdi) has long been a focal point of research due to its significant impact on a country's economy, business environment, and financial systems. this study aims to explore how exchange rate fluctuations impact fdi inflows in the balkan region, accounting also for other explanatory variables. understanding the factors that influence fdi is crucial, particularly in the context of exchange rate volatility, as it can affect investment decisions. hanusch et al. (2018) found a negative impact of exchange rate volatility on fdi inflows through a sample of 80 countries including bulgaria, romania and serbia. benassyquéré et al. (2001) used panel data analysis to investigate 42 developing countries for the period from 1984 to 1996. the results highlight the significant role of exchange rate volatility in influencing fdi, demonstrating its negative impact on inflows. ullah et al (2012) showed similar results for pakistan from 1980 to 2010. the exchange rate volatility deterred fdi inflows while the currency stability was found to be promoting more inflows in pakistan. furthermore, the same findings are confirmed for nigeria, iran and south asian countries (osinubi & amaghionyeodiwe, 2009; sharifi-renani & mirfatah, 2012; azhar et al., 2015). other authors have used fixed effects models to capture the impact of exchange rate volatility on fdi inflows. brzozowski (2006) used fixed effects model in 32 developing countries while the same model was applied in dal bianco and loan (2017) across 10 latin american countries for the period from 1990 to 2012. both studies suggest that there is a negative relationship between exchange rate volatility and investment inflows, reinforcing the robustness of this correlation across different countries. different from the previous studies, balaban et al. (2019) found mixed results using system-gmm methodology among a group of 16 countries in transition economies. while exchange rate volatility had a negative impact on fdi inflows in the manufacturing industry, quite the opposite was found for the financial intermediation industry. furceri and borelli exchange rate volatility and inward fdi: a panel data analysis of balkan countries 204 (2008) investigated 35 emu countries stating that in countries with a closed economy, exchange rate volatility had a negative influence on fdi, opposite to countries with open economies, where fdi inflows were positively influenced by exchange rate volatility. surprisingly, dhakal et al. (2010) found a positive relationship among investment inflows and exchange rate volatility in a group of 6 southeastern asian countries, where mostly were developing economies. similar findings are shown in chowdhury and wheeler (2008) through a var model in 4 developed countries for the period from 1972 to 2005. among other variables, inflation was also found to affect fdi inflows. demirhan and yilmaz (2015) used re and fe models in a sample of 7 balkan countries for two different time intervals. they found a significant negative impact of inflation on fdi inflows in both models. the impact of inflation was found to be insignificant in kurtovic et al. (2014) which investigated the determinants of fdi in 6 balkan countries for a period from 1994 to 2012 using fixed effects model. agudze and ibhagui (2021) investigated a sample of 74 countries including both industrialized and non-industrialized countries and concluded that inflation had a negative impact in both groups of countries. the same findings are confirmed in a larger sample of 148 countries comprised of low income, middle income, and high-income countries for the period from 1996 to 2016 through a gmm methodology (sabir et al., 2019). contrary to the theory and other studies, jaiblai and shenai (2019) found a positive impact of inflation on fdi in sub-saharan countries using an ardl approach. insignificant results about inflation are found in africa and eastern europe (asiedu, 2002; rathnayaka et al., 2021). another important factor in explaining fdi inflows is corruption given its negative effect due to perceived risk and cost of investment. skabic and orlic (2007) found a significant negative impact of corruption on fdi inflows even in the presence of eu membership while investigating a sample comprised of 7 central european countries and 6 western balkan countries for the period from 1993 to 2005. corruption is found to have a significant negative impact on fdi in the asian region through a sample of 24 countries for the period from 1980 to 2000 (mathur & singh, 2013). al-sadig (2009) found this negative relationship in a larger sample of 171 countries during the period of 1984 to 2004. in contrast to studies that report a negative impact, corruption is found to positively affect the fdi inflows in middle east and north africa as shown in helmy (2013) and sub-saharan africa according to gossel (2018). as noted in these studies, there is a lack of consensus on the effect of corruption on fdi as evidenced in different studies through conflicting conclusions particularly with regards to different regions. along with other factors, fluctuations in crude oil prices can influence fdi. the impact may be both positive and negative, depending on the sector and country context. rogmans and ebbers (2013) included crude oil prices to determine the fdi inflows in a sample of 16 countries in middle east and north africa and found a positive relationship among the said variables. similar patterns have been identified in a sample of six gcc countries (eissa and elgammal, 2020). unlike this study, mina (2007) found a negative impact of oil prices in fdi for the gcc countries. earlier studies such as gastanaga et al. (1998) have found similar results through a sample of 49 developing countries. diminishing oil prices have contributed to the slowdown of the fdi inflows in the balkan region (marjanovic et al. 2021). in conclusion, the literature shows strong consensus on the negative impact of exchange kevin morina, nertil mera 205 rate volatility on fdi, though some studies, particularly those focused in developed economies or specific industries, present contradictory findings. in addition to exchange rate volatility, considerable research is focused on using inflation, corruption and oil prices to explain the movements in fdi inflows. the evidence is mixed or inconclusive especially regarding the balkan region. this study aims to address the limited research on the relationship between exchange rate volatility and fdi, with a primary focus on the balkan countries. methodology data and data sources the data sample for this study consists of 7 balkan countries, including albania, bosnia and herzegovina, bulgaria, croatia, north macedonia, romania, and serbia. the data span from 2011 to 2021, providing an optimal sample for analyzing the variables under investigation. table 1 outlines a short description of the variables including the name, calculation method, abbreviations used in the study and the expected impact of explanatory variables on the dependent variable. table 1. description of the variables variables proxy abbreviation expected effect foreign direct investment fdi as a % of gdp fdi n/a exchange rate volatility sd of % change of local currencies to eur exrv negative inflation % change among cpis inf negative corruption perception index the corruption index corr negative crude oil prices historical gasoline prices cop ambiguous source: prepared by the authors. the calculation method of fdi, which is the dependent variable in this study, involves dividing the total fdi volume by the gdp of each respective country. exchange rate volatility was measured as the standard deviation of the percentage changes in national currencies` value relative to the euro. the inflation rate was calculated using the standard method of percentage change on consumer price index (cpi) for consecutive years. the data related to fdi, and inflation were sourced from the world bank database while the data regarding exchange rate volatility were sourced from investing.com, a financial data platform. the corruption perception index was measured on a scale of 0 (most corrupt) to 100 (least corrupt), obtained from trading economies, a global economic and financial platform providing historical data on a wide range of indicators. given that crude oil price indexes were the only aggregator of the underlying data and the countries in the study were grouped together, historical gasoline prices for each respective country were used as a proxy to represent this variable. research model http://www.investing.com/ exchange rate volatility and inward fdi: a panel data analysis of balkan countries 206 this study uses panel data regression analysis with a dynamic specification to assess the impact of exchange rate volatility, along with other explanatory variables such as inflation rate, corruption, and oil prices, on foreign direct investment (fdi). the choice between the random and fixed effects models was made based on the results of the hausman test. given the nature of the study, balanced panel data with no missing observation were selected for the analysis. some preliminary tests were conducted to ensure the stationarity of the data and the robustness of the model. one of the key considerations when employing panel data models is the stationarity of the variables. the unit root hypothesis states that variables should be stationary, meaning they do not exhibit persistent trending patterns. when variables have a unit root, it becomes difficult to accurately capture their isolated impact leading to unreliable and spurious results. the stationarity of the variables in this study was assessed using philips-perron fisher unit root test. the null hypothesis assumes the presence of a unit root while the alternative hypothesis is in favor of stationarity. as shown in table 2, the unit root test results suggest the rejection of the null hypothesis indicating the i(0) stationarity of the variables at 5% significance level. table 2. unit root test summary (stationarity) phillips-perron fisher unit root test t-stat prob.* fdi 49.9461 0.0000* exrv 39.5809 0.0003* inf 38.4422 0.0004* corr 53.9646 0.0000* cop 24.4991 0.0398* *rejects the null hypothesis at 5% significance level. source: generated by the authors using e-views. another important assumption is the absence of a perfect correlation among the explanatory variables. multicollinearity analysis was conducted to verify the degree of correlation among the independent variables. a correlation coefficient above 0.8 indicates a high correlation, suggesting the removal of one of the variables, thus avoiding spurious results. as shown in table 3, the correlation coefficients among the dependent variables in this study are all below 0.8 supporting the inclusion of all variables in the model. table 3. multicollinearity analysis correlation matrix exrv inf corr cop exrv 1 inf 0.4592 1 corr -0.0621 -0.2078 1 cop 0.3974 0.3828 -0.1198 1 source: generated by the authors using e-views. kevin morina, nertil mera 207 in addition to multi-collinearity assumption, the expected value of the error terms needs to be zero given the explanatory variables. the violation of the zero conditional mean assumption results in an endogeneity problem, leading to biased and inefficient estimation of coefficients. the results presented in table 4 show that the residuals mean is close to zero, satisfying the zero conditional mean assumption, which is essential for the model validity. table 4. zero conditional mean assumption residuals mean exrv 1.62e-15 inf 1.64e-15 corr 1.17e-15 cop 3.14e-15 source: generated by the authors using e-views. after ensuring that the regressors are not correlated with the error terms, it is important to verify that the error terms exhibit homoscedasticity. the presence of heteroskedasticity can lead to inefficient estimators and biased statistical inferences. the assumption of homoskedasticity was examined using the breusch-pagan test. the null hypothesis assumes homoscedasticity while the alternative hypothesis is in favor of heteroscedasticity. referring to the f-statistic from the breusch-pagan test results in table 5, the null hypothesis was not rejected at 5% significance level, implying that the variance of the error terms is constant. table 5. heteroskedasticity assumption test dependent variable: resid01^2 method: least squares variable coefficient std. error t-statistic prob. corr -1.16e-05 1.08e-05 -1.0682 0.2894 exrv -0.0077 0.0120 -0.6361 0.5270 cop -7.63e-05 0.0004 -0.1862 0.8529 inf -0.0030 0.0030 -0.9705 0.3354 c 0.0010 0.0007 1.4592 0.1494 exrv (-1) 0.0021 0.0111 0.1903 0.8497 r-squared 0.0513 adjusted r-squared -0.0228 f-statistic 0.6925 prob (f-statistic) 0.6309 source: generated by the authors using e-views. regarding the normality of the error terms, given that the sample size exceeds 30 observations, the central limit theorem ensures the approximation of normality in the sampling distribution of the estimators. furthermore, autocorrelation robust standard errors were employed in the final estimation of the regression equation to account for potential serial correlation in the error terms. after ensuring that all the relevant assumptions were fulfilled, it was important to determine whether a random effects or fixed effects model was more appropriate. hausman test was used to determine whether the unique error terms had a correlation with the explanatory variables. exchange rate volatility and inward fdi: a panel data analysis of balkan countries 208 table 6. hausman test correlated random effects hausman test test cross-section random effects test summary chi-sq. statistic chi-sq. d.f. prob. cross-section random 101.7000 5.0000 0.0000 source: generated by the authors using e-views. the null hypothesis in the hausman test states the appropriateness of the random effects model while the alternative hypothesis suggests the fixed effects model. the test statistics presented in table 6 suggest the rejection of the null hypothesis at 5% significance level. this implies that the fixed effects model is more appropriate given the presence of a correlation among individual effects and the regressors. empirical results this section presents the empirical results of this study, showing the significance of the impact of exchange rate volatility, inflation rate, corruption index, and oil prices on fdi inflows in the balkan countries. after the fulfillment of all the relevant assumptions, a panel data fixed effects model was employed to analyze this relationship. the equation below represents the model specification of the regression equation. 𝐹𝐷𝐼𝑖,𝑡 = 𝑎 + β1𝐸𝑋𝑅𝑉𝑖,𝑡 + β2𝐼𝑁𝐹𝑖,𝑡 + β3𝐶𝑂𝑅𝑅𝑖,𝑡 + β4𝐶𝑂𝑃𝑖,𝑡 + β5𝐸𝑋𝑅𝑉𝑖,𝑡−1 + 𝑢 (1) where: (α) stands for the constant term of the regression, (i) stands for the country, (t) stands for period, and (u) stands for the serially uncorrelated error term. estimation output the empirical results derived from the panel least squares model are summarized in table 7. the estimation output presents the model fit and diagnostic statistics, outlining the relationship between fdi inflows and exchange rate volatility, inflation rate, corruption index, and oil prices in the balkan countries. table 7. estimation output dependent variable: fdi method: panel least squares sample (adjusted): 2012 2021 variable coefficient std. error t-statistic prob. c 0.0267 0.0401 0.6645 0.5090 exrv* -0.6956 0.2706 -2.5698 0.0128 inf 0.0353 0.0548 0.6448 0.5216 corr -0.0003 0.0008 -0.3951 0.6942 cop* 0.0323 0.0147 2.1908 0.0325 exrv (-1) * -1.4131 0.2617 -5.3982 0.0000 r-squared 0.7885 adjusted r-squared 0.7484 f-statistic 19.6595 prob(f-statistic) 0.0000 kevin morina, nertil mera 209 * significant at 5% significance level source: generated by the authors using e-views. the regression results displayed in table 7 suggest that exchange rate volatility and oil prices are statistically significant in explaining the variations in fdi inflows. a significant negative relationship is observed among exchange rate volatility and its first lag with respect to fdi inflows. similar findings were observed in benassy-quéré et al. (2001), brzozowski (2006), and hanusch et al. (2018). while literature generally suggests a negative relationship among oil prices and fdi, some studies report a positive relationship. this study reveals a positive relationship between oil prices and fdi. these findings are in line with those of marjanovic et al. (2021), who suggest a slowdown in fdi inflows due to decreasing oil prices in the balkan countries. in contrast to exchange rate volatility and oil prices, inflation rate and corruption were found to be statistically insignificant in explaining the fdi inflows in this study. in line with this results, kurtovic et. al. (2014) also found inflation to be insignificant for the balkan countries. following this results, the significance of the overall model is examined, demonstrating the reliability of the factors influencing fdi in the region. the adjusted r-squared statistics show the explanatory power of the model indicating that 75 percent of the variation in the fdi inflows is explained by the movements in the explanatory variables. this is further supported by the f-statistic value showing the significance of the model in explaining the variations in fdi inflows. conclusions the main aim of this study was to investigate the relationship between exchange rate volatility and fdi inflows with a particular focus in the balkan countries. other control variables such as inflation rate, corruption, and oil prices, were used alongside the exchange rate volatility to explain the movements in fdi inflows. the empirical results from the panel data regression analysis indicate a significant negative relationship between exchange rate volatility and fdi inflows in the balkan countries. the findings align with most of the literature reviewed in this study, confirming the importance of currency stability in attracting fdi. fluctuations in the oil prices, on the other hand, were found to have a positive relationship with fdi inflows. however, literature presents mixed results regarding this relationship, and the positive relationship is particularly evident when fdi targets the energy or oil sector. unlike the other variables, inflation rate and corruption were found to be statistically insignificant in explaining fdi movements. kurtovic et. al. (2014) also found inflation to be insignificant in the balkan countries, suggesting that this relationship has remained consistent over time. while this study provides valuable contributions to the existing literature, it also has limitations. the data used in the analysis is limited to a specific time period and may not fully capture the long-term dynamics of fdi. future studies could expand the analysis by incorporating additional variables, exploring cross-country comparisons, or applying alternative methodologies, to better understand the complexities of fdi inflows. references 1. adler, m., & dumas, b. (1984). exposure to currency risk: definition and measurement. financial management, 41-50. https://doi.org/10.2307/3665446 https://doi.org/10.2307/3665446 exchange rate volatility and inward fdi: a panel data analysis of balkan countries 210 2. agudze, k., & ibhagui, o. (2021). inflation and fdi in industrialized and developing economies. international review of applied economics, 35(5), 749-764. doi:10.1080/02692171.2020.1853683 3. al-sadig, a. (2009). the effects of corruption on fdi inflows. cato journal, 29(2), 267-294. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2264898 4. asiedu, e. (2002). on the determinants of foreign direct investment to developing countries: is africa different? world development, 30(1), 107-119. https://doi.org/10.1016/s0305-750x(01)00100-0 5. azhar, a., ullah, n., & malik, q. a. (2015). effect of exchange rate volatility on foreign direct investment in saarc countries. middle-east journal of scientific research, 23(2), 350-356. 10.5829/idosi.mejsr.2015.23.02.22122 6. balaban, s., živkov, d., & milenković, i. (2019). impact of an unexplained component of real exchange rate volatility on fdi: evidence from transition countries. economic systems, 43(3-4), 100719. https://doi.org/10.1016/j.ecosys.2019.100719 7. bénassy-quéré, a., fontagné, l., & lahrèche-révil, a. (2001). exchange-rate strategies in the competition for attracting foreign direct investment. journal of the japanese and international economies, 15(2), 178-198. https://doi.org/10.1006/jjie.2001.0472 8. brzozowski, m. (2006). exchange rate variability and foreign direct investment: consequences of emu enlargement. eastern european economics, 44(1), 5-24. https://www.jstor.org/stable/4380450 9. chowdhury, a. r., & wheeler, m. (2008). does real exchange rate volatility affect foreign direct investment? evidence from four developed economies. the international trade journal, 22(2), 218-245. doi:10.1080/08853900801970601 10. dal bianco, s., & loan, n. c. t. (2017). fdi inflows, price and exchange rate volatility: new empirical evidence from latin america. international journal of financial studies, 5(1), 6. doi:10.20944/preprints201608.0212.v1 11. demirhan, b., & yılmaz, c. (2015). a panel data investigation of the foreign direct investment determinants: evidence from balkan countries. the empirical economics letters, 14(11), 1067-1075. issn 1681 8997. 12. dhakal, d., nag, r., pradhan, g., & upadhyaya, k. p. (2010). exchange rate volatility and foreign direct investment: evidence from east asian countries. international business & economics research journal (iber), 9(7). doi:10.19030/iber.v9i7.603 13. eissa, m. a., & elgammal, m. m. (2020). foreign direct investment determinants in oil exporting countries: revisiting the role of natural resources. journal of emerging market finance, 19(1), 33-65. https://doi.org/10.1177/0972652719880153 14. froot, k., & stein, j. (1991). exchange rates and foreign direct investment: an imperfect capital markets approach. quarterly journal of economics, 427, 11911217. 15. https://doi.org/10.2307/2937961 16. furceri, d., & borelli, s. (2008). foreign direct investments and exchange rate volatility in the emu neighborhood countries. journal of international and global economic studies, 1(1), 42-59. ssrn: https://ssrn.com/abstract=1215200 17. gastanaga, v. m., nugent, j. b., & pashamova, b. (1998). host country reforms and fdi inflows: how much difference do they make? world development, 26(7), 12991314. https://doi.org/10.1016/s0305-750x(98)00049-7 18. gorg, h., & greenaway, s. d. (2004). much ado about nothing? do domestic firms really benefit from foreign direct investment? the world bank research observer, 19(2), 171-197. https://doi.org/10.1142/9789814749237_0009 http://dx.doi.org/10.1080/02692171.2020.1853683 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2264898 https://doi.org/10.1016/s0305-750x(01)00100-0 http://dx.doi.org/10.5829/idosi.mejsr.2015.23.02.22122 https://doi.org/10.1016/j.ecosys.2019.100719 https://doi.org/10.1006/jjie.2001.0472 https://www.jstor.org/stable/4380450 http://dx.doi.org/10.1080/08853900801970601 http://dx.doi.org/10.20944/preprints201608.0212.v1 http://dx.doi.org/10.19030/iber.v9i7.603 https://doi.org/10.1177/0972652719880153 https://doi.org/10.2307/2937961 https://ssrn.com/abstract=1215200 https://doi.org/10.1016/s0305-750x(98)00049-7 https://doi.org/10.1142/9789814749237_0009 kevin morina, nertil mera 211 19. gossel, s. j. (2018). fdi, democracy and corruption in sub-saharan africa. journal of policy modeling, 40(4), 647-662. https://doi.org/10.1016/j.jpolmod.2018.04.001 20. hanusch, m., nguyen, h., & algu, y. (2018). exchange rate volatility and fdi inflows. the world bank group, world bank publications reports 29911. 21. helmy, h. e. (2013). the impact of corruption on fdi: is mena an exception? international review of applied economics, 27(4), 491-514. https://doi.org/10.1080/02692171.2012.752445 22. jaiblai, p., & shenai, v. (2019). the determinants of fdi in sub-saharan economies: a study of data from 1990–2017. international journal of financial studies, 7(3), 43. doi:10.3390/ijfs7030043 23. skabic, i., & orlic, e. (2007). determinants of fdi inflows in cee1 and western balkan countries (is accession to the eu important for attracting fdi?). economic and business review, 9(4), 333. issn 1580-0466. 24. kok, r., & acikgoz b. (2009). analyses of fdi determinants in developing countries. international journal of social economics, 36(1/2), 105-123. doi:10.1108/03068290910921226 25. kurtovic, s., todorovic, j. ð., & siljkovic, b. (2014). determinants of foreign direct investments and transition countries of the western balkans. journal of economic & management perspectives, 8(2), 43. issn 1307-1637 26. mallampally, p., & sauvant, k. p. (1999). guest article: foreign direct investment in developing countries. finance & development, 36(1), 1-7. https://www.imf.org/external/pubs/ft/fandd/1999/03/mallampa.htm 27. marjanovic, d., beraha, i., & somovic, v. (2021). the impact of import, export and fdi on the economics growth of the western balkans countries. journal of economic analysis, 54(2), 20-29. https://doi.org/10.28934/ea.21.54.2.pp20-29 28. mathur, a., & singh, k. (2013). foreign direct investment, corruption and democracy. applied economics, 45(8), 991-1002. https://doi.org/10.1080/00036846.2011.613786 29. mina, w. (2007). the location determinants of fdi in the gcc countries. journal of multinational financial management, 17(4), 336-348. https://doi.org/10.1016/j.mulfin.2007.02.002 30. osinubi, t. s., & amaghionyeodiwe, l. a. (2009). foreign direct investment and exchange rate volatility in nigeria. international journal of applied econometrics and quantitative studies, 6(2), 83-116. https://ideas.repec.org/a/eaa/ijaeqs/v9y2009i1_13.html 31. rathnayaka mudiyanselage, m. m., epuran, g., & tescașiu, b. (2021). causal links between trade openness and foreign direct investment in romania. journal of risk and financial management, 14(3), 90. doi:10.3390/jrfm14030090 32. rogmans, t., & ebbers, h. (2013). the determinants of foreign direct investment in the middle east north africa region. international journal of emerging markets, 8(3), 240257. doi:10.1108/17468801311330310 33. sabir, s., rafique, a., & abbas, k. (2019). institutions and fdi: evidence from developed and developing countries. financial innovation, 5(1), 1-20. doi:10.1186/s40854-019-0123-7 34. sharifi-renani, h., & mirfatah, m. (2012). the impact of exchange rate volatility on foreign direct investment in iran. procedia economics and finance, 1, 365-373. https://doi.org/10.1016/s2212-5671(12)00042-1 35. ullah, s., haider, s. z., & azim, p. (2012). impact of exchange rate volatility on foreign direct investment: a case study of pakistan. pakistan economic and social review, 50, 121-138. http://www.jstor.org/stable/43855777. https://doi.org/10.1016/j.jpolmod.2018.04.001 https://ideas.repec.org/s/wbk/wboper.html https://doi.org/10.1080/02692171.2012.752445 http://dx.doi.org/10.3390/ijfs7030043 http://dx.doi.org/10.1108/03068290910921226 https://www.imf.org/external/pubs/ft/fandd/1999/03/mallampa.htm https://doi.org/10.28934/ea.21.54.2.pp20-29 https://doi.org/10.1080/00036846.2011.613786 https://doi.org/10.1016/j.mulfin.2007.02.002 https://ideas.repec.org/a/eaa/ijaeqs/v9y2009i1_13.html http://dx.doi.org/10.3390/jrfm14030090 http://dx.doi.org/10.1108/17468801311330310 http://dx.doi.org/10.1186/s40854-019-0123-7 https://doi.org/10.1016/s2212-5671(12)00042-1 http://www.jstor.org/stable/43855777 agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 18, no. 2 (2024), pp. 11-27 11 marketing problems in agriculture: especially in the field of grape farming n. n. abbasova, t. a. sheydai nurana namik abbasova1, turkan ali sheydai2 1 2azerbaijan state oil and industrial university, management department, azerbaijan 1 https://orcid.org/0000-0003-2034-7629, e-mail: nuraneabd98@gmail.com 2 https://orcid.org/0000-0002-2106-7883, e-mail: turkan90sheydai@gmail.com abstract: purpose. the main purpose of the research study is to compare viticulture, one of the leading branches of azerbaijani agriculture, in the world market and to develop this field by eliminating the marketing problems that arise during the analysis. need for the study. the concept of marketing in agriculture includes all the activities in the process of preparation, standardization, storage, delivery to the market and finally delivery of the agricultural product, starting from the quantity and quality of the product to be produced by the producer. recent times, the growing demand for food due to population growth has led to an increase in the demand for agricultural products. what needs to be done at this point is that agricultural producers can influence market demand with proper marketing efforts. because the awareness of consumption of natural agricultural products affects the choice of products and purchasing behavior of consumers, and the reason for this is the presence of chemical substitutes for agricultural products in many countries. methodology. the data required for the article were collected by survey method. then, the statistical relationships of the data collected by the survey method were investigated. findings. as a result, important problems of marketing of agricultural products were discovered in a number of regions of azerbaijan. practical implications. advertising factors were seen as the main negative effect during the research. it was recommended that work be done in this direction. keywords: agriculture marketing; farming; development; agricultural economy; environmentally sensitive introduction it is obvious that agricultural marketing refers to a system that includes processes such as purchase, sale and distribution of agricultural products and so on. it includes activities such as identifying consumer needs, promoting products, determining prices, advertising products, transporting, storing and distributing goods. agricultural marketing is an important part of the agricultural industry for most countries in the world and plays an important role in the economy of many countries. therefore, marketing and agriculture are closely related, and marketing plays an important role in the success and profitability of the agricultural industry. first of all, it can be noted that marketing is an important and integral part of market-oriented production, which realizes the production of agricultural products that meet the needs of customers. that is, by understanding customer demand, farmers can produce products that are more likely to sell at a fair price. marketing, on the other hand, helps farmers differentiate their products from competitors in the marketplace by emphasizing quality, sustainability, or other unique features. https://orcid.org/0000-0003-2034-7629 mailto:nuraneabd98@gmail.com https://orcid.org/0000-0002-2106-7883 mailto:turkan90sheydai@gmail.com marketing problems in agriculture: especially in the field of grape farming 12 thanks to this, farmers will stand out in a crowded market and offer products at a higher price. effective marketing can help farmers introduce their products to new markets, both domestically and internationally. at the same time, marketing can help farmers improve their distribution channels, making it easier to market their products and increase sales, which means working with wholesalers, retailers and other intermediaries to ensure that their products reach customers in a timely and efficient manner. it is also important to know the problems in this area after marking the importance of marketing in agriculture. if we look at the agricultural marketing of countries around the world, one of the most important problems is the price variability. the reason for this change is the issue of supply and demand, due to changes in weather conditions and other factors. economic and environmental variating such as economic and environmental variations can effectively implement and manage production and marketing strategies. another problem is little or no market information. that is, farmers cannot have modern market information. however, this information helps to produce, and decide where to be sold products. problems in quality and standardization are also reflected in agriculture. thus, in many cases, agricultural products are sold based on the quality and standards owned by small farmers. these standards (equipment, training and infrastructure) emerge large problems when small farmers do not respond. one of the main problems of agricultural marketing is the presence of market competition. because farmers and agribusinesses enter the market, the competition in agriculture is growing and it can make them difficult to sell their products at a fair price. consumers require a continuous growing product and weaken the production of organic and other sustainable agricultural products that can be difficult for manufacturing and marketers. in many developed countries, industrial agriculture, characterized by large farms and high-yield production systems, dominates, and this process is gradually spreading to developing countries. gm crops, which are widely accepted in the united states and many other countries, remain a controversial issue in some countries due to their negative effects on the environment (masters and nelson 1995). a number of world researchers have mentioned the high post-harvest losses in agricultural fields in their countries, as well as in countries around the world, and have attributed these problems to farmers' lack of market information and weak marketing infrastructure (jemal and genet 2019). while discussing marketing challenges, lack of market information and poor road networks have led to significant losses of agricultural produce (njaya 2014). miljkovic (2015) says that most countries' food security efforts are based on the availability of supplies. households in agricultural areas invest more in agriculture than in areas with less agricultural potential (daidone et al. 2019). dani rodrik (2011) professor of economics at princeton university, has conducted valuable research on emerging and existing problems in agricultural marketing worldwide. in his studies, he emphasizes that the development of the field as a solution to the problem in the field of agriculture will be provided by the joint activity of the public and private sectors. amartya sen (1999), an indian economist and nobel prize laureate, draws attention to the problems of valuation and product standards in agricultural marketing in his research. in its study, the importance of applying a fair and transparent product standards and evaluation system is brought to the fore. while investigating this area, it turned out that the views on agricultural marketing vary depending on the individual's field and experience. for example, according to scientists, nurana namik abbasova, turkan ali sheydai 13 marketing is a critical component of the agricultural industry. emphasizing the importance of use of information and scientific research, it is important to inform market trends and marketing decisions such as clear consumer choices. they also note that the role of marketing in promoting continuous agricultural practices such as waste reduction, increase efficiency and minimizing the environmental impact. according to scientists, agricultural marketing causes environmental degradation such as deforestation, soil erosion and water pollution. to solve these types of problems, marketing should prioritize practices that minimize these effects. they say that agricultural products must be safe for human consumption and contain no harmful contaminants, pesticides or antibiotic residues. economists view agricultural marketing primarily through the lens of supply and demand. in other words, they say that efficient markets are essential, where information flows freely between buyers and sellers and where prices reflect the true value of agricultural products. on the other hand, they note that marketing has the potential to create market distortions and exacerbate income inequality for smallholder farmers. in addition, economists emphasize the importance of government policies and regulations to ensure that markets are fair and competitive. marketers emphasize the importance of identifying target markets, developing effective advertising and promotion strategies, and building strong relationships with customers. that is, they see agricultural marketing as an important tool for farmers and agribusinesses to promote their products and increase brand awareness. according to marketers, digital platforms are the biggest chance for farmers in the era of digitization. introduction to agricultural marketing and agricultural economy any economic activity aimed at the production of plant and animal products or making these products more valuable is included in the definition of agriculture, and according to this definition, forestry and fishing is also included in the scope of agriculture. in other words, agriculture is the process of producing plant and animal products, improving their quality and effectiveness, protecting these products under appropriate conditions, developing them and putting them on sale. agriculture has an important place in the economy. in recent years, as in all fields, marketing problems have emerged in the field of agriculture, and this has made the science of agricultural marketing more important than other disciplines included in its scope (topcu 2004). economic aspects of micro and macro economy are analyzed in agricultural economics. issues aimed at improving agriculture in the country, regulating agricultural products in accordance with public interests, raising the welfare level of farmers, and protecting producers and consumers from excessive price fluctuations are discussed in the macro evaluation. the topics covered at the micro level are mostly business management, business planning, production economics, accounting, investment, finance, marketing and cooperatives. however, it should be known that the topics discussed at the macro and micro level are closely related to each other. given the recent developments and increased competitive conditions, as in all fields, marketing challenges have emerged in the field of agriculture, which has made the science of agricultural marketing more important than any other subject under its purview. therefore, this area is one of the main areas that require recent research. agricultural marketing is a branch of science that studies the events from the producer to the final consumer just as marketing studies the events on the way of commodities from the producer to the final consumer. marketing problems in agriculture: especially in the field of grape farming 14 agricultural marketing is an important field of activity that affects the economic development of every country (government of khyber pakhtunkhwa 2012; branson and dauglass 1983). these effects can be seen in the table below: table 1. factors affecting the country's economy to reduce costs by increasing economic and technical efficiency; to increase the purchasing power of producers in the modern market economy; increasing competition in the marketing system and reducing marketing margins; improve management skills in marketing organizations; increase the supply of high-quality products; end waste reduction and inefficient use of resources; providing sufficient information about supply and demand and other market issues, changes in consumer preferences and general market conditions; build understanding and communication between manufacturers, marketing organizations and consumers. the most important event in the sale of goods in the market is the formation of the price, and although the price in the market is thought to reflect the supply and demand, on the other hand, it may be necessary to support products that are important for the country's economy. in this case, agricultural marketing examines how prices are formed, checks whether the method of price formation is appropriate, and determines how and at what level products should be valued. agricultural marketing has a significant impact on producer and consumer incomes, and therefore on the national economy, by delivering the product to the consumer without any loss, processing it, presenting it to the market in a good form, within the appropriate profit rates. in the period of closed economy, the first goal of the farmer in agricultural activity was to directly meet the needs of himself and his family. this type of situation is called auto consumption in economics. with the development of the barter economy, producers increasingly used agricultural products to buy other goods and services they needed (reardon and timmer 2005). over time, farmers began to produce not only for themselves, but also for consumers. consumers want the products they need at the most appropriate time, at the most affordable price, in the most appropriate quantity and in the most appropriate quality. it is clear that agricultural products go through a certain channel from the producer to the consumer and are subjected to some processes that increase their utility and economic value. ways of bringing products to the market and the services provided for them are classified in different ways by different scientists. purpose of the research: hypotheses testing the aim of the research is analyzing whether the variables selected have positive impacts on marketing success/performance or not. below, the hypotheses used in the research are listed:  “the marketing success of grape is positively correlated with the effectiveness of the distribution system”.  "price favorably influences grape marketing performance."  "product features favorably affect grape marketing performance."  "promotional factors favorably affect grape marketing performance." nurana namik abbasova, turkan ali sheydai 15 research approach the deductive technique was applied in this study. the adoption of the deductive method was motivated by the statement made by saunders et al (2013) that using the deductive approach, research hypotheses are formed and research strategies are advanced with the purpose of evaluating them. arbitrary sampling processes, empirical testing and controlled variables such as independent and dependent variables are all included in this technique (scotland, 2013). sample size the sample size was calculated using yamane's (1968) calculation for a population of 220 farmers. 𝑛 = 𝑁 1+𝑁∙(𝑒)2 ), where n estimated sample size e level of precision (e = 0.05 for the research) n population size after the calculation estimated sample size was obtained to be equal 142. according to kotler (2001), excellent reliability may be achieved with a sample size of 1.5% drawn from the population. according to sekaran (1992), a sample size of larger than 25 but fewer than 450 is suitable for most investigations. according to the data, 142 is greater than 25 but less than 450, as indicated by sekaran (1992). data collection data are opinions, facts and statistics that have been gathered and documented for future study or reference (saunders et al. 2013). for this research particularly, data was collected by questionnaire. two types of the data used in the research: primary data, and secondary data. primary data were obtained with the help of the survey conducted, and from literature review the secondary data results were used to confirm whether the obtained results are similar or not. questionnaires snell-hornby (2006) defines this term as a series of questions that should be answered by a certain number of individuals in order to acquire the appropriate data. a closed-ended questionnaire was created for the current research in order to obtain data from the study's intended respondents. the benefit of utilizing this approach is that it is simple to collect a big amount of information from the responder in a short period of time. table 2. summary of measurement of parameters parameters items scales place/distribution • we possess distribution systems that are efficient and effective. • we have secure and economical transportation systems. stratadapt marketing problems in agriculture: especially in the field of grape farming 16 • our product has a sufficient channel for distribution. • to store the harvested grapes, we have an effective storage system. • we have an extensive clientele for our goods. pricing • the grapes have resulted in high prices. • the price of grapes is high due to the increased demand from consumers • we are knowledgeable on how to negotiate for the price of our grapes. • the cost of grapes is as anticipated. • we are extremely pleased with the present grape pricing. • we are paid more for our product. stratadapt product • we pay particular attention to the grape's quality. • we make grapes in the color the consumers prefer. • we make grapes that meet the clients' taste requirements. • we produce grapes in the size and weight that our consumers like. • we have the resources, expertise, and understanding necessary to create superior grapes. stratadapt promotion-related factors • we put a lot of effort into packing our grape fruits. • we have been promoting our grape fruits through public relations. • to boost grape fruit sales, we deploy sales promotion. • for personal sales of our grape fruits, we offer a skilled sales team. • we are promoting our goods through advertising approach. stratadapt marketing performance • grape sales are quite profitable for us. • grape have a significant profit margin where we operate. • we are happy with the payment. fos (financial output scale) source: compiled by the author nurana namik abbasova, turkan ali sheydai 17 2.6 data analysis. descriptive statistics and multiple regression analysis were applied in the current research to assess the data collected. the descriptive statistics including percentages, frequencies, and figures were utilized to analyze the responses' data. the correlation between the dependent variable (marketing profitability of grapes) and the independent factors (pricing, distribution system, product features and promotion related elements) were examined using multiple linear regression. multiple regression equation therefore has the following form: 𝑌 = 𝑎 + 𝑏1𝑋1 + 𝑏2𝑋2 + 𝑏3𝑋3 + 𝑏4𝑋4, where: x_i – independent variable i; a – constant; b_i – regression coefficient of the ith independent variable. assumptions underling multiple regression analysis shayo (2018) argued that in order to prevent drawing the wrong conclusions, assumptions must be tested. consequently, the following presumptions were examined in this study; linearity was tested using multidimensional scatter plots for each of the variables. additionally, this study used kurtosis and skewness to make sure the data it had obtained was normal. multicollinearity and homoscedasticity were also examined. validity according to saunders et al. (2013), valid data collecting methods evaluate exactly what they were designed to measure. the methodology was piloted on a small group of chosen respondents in the azerbaijan to determine the validity of this study. it was observed that the few chosen responders, however, had no trouble answering the questionnaire. reliability according to saunders et al. (2013), reliability refers to how well data gathering procedures provide consistent results. however, the reliability of this research was examined using cronbach's alpha method. it has been emphasized that a study with an internal consistency coefficient of 0.7 or higher is more reliable, and vice versa (santos 2000). ethical issues research ethics is concerned with how we define and justify our research subject, plan our study and secure access to gathering information, store and process our data, analyze our data, and properly and morally communicate our findings (saunders et al. 2013). the researcher in this study made sure that the respondents' privacy, rights and welfare were protected throughout the process of data collecting, presentation, analysis, and reporting. the researcher also gave harmlessness, free consents, secrecy, and anonymity some thought. results overview based on the respondents' gender, educational background, and years of grape fruit farming and marketing experience, the results are presented. additionally, it gives research results based on the study's particular goals on variables influencing grape marketing performance. marketing problems in agriculture: especially in the field of grape farming 18 results of reliability statistics this study used cronbach alpha to gauge statistical reliability. the study's findings showed that the cronbach alpha scores fall between 0.737 and 0.793. this suggests that the research's data were more internally consistent. the claim made by santos (2000) that research with a coefficient of 0.7 or higher expected to exhibit a strong internal consistency of results, and vice versa, is therefore validated by the findings of this study. table 3 displays the reliability statistics findings. table 3. reliability statistics cronbach’s alpha number of items price 0.760 6 promotion aspects 0.763 5 product attributes 0.737 5 distribution system 0.775 5 price 0.793 3 promotion aspects 0.760 6 source: public information. background information of the respondents according to their gender, educational background, and duration of grape farming and marketing experience, the responses are profiled in this section. gender of the respondents this study found that 14 (or 10%) of the total respondents were female, with 128 (90%) of the respondents being men. this suggests that men are responsible for grape farming and commercialization in azerbaijan. the findings of the respondents' gender are displayed in table 4. table 4. respondents’ gender data female frequency percentage female 14 10 male 128 90 sum 142 100 nurana namik abbasova, turkan ali sheydai 19 academic qualification of the respondent the results of this survey show that over half of the respondents—66 (47%)—had received their elementary education certificates, 39 (28%) had completed their secondary education, and 6 (4%) had received their certificates. therefore, it was shown that 8 (6%) of the participants had a diploma, 20 (14%) of all respondents had earned a bachelor's degree, and a tiny portion of all respondents had earned a master's degree. these results suggest that the majority of individuals with just an elementary education are responsible for a large portion of the grape production and commercialization in azerbaijan. in table 5, the results of the respondents' academic background are shown. table 5. respondents’ educational background education frequency percentage primary 66 47 secondary 39 27 certificate 6 4 diploma 8 6 bachelor 20 14 master 3 2 sum 142 100 experience in grape marketing and cultivation according to the research's findings, 109 (77%) of the total respondents had between 4 and 10 years of experience in grape cultivation and marketing, compared to 19 (13%) of the total respondents who had experience between 0 and 4 years. accordingly, 13 (or 9.2%) of the total respondents said they had between 10 and 15 years of experience in grape marketing and cultivation, while just 1 said he had more than 15 years. these findings show that many participants had substantial expertise in the manufacturing and marketing of grapes and were thus aware of the variables affecting the marketing success of the fruit. the results of the participants' years of marketing and agricultural experience for grape fruits are shown in table 6. table 6. respondents’ experience years of experience frequency percentage 0-4 19 13.38 4-10 109 76.76 10-15 13 9.15 15+ 1 0.71 sum 142 100 correlation matrix and factor analysis here, 4 predictor variables -distribution systems (ds) price (pr) product characteristics (pc), promotion related features (pf), and one dependent variable – marketing marketing problems in agriculture: especially in the field of grape farming 20 performance (mp) were used in order to build a regression model. before doing the regression analysis, factor analysis should be performed, and correlation matrix should be constructed: figure 1. correlation matrix here, lower coefficients indicate that neither of variable has a dependency with the other ones, and factor analysis conducted, and eigenvalues for these variables will give this the array of [2.1, 4.6, 7.9, 1.6, 3.3] respectively, as a consequence as the eigenvalue values are greater than 1, all variables should be recommended to kept for further analysis. model coefficients and pvalues price was discovered to have an impact on the market performance of grapes with a positive coefficient and statistical significance at the 5% level (β = 0.371, p = 0.031). this suggests that a rise in price per unit is correlated with an increase in grape market performance of 0.032 times. price thus had a significant role in how well this fruit did on the market. additionally, according to the research's findings, product characteristics had a positive coefficient and were statistically significant at the 5% level of significance in affecting the market performance of grapes (β= 0.292, p= 0.0028). this translates to a 0.292 times improvement in market performance for grapes for every unit increase in product characteristics. this indicates that a key factor affecting the market performance of grape fruits was their product characteristics. additionally, it was shown that promotion related features did not significantly impact the market performance of grapes (β = -0.098, p = 0.411) and had negative coefficients. this suggests that increasing promotional methods by more units won't result in better grape market performance. furthermore, it was shown that the distribution systems exhibited a positive coefficient and was significant in statistical terms (β = 0.430, p = 0.0068) to affect the performance of the grape market. this suggests that a distribution systems unit increase is correlated with 0.429 times rise in grape market performance. as a result, the grape market performance included the distribution system as a key factor. table 7 summarizes the findings of the model confidences and p-values for each variable included in the regression model on the variables impacting marketing performance. nurana namik abbasova, turkan ali sheydai 21 table 7. coefficients and p –values model unstandardized coefficients standardized coefficients t sig. b error (std) β coefficient -0.136 0.482 -0.282 0.001 distribution systems 0.430 0.157 0.227 2.746 0.007 price 0.371 0.171 0.181 2.171 0.031 product characteristics 0.292 0.096 0.252 3.050 0.028 promotion related features -0.098 0.119 -0.072 -0.828 0.411 in accordance with the research's outcomes, the correlation formula is as follows: marketing performance = 0.136 (coefficient) + 0.430 (distribution systems) + 0.371 (price) + 0. 292 (product characteristics) promotional factors, nevertheless, are not included in the formula since they were determined to be negligible; as a result, they make no impact to the research's model. testing of regression assumptions testing for regression assumptions has been advised as being crucial to prevent drawing incorrect inferences (shayo 2018). the assumptions of normality, multicollinearity, homoscedasticity and linearity were examined in this research. multicollinearity test multicollinearity, as defined by pallant (2011), happens when variables that are independent have a significant correlation. nevertheless, in this study, tolerance and the variance inflation factor (vif) were used to test for multicollinearity. according to shiu et al. (2006a; 2006b) the tolerance values for multicollinearity ought to be in excess of 0.1 and the values for the vif ought to be lower than 5. additionally, the findings of the current research's multicollinearity test indicate that tolerance values range from 0.872 to 0.942, whereas the values for vif range from 1.062 to 1.146. this result suggests that the multicollinearity condition was satisfied by the research's data. the outcomes of the test for multicollinearity are shown in table 8. table 8. multicollinearity test model collinearity test vif tolerance coefficient price 0.926 1.082 promotion related factors 0.872 1.146 distribution system 0.935 1.070 product attributes 0.942 1.062 marketing problems in agriculture: especially in the field of grape farming 22 normality test skewness and kurtosis have been used in this investigation to evaluate the assumption of normalcy. hair et al. (2014) and osborne and waters (2019) emphasized that the skewness and kurtosis values for the parameters must be between +2.5 and -2.5 in order to achieve the normality condition. nevertheless, the research's results showed that skewness levels fall between -0.002 and 0.734. as a result, the range of kurtosis values is between -0.145 and 1.067. these results suggest that the research's normality criterion was met. the test's outcomes are shown in table 9. table 9. skewness and kurtosis outcomes skewness kurtosis stat. error (std) stat. error (std) price 0.300 0.202 -0.145 0.404 promotion related factors 0.734 0.202 -0.410 0.404 distribution system 0.721 0.202 1.067 0.404 product attributes -0.002 0.202 -0.165 0.404 linearity test to determine if the connection between the variables is linear, a linearity test was carried out. by employing a scatterplot of the results, the linearity assumption in this study was verified. according to pallant (2011), the requirement of linearity has to be satisfied for the scatterplot of scores to follow a straight line. according to the research's outcomes, title circles move along straight lines. this indicates it has a linear relationship between the variables in this research. the outcomes of a linearity test are shown in figure 2. figure 2. linearity test the ramsey test coefficients are also greater than 0.05 (0.86 -linear and 0.83logarithmic). this concludes that the data can be approximated as linear. nurana namik abbasova, turkan ali sheydai 23 homoscedasticity test (white test) according to this presumption, there should be little variation in the scores for variable x across the board for all values of variable y. if residuals do not spread equally throughout the line, heteroscedasticity is shown (hair et al. 2014; osborne and waters 2019). additionally, the assumption of homoscedasticity was verified using a visual study of the plot of the standardized regression residuals. according to the research's outcomes, residual values are equally distributed on the x-axis below and above zero and on the y-axis scatterplot to the left and right of zero. thus, the hypothesis of homoscedasticity was satisfied by the investigation. the white test is a statistical significance test used to identify heteroscedasticity in regression analysis. heteroscedasticity is a circumstance where the variance of the errors in the regression model cannot stay constant throughout the whole range of values for the independent variable. this violates homoscedasticity, a fundamental tenet of linear regression models. the white test is used to determine whether heteroscedasticity exists in the data being investigated by correlating the squared residuals from the regression model with the independent variables. if the test's p-value is less than the chosen significance limit, which is frequently 0.05, there may be evidence of data variability. in our research the p value is 0.24, and the results passes white test. the homoscedasticity test results are shown in figure 3. figure 3. homoscedasticity test results of the grape marketing performance factors study the findings of the elements influencing the marketing effectiveness of grapes are presented in this part: anova testing, p-values and model coefficients were applied. findings of anova test the degree to which the data were gathered fit the model of regression was evaluated using the anova test. f (regression df (4), residual df (137) = 5.06, p = 0.001 is what the model reveals. given that the significance value (p) is less than 0.05, the regression model is a significant predictor of the variables influencing grape marketing success. table 10 provides a summary of the anova test findings. marketing problems in agriculture: especially in the field of grape farming 24 table 10. anova test outcomes model ss – sum of squares df mean square f sig. regression 4.6 4.0 1.13 5.06 0.001 residuals 30.8 137.0 0.23 sum 35.4 141.0 research hypotheses testing the results of testing hypotheses are presented in this section. using multiple regression analysis, the proposed relationships were evaluated against various correlation values. according to this study, there is a strong correlation between grape marketing success and the efficiency of the distribution system. consequently, it was proposed that: “the marketing success of grape is positively correlated with the effectiveness of the distribution system”. nevertheless, the results showed that the distribution system's effectiveness had correlation coefficient values of 0.430 and p values of 0.0068. it follows that that the effectiveness of the distribution systems is statistically important at the 5% level of significance and is thus more likely to have an impact on the marketing success of grapes, supporting the study's initial premise that: “the marketing success of grape is positively correlated with the effectiveness of the distribution system”. additionally, this research revealed a favorable correlation between grape price and marketing success. the study nevertheless managed to discover a regression coefficient of 0.371 and a p value of 0.031. this suggests that price had a statistically important effect on the market performance of grapes at the 5% level of significance, validating the investigation's second hypothesis (h2) that: "price favorably influences grape marketing performance". additionally, the study indicated a favorable correlation between grape product features and marketing performance. outcomes of the regression showed a coefficient of 0.292 and a p value of 0.0031. this suggests that product features were statistically significant at the 5% level of significance and more likely to have an impact on the market performance of grape fruits, supporting the research's third hypothesis (h3). that: "product features favorably affect grape marketing performance." in addition, it was suggested in this study that there is a positive correlation between promotion-related factors and the marketing effectiveness of the fruit. nevertheless, the outcomes of the regression showed a coefficient value of -0.098 and a p value of 0.411. this refutes the fourth hypothesis (h4) of the present investigation, which states that: "promotional factors favorably affect grape marketing performance." the overview of the testing of hypotheses is shown in table 11. table 11. hypotheses testing hypotheses β t sinq result h1 0.430 2.746 0.008 accept h2 0.371 2.171 0.033 accept h3 0.292 3.050 0.004 accept h4 -0.098 -0.828 0.411 decline nurana namik abbasova, turkan ali sheydai 25 discussion the purpose of the research was to evaluate the variables influencing the marketing success of grapes in azerbaijan. as a consequence, the discussion of the results of the research takes into account how they compare to and contrast with earlier findings on the topic. the connection between the grape market performance and the distribution system. the present investigation aimed to determine if grape marketing performance was favorably influenced by the distribution system, subsequently was found that the distribution system was statistically significant and positively correlated with market performance of azerbaijan grapes. the results of this study are consistent with those of farooq et al. (2017), who found that road accessibility had an impact on pakistani fruit producers' productivity. the connection between grape marketing success and price. the purpose of this study was to investigate the connection between grape prices and marketing success. however, it was discovered that price had a significant and positive correlation with the market success of grapes. the results presented imply that a particular product's market success depends on the price of grape fruits. the results of this research seem to agree with those of mitm (2009) who found that pricing had a significant impact on tanzanian farmers' productivity. on the other hand, according to (anand and negi 2016) pricing was not mentioned as a major variable impacting the fruit sector in india. the connection between grape market performance and product attributes. this study was designed to determine whether product characteristics may have a favorable effect on grape market performance. nevertheless, it was discovered that product characteristics significantly affected the marketing success of grape fruits and had a strong positive correlation with it. the conclusions of this study are consistent with those of nguni (2014) and mitm (2009) who found that bad harvests and product standards were the main problems affecting farmers in tanzania. classification and uniformity hampered the selling of agricultural goods in timor leste, according to diaz and negi (2006) on several occasions. the connection between market performance and grape promotion. the primary finding of this research was that grape fruit marketing effectiveness is favorably influenced by promotion factors. the findings of the hypotheses test, however, showed that marketing had a negative connection and was not statistically important in affecting grape fruit market performance. the findings of this study conflict with those of farooq et al. (2017) and lasvai et al. (2019) who anticipated that marketing of fruits was highly impacted by promotion factors such packing, purchase locations, and marketing information. conclusions and recommendations using the research's findings as a foundation, this chapter presents a number of recommendations and conclusions. grape market performance and distribution system. the current research aimed to investigate the connection between grape market success and distribution system. distribution system was discovered to have a positive link and be statistically significant in influencing grape fruit market performance. as a result, it was determined that the distribution system is a significant factor affecting the market performance of grapes. grape market performance and price. the current research investigates the connection between grape fruit pricing and marketing success. it was shown that pricing had a marketing problems in agriculture: especially in the field of grape farming 26 substantial impact on the market success of grape fruits and was positively connected with it. the findings from this study implies that a certain item's market performance might benefit from a greater pricing for grape fruits. the results of this study are corroborated by mitm's (2009) results that the performance of tanzanian farmers was significantly influenced by price. therefore, it can be claimed that a fair price for grapes is crucial to the success of grape marketing in azerbaijan. grape market performance and product attributes. this study looks at the connection between grape fruit market performance and product features. nevertheless, the outcomes of the research showed that the characteristics of the product had a strong positive correlation and had an important influence on how well grapes were marketed. thereby, it may be established that agriculturalists should continuously maintain and improve the characteristics of grapes, such as teste, color, weight, and size, since these features tend to show an enormous effect on how well it performs on the market. grape market performance and promotion aspects. the primary assumption made in this research was that grape fruit marketing effectiveness is favorably influenced by promotion factors. the findings of the hypothesis test showed that the influence of promotion on the market success of grapes had a negative connection and was not statistically important. therefore, it can be coming to the conclusion that, in the context of azerbaijan, the promotion factor is not an important consideration when evaluating the marketing effectiveness of grapes. recommendations price has been found to be a significant factor affecting the market success of grapes. therefore, the research suggests that producers of grape fruits be paid well. the research's results also showed that grape marketing success was significantly influenced by product features. farmers are advised to enhance and preserve product characteristics. in addition, since it plays a significant role in the grape market performance, the distribution system's enhancement needs to be put into consideration. farmers are going to be able to keep, maintain, and represent their goods to the intended clients effectively and efficiently with an adequate distribution system. limitations and subjects deserving more research the focus of this investigation was grape products. other fruits do exist, though, and they weren't included in this study. future research should thus concentrate on additional fruit varieties in an effort to evaluate the factors affecting those fruits' market performance. this study also concentrated on the elements influencing the success of fruit products on the market. future research may therefore be conducted on other categories of agricultural goods, including cucumber and tomato. the impact of promotional factors on the market performance of grapes was also shown to be minimal. as a result, additional research may examine its relevance in evaluating the performance of other fruits on the market. funding. this study was carried out as part of the project “belt and road initiative center for chinese–european studies” and was funded by the guangdong university of petrochemical technology. nurana namik abbasova, turkan ali sheydai 27 data availability statement. data can be obtained upon request from the authors. acknowledgments. thanks to guangdong university of petrochemical technology for supporting and donating this research. conflicts of interest. the authors declare no conflict of interest. ethical statement. not applicable. references 1. anand n., negi s. (2016) issues and challenges in supply chain of fruits and vegetables sector in india, international journal of marketing and supply chain, india no. 06 (2) 47-62. 2. branson r. e., dauglass g. n., (1983) introduction to agricultural marketing, american journal of agricultural economics, usa, no. 65(4) 837–838. 3. daidone s., davis b., handa s., winters p, (2019) the household and individual-level productive impacts of cash transfer programs in sub-saharan africa, american journal of agricultural economics, usa, no. (101.5) 1401–1431. 4. g. s. suleymanov, t. a. sheydai, n. n. abdullayeva, k. v. fokina-mezentseva, h. a. bratus, yu. v. mazur., (2023) the role of the formation of the environmental management system in the improvement of international economic relations, editorial board of the journal naukovyi visnyk natsionalnoho hirnychoho universytetu, ukraine, no. (4)118-124. 5. diaz n., negi s. , (2006) issues and challenges in supply chain of fruits and vegetables sector in india, international journal of marketing and supply chain, india, no., (06-2) 47-62. 6. farooq m., burfat f.m., abdullah f., muhammad g., muhammad a.f.,(2017) the problems faced by fruit growers to market access: a case study of district neelum azad jammu and kashmir, bulletin of environment, pharmacology and life sciences, india, no., (05-2) 1-10. 7. government of khyber pakhtunkhwa: fruits statistics khyber pakhtunkhwa, (2005-06 (2012 to 2010-11), crop reporting services, agriculture, livestock and coop: department, http://archives.dawn.com/2008/03/03/ebr5.htm. 8. jemal m., genet g., (2019) affecting marketing of vegetable product: the case of qewet woreda, ethiopia, iosr j. bus.no. (21) 82-93. 9. kotler p. (2001) marketing management, 10th ed. prentice hall. 10. njaya t. (2014) the economics of fruit and vegetable marketing by smallholder farmers in murehwa and mutoko districts in zimbabwe, int. j. res. humanit, social sci., no.1(1): 3543. 11. topcu y., (2004) a study on the meat cost and marketing margins of cattle fattening farms in erzurum province, turkish journal of veterinary and animal sciences, no.28(6): 10071015. 12. yamane y., (1968) applied sampling, academic press, new york. http://www.nvngu.in.ua/index.php/en/archive/on-the-issues/1898-2023/content-4-2023/6679-118 http://www.nvngu.in.ua/index.php/en/archive/on-the-issues/1898-2023/content-4-2023/6679-118 http://www.nvngu.in.ua/index.php/en/publishing-house/editorial-board http://www.nvngu.in.ua/index.php/en/publishing-house/editorial-board http://archives.dawn.com/2008/03/03/ebr5.htm agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 18, no. 1 (2024), pp. 44-54 44 fiscal policy framework in a decarbonized future for resource-rich countries e. eyvaz-zada elmir eyvaz-zada economic scientific research institute, azerbaijan https://orcid.org/0000-0001-8245-7546, e-mail: eyvazzadeelmir@gmail.com abstract: in a world transitioning towards decarbonization, resource-rich countries (rrcs) face unique challenges in shaping their fiscal policy frameworks, necessitating significant adjustments. this paper analyzes the effects of decarbonization on the fiscal policies of rrcs, focusing on the intersection of fiscal sustainability and sustainable development goals. the key findings reveal that effective fiscal discipline is crucial for maintaining fiscal sustainability amid fluctuating resource revenues. implementing medium-term budget frameworks helps rrcs manage economic volatility and plan for long-term fiscal health. the adoption of green fiscal policies can support rrcs in navigating the challenges of decarbonization, contributing to both fiscal sustainability and sustainable development goals. additionally, decarbonization affects various economic aspects, including budget revenues, expenditures, and the overall fiscal sustainability landscape, necessitating tailored fiscal policies. this comprehensive analysis provides valuable insights into designing and implementing fiscal policies suited to the needs of resource-rich countries during the global energy transition. the study highlights how green fiscal policies can assist rrcs in managing decarbonization challenges while achieving sustainable development goals. keywords: decarbonization, fiscal policy, resource-rich countries, public finance, green fiscal policies. introduction achieving the target of keeping global temperature increases below 2°c, ideally stay within a 1.5°c limit, requires a profound transformation across various sectors, including energy, industry, transportation, and agriculture. this urgent need for action was emphasized with the adoption of the paris agreement in december 2015, indicating a collective global effort to address climate change. however, international efforts to combat climate change remain mainly insufficient, and pose fiscal risks on public finances. the global temperature levels are expected to increase by more than 1.5°c above pre-industrial levels over the next five years, according to the latest data from the world meteorological organization (wmo, 2023). according to the "global risks-2024" report of the davos economic forum published in january of 2024, "extreme weather events", "loss of biodiversity and destruction of the ecosystem" and "lack of natural resources" are among the main risks in the long term (world economic forum, 2024). these risks emphasize the critical necessity for coordinated global efforts to tackle climate change and its related impacts. https://orcid.org/0000-0001-8245-7546 mailto:eyvazzadeelmir@gmail.com elmir eyvaz-zada 45 furthermore, fossil fuels, including crude oil, natural gas, and coal are the primary source of anthropogenic greenhouse gas emissions, and continue to dominate global energy supply. the resource-rich countries are the major contributors to global emissions on a per capita basis due to extraction, processing, and exports, and sometimes inefficient energy systems used by industry and housing. these countries as a whole represent almost 30.0 percent of the global population, 15.0 percent of world’s gross domestic product, and 20.0 percent of global greenhouse gas emissions. even a 50 percent probability of limiting warming to 1.5°c, nearly 60 percent of proven reserves for oil and natural gas and 90 percent for coal must remain unextracted (welsby, et al., 2021). considering the decarbonization is important, resource-rich countries face unique challenges on designing their fiscal policy frameworks, requiring significant adjustments. during the 2017-22 period, the net export of fossil fuels on average represented a significant portion of gdp in various countries: 40.3 percent in libya, 39.2 percent in equatorial guinea, 37.3 percent in qatar, 36.0 percent in kuwait, and 35.5 percent in azerbaijan (figure 1). figure 1. net export of fossil fuels (percent of gdp) by fossil fuel producer (average 2017-2022) rank country all fuels crude oil natural gas coal 1 libya 40,3 35,2 5,2 -0,01 2 equatorial guinea 39,2 28,1 11,1 0,00 3 qatar 37,3 13,0 24,3 -0,01 4 kuwait 36,0 33,5 2,5 -0,03 5 azerbaijan 35,5 28,7 6,7 0,00 6 angola 34,9 32,2 2,7 -0,01 7 iraq 33,2 33,7 -0,4 -0,01 8 brunei darussalam 32,9 10,6 22,7 -0,49 9 united arab emirates 32,6 29,1 3,5 -0,04 10 south sudan 31,1 31,1 0,0 0,00 11 republic of congo 30,6 30,5 0,2 -0,09 12 oman 23,1 16,6 6,6 -0,03 13 saudi arabia 22,1 21,4 0,7 -0,01 14 gabon 20,7 20,5 0,2 -0,02 15 algeria 20,3 10,2 10,1 -0,06 16 kazakhstan 19,1 17,9 1,1 0,11 17 norway 18,1 7,9 10,1 -0,06 18 mongolia 14,8 -5,8 -0,2 22,5 19 turkmenistan 14,3 1,6 12,4 0,20 20 chad 14,1 14,1 0,0 0,00 21 venezuela 13,2 13,2 -0,1 0,03 22 trinidad and tobago 13,0 3,2 10,0 -0,08 23 russian federation 12,3 10,5 0,6 1,12 24 papua new guinea 12,1 2,1 10,0 0,00 25 iran 11,9 10,3 1,5 0,02 26 bahrain 9,5 8,9 n/a 0,00 27 nigeria 8,7 7,1 1,6 0,00 28 ghana 5,8 5,8 0,0 -0,04 29 colombia 5,6 3,4 -0,1 2,30 30 canada 4,1 3,2 0,5 0,30 sources: imf, world economic outlook database; unctad; imf staff calculations. fiscal policy framework in a decarbonized future for resource-rich countries 46 in angola, the net export of fossil fuels represented 34.9 percent of gdp in 2017-2022. moving forward, countries like iraq, brunei, the united arab emirates, south sudan, and congo was estimated to have more than 30 percent of gdp from fossil fuel exports during the same period. in addition, the world bank analyzes countries' preparedness levels for a lowcarbon transition using a composite indicator. (figure 2). the gulf countries and russia are on the borderline, frequently facing similar levels of exposure but enjoying greater resilience due to the complexity of their economies. this indicator highlights the more vulnerable rrcs that have not yet diversified their economy towards low-carbon growth. these rrcs are small oilgas producers in middle east, the north africa, sub-saharan africa, and latin america (peszko, and grzegorz, 2020). in addition, poverty and ongoing conflicts are among the most significant challenges making countries more vulnerable to climate change. figure 2. countries’ preparedness for a low-carbon transition source: diversification and cooperation in a decarbonizing world (world bank, 2020, p.57) the least prepared countries, such as iraq and libya, are particularly vulnerable to external shocks from the decarbonization process, due to long-term conflicts have destroyed all non-oil tradable industries and already weak institutions. due to their poor governance, equatoral guinea, nigeria, and the venezuela are the least resilient and most exposed countries. azerbaijan, botswana, and kazakhstan share high exposure and relatively weak resilience. on the other hand, norway is well-equipped for decarbonization due to its resilience, particularly its diversity, economic flexibility, and high quality of human capital and elmir eyvaz-zada 47 institutions. in contrast, some less prepared countries, like angola, are less exposed than norway. another significant determinant of the resilience for resource-rich countries to decarbonization is their complexity and economic performance. countries with high levels of economic complexity, high-income growth are better prepared to new capacities in anticipation of decline in demands for fossil fuels and carbon-intensive products and services. the economic complexity index (eci) measures the diversity and prevalence of a country's exports. eci scores show that mongolia, venezuela, nigeria, and congo perform particularly poorly and may struggle to create new capabilities in their economies compared to other rrcs. russia and kuwait, ranking 53rd and 55th respectively, are good performers in the eci index among the rrcs out of 133 countries listed in the harvard atlas of economic complexity. interestingly, saudi arabia, ranked 38th, holds a better position than norway, which remains at 44th place. the low-ranking countries show potential challenges in diversification and innovation, indicating lower resilience to decarbonization compared to other rrcs. gabon, the republic of congo, mongolia, and azerbaijan have low eci scores. this low ranking suggests that these rrcs may face challenges in adapting to the decarbonization process due to their fossil fuel-focused economies. figure 3. economic complexity index ranking, 1995-2021 source: the growth lab at harvard university 2021 uncertainties related policy actions in the rest of the world, consumption choices in developing countries, and technological advancements complicate decision-making for the resource-rich countries when establishing a comprehensive strategy. robust transition risk management strategies towards sustainable growth calls for rrcs to implement two main strategies. fiscal policy framework in a decarbonized future for resource-rich countries 48 historically, diversification efforts in resource-rich countries have traditionally focused on shifting down the value chain towards energy-intensive and polluting industries. this involves diversifying outputs and exports through energy or carbon-intensive industrialization related to fossil fuels. this approach has generated short-term export revenues and helped in managing volatility in energy prices. however, this approach has also heightened their dependency on carbon-intensive economic activities, thereby increasing their vulnerability to the global low-carbon transition. another pathway for diversification is to promote a more extensive diversification of wealth (assets), which can lead to the development of productive and competitive economies that are also adaptable and resilient in a decarbonizing world. this relies on knowledge and efficiency, which enhance productivity over time and diversify the portfolio of national assets (inputs), including natural capital and intangible assets such as knowledge, innovation, and institutions. fossil fuel depended countries should diversify their portfolio to include a broader range of produced, human, and natural capital. this can be achieved by increasing investments in education and innovation, ecosystem services, and enhancing their social capital and institutional capacity. this involves prioritizing investing in education sector and innovation to foster a proficient workforce able to stimulate diversified economic growth. additionally, improving ecosystem services through restoration efforts can mitigate environmental decline while promoting sustainable development. moreover, strengthening social capital and institutional capacity is crucial for fostering inclusive governance systems that enable efficient resource management and fair distribution of advantages. by collectively focusing on these aspects, fossil fuel-dependent countries can navigate the transition towards a more varied and sustainable future. additionally, diversification can occur through climate cooperation. diversification alone is unlikely to trigger a low-carbon transition. moreover, climate initiatives in net fuelimporting nations might result in what is known as "dirty" diversification, where emissionintensive industries relocate to resource-rich countries. in order to transition the global economy to a low-carbon model, resource-rich countries must implement domestic climate policies. these policies would aid in diversifying assets and promoting economic diversification, while also shielding rrcs from potential consequences such as border taxes or broader trade sanctions imposed by other nations due to insufficient climate policies. nonetheless, these policies come with immediate risks, posing challenges for policymakers in terms of justification and implementation. possible remedies for this issue encompass innovative collaborative mechanisms, such as wellhead taxes and preferential trade agreements, or broader conditional financial and technology transfers. these strategies have the potential to encourage and streamline climate cooperation among resource-rich countries, facilitating a more comprehensive structural transition compared to a piecemeal, project-focused approach to climate finance. for both of these strategies, rrcs will need to develop and implement plans that account for a just transition for affected communities particularly in the coal-dependent regions who will be the first affected by a low carbon transition, including through re-training, retooling and targeted social protection (international labour organization, 2015). https://www.ilo.org/wcmsp5/groups/public/---ed_emp/---emp_ent/documents/publication/wcms_432859.pdf elmir eyvaz-zada 49 fiscal impact of decarbonization and climate change managing the impact of decarbonization on fiscal sustainability will be one of the most serious concerns facing resource-rich countries in the future decades. currently, the growing production of energy from renewable sources and the global expansion of electrification in both public and private transportation are anticipated to reduce the demand for commodities. as alternative technologies become more affordable and actions to address climate change intensify in accordance with the paris agreement, the demand for hydrocarbons is expected to decrease significantly. renewable energy sources are expected to play a greater role in electricity production, and the transition to electromobility and increased reliance on electricity in various sectors will significantly reduce the demand for hydrocarbons. the international renewable energy agency (irena) and the international energy agency (iea) report that renewable energy has become more affordable than fossil fuels, and three-quarters of all new electricity production capacity is renewable globally (irena, 2024). many countries are increasing the sale of electric vehicles while proposing a ban on the sale of diesel and gasoline vehicles in the relatively near future. from a public finance perspective, uncertainty regarding future oil-gas demand poses major fiscal risks, as many countries rely on production and export of hydrocarbon resources. the fiscal consequences of decarbonization have a significant impact on countries' budget balances, resulting in decreasing fiscal income and increased public spending (ossowski, rolando & havard halland, 2016). to improve fiscal risk management in the face of such challenges, the rrcs must strengthen its fiscal strategy and tools. the impact of decarbonization on hydrocarbon export revenues often translate into fluctuations in budget revenues derived from state-owned enterprises and private companies, both domestic and international. these revenues encompass dividends, royalties, production sharing, and tax payments, where applicable. the potential effects of decarbonization on public finance can occur in various ways. broad tax base and spending composition. decarbonization effects on hydrocarbon revenues can lead to broader implications for the tax base and government expenditure. apart from directly affecting the budget revenues, the changes can impact various aspects of taxation and public expenditure. for example, a decrease in hydrocarbon revenues might push governments to consider their spending priorities, potentially redistributing spendings. this reallocation could affect crucial sectors like infrastructure development, social welfare programs, or educational initiatives. moreover, the interaction between hydrocarbon revenues and government spending can impact economic stability and long-term viability. governments may face challenges if excessively dependent on volatile hydrocarbon revenues to public finance essential services and infrastructure projects. a sudden decline in revenues could result in budget deficits, increased debt, all of which can hinder economic growth and social cohesion. in rrcs, a decrease in hydrocarbon revenues could precipitate economic downturns, unemployment, and social unrest, underscoring the link between hydrocarbon exports and broader macroeconomic stability. increasing spending. the decarbonization might necessitate increased spending on certain areas. the process may lead to job losses and economic dislocation for workers in fiscal policy framework in a decarbonized future for resource-rich countries 50 affected industries. to mitigate the social impacts of these changes, governments may need to expand spending on social safety nets and support programs. this could include unemployment benefits, job training programs, healthcare coverage, and assistance for displaced workers to transition to new employment opportunities. as countries navigate the decarbonization, state-owned enterprises focuses on fossil fuel-related activities may face important challenges. in order to address these challenges, financial support may be required for soes in several key areas. this assistance focues a lot of initiatives, such as investments in research to explore alternative energy sources, expansion into renewable energy initatives, and the implementation of more sustainable business practices. furthemore, allocating spending for infrastructure aimed at meeting environmental standards and helping the decarbonization to cleaner energy sources is important. morever, the appling of workforce transition projects and retraining initiatives is significant to aim employees impacted by the evolving landscape of the industry. in such case, targeted financial support serves as a cornerstone in empowering soes to navigate shifting market dynamics and contribute meaningfully to the achievning decarbonization goals. government guarantees and debt: when state-owned enterprises face financial challanges during the decarbonization process, governments might provide guarantees on their debt, either implicitly or explicitly. while the guarantes can give strugling soes stability, they also pose serious risks to public finances. if the soes default or experience financial trouble, the responsibility of the guarantes falls on the public finance. this could lead to high levels of public debt. in addition, implicit guarantees, even if not officially stated, can create market distortions among state-owned enterprises. in order to mitigate these risks, governments need to evaluate the financial health of the soes receiving guarantees and set clear standards for providing such support. transparency and accountability in managing public finances are crucial. to help minimizing the impact on government finances while facilitating a smooth transition to a sustainable economy is important. decarbonization and the role of fiscal policy framework maintaining fiscal discipline to ensure macroeconomic stability may become even more challenging in a decarbonized future. the global decarbonization could affect various aspects of resource-rich countries' economies, including hydrocarbon export incomes and investments, which directly affect budget revenues, as well as the hydrocarbon industry, with its spillover effects on other sectors of the economy. additionally, decarbonization may have implications for inflation rates and the stability of the financial sector. consequently, it is important to prioritize fiscal discipline measures in upcoming period. experience during previous oil price drops have shown that policy responses are typically procyclical by necessity, with reductions in public expenditure that can hinder longterm growth (imf, 2015). the procyclical fiscal policy may drive inflation and weaken competitiveness during periods of high revenues, while conversely leading to economic downturns when budget revenues decrease and decreasing spending are important to uphold fiscal sustainability. many elmir eyvaz-zada 51 commodity exporters revise or recalibrate their fiscal rules during the collapse in commodity prices. looking ahead, the prospect of permanently reduced of fossil fuel revenues may raise concerns regarding the government's capacity to sustain specific levels of public infrastructure, wage expenditures, social welfare programs, and more broadly, debt sustainability, and balance sheet vulnerabilities. the fiscal policy should be tailored to particular circumstances of each country. implementing a medium-term fiscal framework supported by fiscal rules is crucial in this regard. decarbonization affects the fiscal policies of rrcs, particularly regarding the alignment of fiscal sustainability with sustainable development goals. an assessment of the importance of fiscal discipline, medium-term budget frameworks, and green fiscal policies in guiding rrcs toward a decarbonized path. furthermore, potential impacts of decarbonization on different sectors of the economy, including budget revenues, expenditures, and overall fiscal sustainability are important for implementing fiscal policies tailored to the needs of resource-rich nations amidst the global energy transition. additionally, adoption of green fiscal policies can help these countries address the challenges of decarbonization while advancing their sustainable development goals. by exploring the connection between fiscal resilience and decarbonization, strong and credible fiscal frameworks are crucial for resource-rich countries as they navigate the transition towards a greener and more sustainable future. stabilising public finance by establishing realistic fiscal targets will accelerate green growth. without fiscal sustainability, achieving the sustainable development goals during future decarbonization is not achievable. next-generation fiscal rules should be designed and aimed to strike a better balance between sustainability and flexibility, as well as decarbonization goals. the immediate action should focus on achieving sustainable fiscal targets, such as the non-resource fiscal balance as a share of non-resource gdp, and identifying the sources of financing to smooth the transition process, where possible. the fiscal rule targets should consider not only short-term constraints, such as the size of the financing gap, but also longer-term objectives. resource-rich countries are different, encompassing both high and low-income countries, as well as a range of fiscal positions. the determination of the fiscal rule targets will depend on country-specific elements, including the volatility on hydrocarbon revenues, the adequacy of reserves and fiscal space accordance with fiscal sustainability. to ensure the credibility of fiscal policy, the fiscal rule should integrate well-designed escape clauses for deviations in extraordinary circumstances. the rrcs can achieve climate goals by maintaining fiscal discipline and implementing green fiscal policy. "green fiscal policy" encompasses expenditure, revenue, and borrowing policies to promote the government's sustainable development objectives, utilizing fiscal policy tools to achieve environmental and climate-related targets. the climate change initiatives can be directly associated with fiscal policy, mainly through government spending or taxation, and they also have an indirect effect on macroeconomic and fiscal outcomes. on the expenditure side, green public investment, subsidies and transfers focused on climate-related initiatives play a key role at facilitating the decarbonization by promotion of clean energy, encouraging innovation in green technologies, and improving energy efficiency. fiscal policy framework in a decarbonized future for resource-rich countries 52 by employing fiscal instruments for environmental objectives, it becomes possible to positively impact price signals and market incentives, thereby directing consumers, producers, and investors towards more sustainable decisions. in terms of revenue generation, significant climate policies, such as the emissions trading system (ets), carbon taxes, and other environmental taxes (for example, excise taxes on fossil fuels), directly or indirectly establish a price for carbon emissions. economic theory emphasizes that carbon pricing should be main aspect of effective climate change policy (raúl delgado & huáscar eguino ). the resource-rich countries should work to align their economies with the goals of the paris agreement. to meet the targets, identifying and sharing best practices and common approaches, building expertise, and benefiting rrcs is important. under this approach, identifying, assessing, and reducing government fiscal risks arising from climate change and decarbonization, and using macroeconomic analysis to integrate climate considerations into fiscal policy, is crucial (oecd, 2020). additionally, reducing fiscal risks arising from decarbonization and integrating climate into macro-fiscal policy and management for a sustainable and green recovery is essential (mr. luc eyraud, et al, 2023). efforts to mitigate and adapt to climate change will have major economic consequences and will affect the fiscal sustainability of government budgets in the medium and long terms. supporting the development of methods for identifying and managing fiscal risks from decarbonization impacts and the effects of efforts to mitigate them by reducing greenhouse gas emissions is imperative. using green budgeting, green procurement, and climate-informed public investment management to integrate climate considerations into policymaking and budgeting and drive effective and equitable climate action that can deliver climate policy goals (coalition of finance ministers for climate action , 2022). around the world, reforms are being carried out in accordance with the demands of the decarbonization, particularly in the field of tax legislation. important steps are being taken in the direction of attracting green investments and supporting "green financing" initiatives. implementing green fiscal policies, such as reducing subsidies and using tools like carbon taxes, will be critical to advance any country's decarbonization program. "carbon tax" is a payment levied on the volume of carbon emissions in order to ensure the reduction of relevant carbon-based emissions in the atmosphere. oil products, natural gas, and coal are charged according to their carbon content. the implementation of the carbon tax aims to attract additional funds to revive the economy and bring it to a higher ecological level, while reducing the volume of ghg emissions (asian development bank, 2023). the main goal here is to encourage enterprises to decrease ghg emissions and invest in the application of modern technologies along with paying for environmental damage. this, in turn, is called the "polluter pays" principle. in this case, the damage that may be caused to nature as a result of production activity is compensated. environmental tax reforms (such as those carbon taxes) have multiple benefits beyond climate. carbon taxes can support multiple sustainable development goals (sdgs) in various ways. firstly, carbon taxes absolutely increase the price of fossil fuels, thereby reducing fossil fuel consumption and aiding in achieving climate goals. secondly, as a source of tax revenue, carbon taxes can increase budgetary revenues, which can then be utilized for development purposes, such as enhancing spending on health, education, and welfare (un, 2023). elmir eyvaz-zada 53 carbon taxes can serve as economic incentives for innovation by stimulating the development of green technologies and sustainable practices. additionally, they encourage businesses to invest in research and development for low-carbon solutions. furthermore, carbon taxes can generate revenue for sustainability, such as providing funds for environmental initiatives and renewable energy projects, thereby addressing the dual goals of emission reduction and funding sustainable programs. beyond all the advantages mentioned above, there are also disadvantages of carbon taxation. one such disadvantage is its regressive impact on lower-income individuals. there is a risk that carbon taxes may disproportionately affect lower-income individuals, as they often spend a higher percentage of their income on carbon-intensive goods and services. additionally, competitiveness concerns for industries are a significant issue. industries subject to carbon taxes may face higher production costs, potentially leading to concerns about competitiveness and the possibility of carbon leakage, where industries relocate to regions with less stringent regulations. furthermore, considering the complexity of implementation, carbon taxation can be challenging. designing and implementing an effective carbon tax system requires careful consideration and monitoring to determine the appropriate tax rate and address potential loopholes. additionally, incomplete coverage and sectoral exemptions can also be disadvantages. the effectiveness of carbon taxes may be compromised if they do not cover all sectors or if certain industries are granted exemptions, potentially limiting their overall impact on emissions reduction. discussion/conclussion as countries transition towards decarbonization, policymakers will need to carefully balance environmental goals with economic considerations. assisting in mobilizing the financial resources to implement national climate action plans in rrcs, climate budgeting applications, as well as addressing climate risks and vulnerabilities is important to ensure climate resilience. the rrcs can achieve climate goals by maintaining fiscal discipline and implementing green fiscal policy. the transition to sustainable development requires funding beyond governments' financial capacity. public finances are important in spurring private investment consistent with climate goals. stabilising public finance by establishing realistic fiscal targets will accelerate green growth. without fiscal sustainability, achieving the sustainable development goals during future decarbonization is not achievable. implementing carbon pricing mechanism and investing in renewable energy can help mitigate the economic impacts of decarbonization. investing in climate initiatives not only brings about climate benefits such as helping achieve nationally determined contributions (ndcs) and mitigating climate-related risks, migration, and disease but also environmental benefits, including cleaner air and water quality, and safer and less congested roads. governments can promote the use of green bonds by leveraging the growing interest of capital markets in sustainable projects. in addition, ministries of finance can support the development of fiscal policy framework with their implemenation of carbon taxes. moreover, fostering global cooperation and partnerships will be essential to address worldwide challenges related climate change. governments might also necessitate to provide targeted support and fiscal policy framework in a decarbonized future for resource-rich countries 54 incentives for industries and communities heavily reliant on fossil fuels to facilitate a just transition. in addition, to facilitate the process, it is important to ensure macroeconomic stability and improve governance and the business climate. this involves planning public investments, and structural reforms to facilitate private investment. overall, specific and coordinated efforts will be important to ensure sustainable and a smooth transition to a decarbonized future. while this study provides a comprehensive analysis, one of its strengths is its detailed exploration of fiscal policies tailored to rrcs. however, a potential weakness is the variability of regional contexts, which may limit the generalizability of the findings. additionally, further research is needed to explore alternative explanations and practical implications of fiscal policies in different economic and political environments. references 1. asian development bank (2023). fiscal policy instruments. 2. coalition of finance ministers for climate action (2022). driving climate action through economic and fiscal. 3. imf (2015). the commodities roller coaster: a fiscal framework for uncertain times. fiscal monitor. 4. international labour organization (2015). in guidelines for a just transition towards environmentally sustainable economies and societies for all 5. international renewable energy agency– irena (2024). 6. mr. luc eyraud, william gbohoui, and mr. paulo a medas (2023). a new fiscal framework for resource-rich countries. 7. oecd (2020). best practices for managing fiscal risks. 8. ossowski, rolando, and håvard halland (2016). fiscal management in resource-rich countries. 9. peszko, grzegorz (2020). diversification and cooperation in a decarbonizing world. 10. raúl delgado & huáscar eguino . fiscal policy and climate change. 11. the growth lab at harvard university (2021). the growth lab at harvard university. 12. un (2023). https://www.un.org/sustainabledevelopment/sustainable-development-goals/. 13. welsby, dan, james price, steve pye, and paul ekins (2021). “unextractable fossil fuels in a 1.5 °c world”. 14. world meteorological organization wmo (2023). 15. world bank blog. https://blogs.worldbank.org/en/climatechange/diversification-andcooperation-decarbonizing-world-climate-strategies-fossil-fuel 16. world economic forum (2024). global risks report agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 18, no. 1 (2024), pp. 55-64 55 analyzing and forecasting co2 emissions in the aluminum sector using arima model r. hasanov, j. safarov, a. safarli ramil hasanov¹, jamil safarov², arzu safarli³ ¹ university of technology of azerbaijan, azerbaijan https://orcid.org/0000-0003-4267-7039, e-mail: r.hasanov@uteca.edu.az ² university of technology of azerbaijan, azerbaijan https://orcid.org/0009-0004-0392-3860, e-mail: jamil.safarov@azeraluminium.com ³ azerbaijan technical university, azerbaijan https://orcid.org/0000-0003-2670-0665, e-mail: arzu.safarli@aztu.edu.az abstract: the urgent and pressing challenge posed by global climate change underscores the critical need for immediate and decisive action, particularly in the mitigation of greenhouse gas (ghg) emissions to facilitate a trajectory towards sustainability. the significance of the aluminium industry, characterized by its notable carbon footprint, accentuates the importance of conducting comprehensive and environmentally conscious analyses within this sector. heightened environmental apprehensions surrounding aluminium production necessitate the development of effective approaches for emission forecast. the primary aim of the article is to elucidate the present situation and future predictions of carbon emissions within the global aluminium industry, particularly in the context of escalating concerns regarding global climate security. the research concluded that there will be a decrease in co2 emissions within the aluminium industry in the future as a result. through meticulous assessments and exhaustive forecasts of co2 emissions across the global aluminium industrial chain system, this study employed the autoregressive integrated moving average (arima) model to scrutinize data spanning from 2005 to 2030. by furnishing valuable insights into prospective emission patterns and providing guidance for the formulation of sustainable policy measures, this research assumes a pivotal role in shaping data-driven strategies aimed at mitigating the environmental impact of aluminum production. consequently, it contributes significantly to the collective endeavor to combat climate change and foster a more resilient and sustainable future for humanity. keywords: green economics, aluminum industry, co2 emissions, arima model, sustainability. introduction aluminium plays a vital role in various technologies essential for the energy transition, but it also serves as a significant source of co2 emissions, emitting close to 270 million tonnes of direct co2 emissions in 2022, which corresponds to approximately 3% of the world's direct industrial co2 emissions (iea, 2023). despite being consumed in lower quantities compared to steel or cement, aluminum emerges as the most carbon-intensive material per tonne among https://orcid.org/0000-0003-4267-7039 mailto:r.hasanov@uteca.edu.az https://orcid.org/0009-0004-0392-3860 mailto:jamil.safarov@azeraluminium.com https://orcid.org/0000-0003-2670-0665 mailto:arzu.safarli@aztu.edu.az analyzing and forecasting co2 emissions in the aluminum sector using arima model 56 the top three highest-emitting materials (berker, 2022). these statistics reiterate the fundamental importance of the current sector in promoting a sustainable eco-economic system. graph 1 depicts the co2 emissions of the global aluminum industry over the past 18 years, revealing a notable shift from an upward trend to a decrease since 2020. concurrently, there has been observed growth in global aluminum production, indicating a positive trend towards green integration in recent years. graph 1. co2 emissions in aluminum sector (in million tons). source: international aluminum institution (iai). https://international-aluminium.org/statistics/greenhouse-gasemissions-aluminium-sector/ (25.01.2023) the global aluminum industry holds considerable economic significance, yet its manufacturing activities contribute significantly to greenhouse gas emissions, particularly carbon dioxide (co2). therefore, understanding the emission patterns within this sector is crucial for implementing effective mitigation strategies. utilizing some techniques in time series analysis and forecasting, this research aims to examine co2 emission data in the global aluminum industry to identify prevailing trends and forecast future emission patterns. by conducting thorough analysis and forecasting modeling, the findings of this study aim to provide insights that can guide strategic decision-making processes geared towards promoting sustainability in the aluminum sector. literature review time series forecasting is indispensable across multiple fields, including finance, economics, engineering, and social sciences. arima (autoregressive integrated moving average) models serve as a cornerstone in statistical time series analysis, offering a flexible and powerful framework for forecasting future values based on past observations. arima models have become a well-established tool within the field of economics for forecasting key macroeconomic indicators. these indicators, such as gross domestic product (gdp), inflation rates, and unemployment levels, provide crucial insights into the health and trajectory of a nation's economy. vafin (2020) utilized the automatic arima forecasting method to anticipate significant macroeconomic indicators across seven notable economies, uncovering anticipated reductions in employment and inflation within the united states, alongside diminishing rates of labor force participation in russia, alongside other forecasted patterns. https://international-aluminium.org/statistics/greenhouse-gas-emissions-aluminium-sector/ https://international-aluminium.org/statistics/greenhouse-gas-emissions-aluminium-sector/ ramil hasanov, jamil safarov, arzu safarli 57 moreover, this model is extensively employed in financial analysis and forecasting. numerous scientific articles exist that explore this area (li, han, & song, 2020; ariyo, adewumi, & ayo, 2014; cheng et al, 2020). in addition to these instances, the arima forecasting model is employed in a multitude of scholarly investigations centered on sustainable economic development and resilience. using annual time series data from 1960 to 2017 on co2 emissions in china, employs nyoni, & mutongi (2019) the box-jenkins arima approach to model and forecast co2 levels, revealing an anticipated increase in emissions and suggesting four key policy recommendations for the chinese government. dritsaki, m., & dritsaki, c. (2020) investigate the most effective model for forecasting co2 emissions in the eu-28, utilizing an arima(1,1,1)-arch(1) model with parameter optimization via maximum likelihood estimation, employing both static and dynamic methods for forecasting, with the static approach demonstrating superior accuracy in forecasting. the thorough scientific analysis of carbon dioxide emissions within the global aluminum industry, renowned for its expansive industrial network, holds considerable importance on a global scale. ciacci et al. (2014) employs standard material flow analysis (mfa) and life cycle assessment (lca) models to study the historical greenhouse gas emissions from italian aluminum production (1960-2009), aiming to guide future industrial and environmental policies. it calculates annual emissions and cradle-to-gate factors, revealing the carbon footprint and highlighting emissions transfers between production and use locations. the study suggests potential emissions reductions through aluminum recycling and underscores the value of integrating mfa and lca for comprehensive environmental analysis. liu & muller (2012) conducted an extensive analysis of aluminum life cycle assessments, taking into account sustainability principles from a wide-ranging perspective. data and methodology the present study employs data concerning aluminum life cycle emissions (alce), offering insights into carbon co2 emissions associated with the worldwide aluminum sector. spanning from 2005 to 2022, this dataset provides a holistic perspective on emission patterns throughout the specified timeframe. sourced primarily from the international aluminium institute (iai, 2023) and derived through total-cradle to gate calculations, this dataset serves as a pivotal resource for comprehending the environmental ramifications of aluminum production processes, serving as the cornerstone for subsequent analyses and interpretations within the study. table 1 presents the descriptive statistical analysis of co2 emissions in the aluminum sector spanning from 2005 to 2022, providing essential insights for environmental and industrial evaluation. the mean annual emission is documented at 913.00 million tons, with a median emission of 964.00 million tons, signifying the central tendency of the data. additionally, the dataset highlights a range of emissions, with a minimum of 569.00 million tons and a maximum of 1133.00 million tons, alongside a moderate level of variability (sd = 189.25), a slight left skew (skewness = -0.35), and a moderately peaked distribution (kurtosis = 1.74). these findings are instrumental for researchers and policymakers to discern trends and devise sustainable strategies within the aluminum industry. analyzing and forecasting co2 emissions in the aluminum sector using arima model 58 table 1. descriptive statistical view (alce in level). mean median maximum minimum std. dev. skewness kurtosis 913.00 964.00 1133.00 569.00 189.25 -0.35 1.74 unit root tests are statistical techniques employed to ascertain the stationarity of a time series variable. a stationary time series variable is characterized by consistent attributes, including a constant mean, variance, and autocorrelation, which remain unchanged over time. the augmented dickey-fuller (adf) test (1979) evaluates the presence of a unit root, implying non-stationarity, in a time series variable, whereas the phillips-perron (pp) test (1988), a comparable unit root examination, incorporates modifications to account for serial correlation and heteroscedasticity. adf and pp tests are implemented to evaluate the stationarity of the alce series. in instances where the data exhibits non-stationarity, indicating alterations in statistical properties over time, differencing techniques are employed to attain stationarity. the correlogram provides a visual representation of the autocorrelation function (acf) and partial autocorrelation function (pacf) of the alce series. this visualization facilitates the identification of serial dependence patterns, indicating correlations between past and present values within the dataset. the autoregressive integrated moving average (arima) model serves as a widely employed approach for time series forecasting. this model was established through the pioneering contributions of box and jenkins (1970). their incorporation of differencing into the arma framework transformed the arima model, enabling the handling of non-stationary time series data via observation differencing. arima model is defined by three parameters, represented as (p, d, q), where p signifies the count of autoregressive terms integrating preceding values, d indicates the degree of differencing essential for achieving stationarity, and q denotes the number of moving average terms accounting for past forecast errors. in this research endeavor, we examine the utilization of this methodology for forecasting emissions, as articulated by the equation: alcet = α₁ alcet 1 + εt (1) here:  alcet is the co2 emissions in aluminum sector in period t.  alcet 1 is co2 emissions in the aluminum sector during the preceding period.  εt represents the error term, assumed to be white noise, characterized by being independent and identically distributed with a mean of zero. the selection of the most suitable arima model relies on statistical metrics such as pvalues, r-squared, akaike information criterion (aic), and schwarz bayesian criterion (sbc), which penalize excessive model complexity in favor of simpler alternatives demonstrating enhanced forecasting precision. for a more dependable forecasting analysis of the model, it is imperative to obtain the ar and ma roots results. these outcomes offer critical information about the stability and characteristics of the autoregressive (ar) and moving average (ma) components, thereby augmenting the accuracy and reliability of the forecasting process. ramil hasanov, jamil safarov, arzu safarli 59 results table 2 displays the results from two unit root examinations, specifically adf and pp tests, which are conducted assuming the presence of both trend and intercept in the data. the p-values presented in the table serve the purpose of determining whether the null hypothesis of a unit root can be rejected. upon the first difference operation, where the data undergoes differencing once, the test statistic yields a value of -3.262 with a corresponding p-value of 0.107. despite this p-value being lower compared to the initial level, it does not attain sufficient significance to reject the null hypothesis at the conventional 5% significance level. however, its proximity to the threshold suggests the consideration of either a test with improved power or a decreased significance level. conversely, at the second difference, the test statistic stands at -4.718 with a p-value of 0.010, denoting statistical significance. this finding implies the potential attainment of stationarity in alce subsequent to two difference operations. the outcomes of the phillips-perron test closely mirror those of the adf test, displaying insignificance at the initial level and first difference, but significance at the second difference, hinting at the likelihood of achieving stationarity after two differences. table 1. unit root test: alce. augmented dickey-fuller level 1st difference 2nd difference trend and intercept t-statistic -1.075 -3.262 -4.718 p-value 0.903 0.107 0.010 phillips-perron level 1st difference 2nd difference trend and intercept t-statistic -1.308 -3.284 -6.586 p-value 0.849 0.104 0.000 the correlogram provided in graph 2 illustrates the autocorrelation coefficients for alce across various lag intervals, spanning up to 12 lags, where the vertical axis denotes these coefficients and the horizontal axis represents lag duration. additionally, the correlogram incorporates partial autocorrelation coefficients (pac), which reveal correlation patterns after adjusting for intervening lags. notably, the prominently elevated and positive first lag autocorrelation coefficient indicates a persistent influence of co2 emissions, while diminishing coefficients suggest decreasing correlations with extended lag durations. multiple coefficients, demonstrating statistical significance, suggest the presence of serial dependence, while other observed patterns hint at potential non-stationarity. leveraging the correlogram facilitates the identification of appropriate arima models for diagnostic purposes. analyzing and forecasting co2 emissions in the aluminum sector using arima model 60 graph 2. the correlogram of alce. *derived through the utilization of the eviews software application several scholars (ning, pei, & li, 2021; sharma et al., 2023; lotfalipour, falahi, & bastam, 2013) have applied the arima forecasting model to analyze carbon dioxide (co2) emissions, as evidenced by a body of research in the field. based on the findings presented in table 4, we examine the suitability of employing ar(1)ma(1) models for the analysis and forecasting of time series data. the ar(1) model characterizes a time series wherein the current value exhibits a linear dependence on the previous value (lag 1), while the ma(1) model captures the relationship between the current value and the preceding error term (lag 1). in contrast, ar(1) employs lagged outcome values for forecasting, while ma(1) utilizes unobserved error terms as inputs, leading to distinct methodologies and estimation outcomes. through comparison and diagnostic evaluation, encompassing measures such as r-squared and hannan-quinn criteria, it is evident that the ar(1)ma(1) model proves to be more suitable. we conduct estimation for the equation below to identify a prospective model suitable for forecasting, ultimately culminating in the generation of forecasts: alce = c(1) + ar(1) * c(2) + ma(1) * c(3) + uncond (2) alce refers to carbon emissions in the aluminum sector, with c(1), c(2), and c(3) denoting the coefficients associated with the constant, autoregressive (ar), and moving average (ma) components, respectively. uncond signifies unconditional estimation. table 3. arma maximum likelihood method results. ar(1)ma(1) ar(1)ma(2) ar(2)ma(1) r-squared 0.948 0.933 0.930 f-statistic 85.232 65.107 62.826 akaike criter. 10.965 11.198 11.226 schwarz criter. 11.163 11.396 11.424 hannan-quinn criter. 10.992 11.226 11.253 graph 3 illustrates the roots of the ar and ma polynomials within the arima model framework. the positioning of ar roots is crucial for determining the stability of the ar date: 03/27/24 time: 14:09 sample: 2005 2022 included observations: 18 autocorrelation partial correlation ac pac q-stat prob 1 0.837 0.837 14.840 0.000 2 0.671 -0.100 24.969 0.000 3 0.537 0.009 31.888 0.000 4 0.397 -0.112 35.937 0.000 5 0.210 -0.252 37.153 0.000 6 0.042 -0.085 37.206 0.000 7 -0.101 -0.099 37.539 0.000 8 -0.212 -0.032 39.150 0.000 9 -0.297 -0.030 42.688 0.000 10 -0.363 -0.067 48.608 0.000 11 -0.417 -0.104 57.572 0.000 12 -0.437 -0.037 69.033 0.000 ramil hasanov, jamil safarov, arzu safarli 61 component, which is confirmed when all roots lie within the unit circle. similarly, the placement of ma roots plays a significant role in model stability, with invertibility being essential for precise estimation and interpretation. the stability of the arima model is essential for analyzing alce data, emphasizing the importance of thorough validation of model assumptions and meticulous interpretation of results to support informed decisionmaking in environmental science and policy domains. graph 3. alce: inverse roots of ar/ma polynomial(s). *derived through the utilization of the eviews software application. the graphical depiction in graph 4 presents historical alce data and projections from 2006 to 2030, with actual emissions depicted by the blue line and forecasted emissions by the orange line (alcef), alongside uncertainty boundaries indicated by the green (lb) and red (up) lines. historically, alce demonstrated a consistent upward trajectory until around 2022, indicative of industrial influences. however, post-2022 forecasts anticipate a decline in alce, potentially influenced by environmental regulations and technological advancements. it is forecasted that if the trajectory persists according to the present trend, by 2030, notwithstanding the augmentation in yearly production and consumption, there will be a 6% decrease in co2 emissions compared to the levels observed in 2022. graph 4. alce: forecasting. *derived through the utilization of the eviews software application. -1.5 -1.0 -0.5 0.0 0.5 1.0 1.5 -1 0 1 ar roots ma roots alce: inverse roots of ar/ma polynomial(s) analyzing and forecasting co2 emissions in the aluminum sector using arima model 62 the presence of uncertainty bounds emphasizes the need for cautious policymaking and adaptive measures within the industry. these projections have implications for environmental sustainability, policy development, and industrial strategies, underscoring the importance of vigilance and adaptation in achieving emission reduction goals within the aluminum sector. discussion mathematical forecasting offers a means to approximate future outcomes based on current trends, although exact figures may not always be attainable within this approach. furthermore, various factors beyond mathematical models can significantly impact the socioeconomic landscape. based on the cru report, there is a forecasted surge in demand for aluminum, projected to rise by 40% by the year 2030 (alfed, 2022). in the absence of significant technological advancements, the anticipated surge in aluminum demand is expected to necessitate a substantial boost in production, consequently leading to a parallel rise in carbon emissions. the majority of carbon emissions are typically released during the energy production phase. the life-cycle greenhouse gas emissions linked to one metric ton of primary aluminum are estimated to be approximately 14.7 tons of co2equivalent (peng, ou, yan, & wang, 2019). transitioning to renewable energy sources such as solar, wind, and hydroelectric power is essential for curtailing co2 emissions in the global aluminum industry. this change not only lessens the carbon footprint associated with energyintensive processes but also fosters sustainability and environmental stewardship within the sector. by investing in renewable energy technologies and embracing eco-friendly practices, aluminum producers can make significant strides in combatting climate change and promoting a greener future for the planet. another potential scenario to consider is the implementation of inert anode technology during the aluminum production process. the adoption of inert anode technology represents a substantial stride in mitigating carbon waste during the electrolysis phase, consequently elevating the sustainability credentials of aluminum manufacturing. this breakthrough not only reduces environmental footprint but also enhances resource utilization and operational efficiency across the sector (hasanov, 2023). the future sustainability of the aluminum industry hinges on two key elements: the evolution of the renewable energy sector and the integration of innovative technologies. these factors are instrumental in guiding the industry toward greater environmental responsibility, facilitating reductions in carbon emissions, and fostering a more sustainable approach to aluminum production. conclusions this research utilized arima models to examine and forecast co2 emissions within the aluminum sector. through unit root tests, it was determined that two differencing operations were necessary to achieve data stationarity. analysis of the correlogram helped identify appropriate arima models, with the ar(1)ma(1) model selected based on diagnostic evaluation criteria. the estimated arima model effectively captured historical co2 emission trends and projected emissions up to 2030, revealing an anticipated decrease in emissions after 2022, likely driven by environmental regulations and advancements in technology. following a thorough diagnostic process, the ar(1)ma(1) model emerged as the most suitable for ramil hasanov, jamil safarov, arzu safarli 63 forecasting co2 emissions. this model attained an r-squared value of 0.948, indicating its capability to explain nearly 95% of the variability in the co2 emission data. additionally, the hannan-quinn criterion, a metric assessing model simplicity, favored the ar(1)ma(1) model over alternative specifications. the forecast analysis results indicate that if the current trend persists, there will be a 6% reduction in the volume of co2 emitted from the global aluminum sector by the year 2030. references 1. alfed (2022). cru report expects aluminium demand to rise 40% by 2030. https://alfed.org.uk/wp-content/uploads/2023/10/cru-summaryreport-for-iai.pdf 2. ariyo, a. a., adewumi, a. o., & ayo, c. k. (2014, march). stock price prediction using the arima model. in 2014 uksim-amss 16th international conference on computer modelling and simulation (pp. 106-112). ieee. doi: 10.1109/uksim.2014.67 3. berker a. (2022). understand your aluminum emissions. https://www.carbonchain.com/blog/understand-your-aluminum-emissions 4. box, g. e. p., & jenkins, g. m. (1970). time series analysis: forecasting and control. san francisco, ca: holden-day. 5. cheng, j., deng, h., sun, g., guo, p., & zhang, j. (2020). application of arima model in financial time series in stocks. in artificial intelligence and security: 6th international conference, icais 2020, hohhot, china, july 17–20, 2020, proceedings, part i 6 (pp. 232243). springer international publishing. https://doi.org/10.1007/97 6. ciacci, l., eckelman, m. j., passarini, f., chen, w. q., vassura, i., & morselli, l. (2014). historical evolution of greenhouse gas emissions from aluminum production at a country level. journal of cleaner production, 84, 540-549. https://doi.org/10.1016/j.jclepro.2014.03.062 7. dickey, d. a., & fuller, w. a. (1979). distribution of the estimators for autoregressive time series with a unit root. journal of the american statistical association, 74(366a), 427-431. 8. dritsaki, m., & dritsaki, c. (2020). forecasting european union co2 emissions using autoregressive integrated moving average-autoregressive conditional heteroscedasticity models. international journal of energy economics and policy, 10(4), 411-423. 9. hasanov, r. i. (2023). towards a sustainable future in aluminium production: environmental and economic benefits of revolutionary inert anode technology. journal of sustainability science and management, 18(10), 176-186. http://doi.org/10.46754/jssm.2023.10.012 10. iai (2023). greenhouse gas emissions – aluminium sector. https://internationalaluminium.org/statistics/greenhouse-gas-emissions-aluminium-sector/ 11. iea (2023). tracking aluminium. https://www.iea.org/energy-system/industry/aluminium 12. li, z., han, j., & song, y. (2020). on the forecasting of high‐frequency financial time series based on arima model improved by deep learning. journal of forecasting, 39(7), 10811097. https://doi.org/10.1002/for.2677 13. liu, g., & müller, d. b. (2012). addressing sustainability in the aluminum industry: a critical review of life cycle assessments. journal of cleaner production, 35, 108-117. https://doi.org/10.1016/j.jclepro.2012.05.030 14. lotfalipour, m. r., falahi, m. a., & bastam, m. (2013). prediction of co2 emissions in https://alfed.org.uk/wp-content/uploads/2023/10/cru-summaryreport-for-iai.pdf https://www.carbonchain.com/blog/understand-your-aluminum-emissions https://doi.org/10.1007/97 https://doi.org/10.1016/j.jclepro.2014.03.062 http://doi.org/10.46754/jssm.2023.10.012 https://international-aluminium.org/statistics/greenhouse-gas-emissions-aluminium-sector/ https://international-aluminium.org/statistics/greenhouse-gas-emissions-aluminium-sector/ https://www.iea.org/energy-system/industry/aluminium https://doi.org/10.1002/for.2677 analyzing and forecasting co2 emissions in the aluminum sector using arima model 64 iran using grey and arima models. international journal of energy economics and policy, 3(3), 229-237. 15. ning, l., pei, l., & li, f. (2021). forecast of china’s carbon emissions based on arima method. discrete dynamics in nature and society, 2021, 1-12. 16. nyoni, t., & mutongi, c. (2019). modeling and forecasting carbon dioxide emissions in china using autoregressive integrated moving average (arima) models. 17. pao, h. t., fu, h. c., & tseng, c. l. (2012). forecasting of co2 emissions, energy consumption and economic growth in china using an improved grey model. energy, 40(1), 400-409. 18. peng, t., ou, x., yan, x., & wang, g. (2019). life-cycle analysis of energy consumption and ghg emissions of aluminium production in china. energy procedia, 158, 3937-3943. 19. phillips, p. c. b., & perron, p. (1988). testing for a unit root in time series regression. biometrika, 75(2), 335-346. 20. sharma, s., mittal, a., bansal, m., joshi, b. p., & rayal, a. (2023). forecasting of carbon emissions in india using (arima) time series predicting approach. in international conference on renewable power (pp. 799-811). singapore: springer nature singapore. 21. vafin, a. (2020). forecasting macroeconomic indicators for seven major economies using the arima model. sage science economic reviews, 3(1), 1-16. https://doi.org/10.17613/j3b4-h115 https://doi.org/10.17613/j3b4-h115 agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 18, no. 1 (2024), pp. 240-249 240 a comprehensive evaluation of face recognition software: balancing total cost of ownership, accuracy and speed k. tirana kledia tirana university metropolitan tirana, albania https://orcid.org/0009-0008-0772-4243, e-mail: ktirana@umt.edu.al abstract: as face recognition technology continues to play a pivotal role in various domains, selecting an optimal software solution becomes imperative. this paper thoroughly analyzes face recognition algorithms, emphasizing a holistic assessment of implementing them that includes the overall cost of ownership, accuracy, and speed. the research aims to guide decision-makers in choosing a solution that balances these three critical factors. the study employs a rigorous methodology and evaluates various intrusion detection solutions across multiple industries. it examines the cost of ownership comprehensively, including initial investment, maintenance expenses, and potential hidden costs. a cost-benefit analysis is conducted to unveil the true economic implications of each implementation. the accuracy of the face recognition algorithms which is the core of intrusion detection systems is assessed through the learnings from academia and real-world feedback from the security industry. furthermore, the paper examines the critical aspect of speed, recognizing its important role in real-time applications. the evaluation considers the processing speed of each software solution, considering its responsiveness to various environments and working with large-scale datasets. this research provides a comprehensive overview of face recognition algorithms, offering small business decision-makers valuable insights to make informed choices for their intrusion detection solutions. by combining the total cost of ownership, accuracy, and speed, organizations can select a solution that aligns with their specific needs and maximizes the return on investment in intrusion detection technology. keywords: face recognition, deep learning, object detection, total cost of ownership. introduction the overall security of small businesses is very important. the enterprises are vulnerable to a range of threats that can severely impact their daily operations, including financial stability and reputation. small businesses face a set of unique challenges in terms of security due to their limited resources, size, and specific operational characteristics. the most important challenges are related to limited budgets, resource constraints, lack of in-house expertise, and dependency on third-party services. recognizing the challenges allows small businesses to tailor their security plans accordingly, emphasizing cost-effective solutions. while it is impossible to address all the challenges, we will focus on physical security by providing a free intrusion detection solution. for our paper, we will use data that we have collected in the usa market. however, the adoption of sophisticated surveillance systems, https://orcid.org/0009-0008-0772-4243 mailto:ktirana@umt.edu.al kledia tirana 241 leveraging cutting-edge technologies such as ai-powered analytics and cloud-based solutions, is not exclusive to the united states. in today's interconnected world, the usa's video security landscape reflects a global paradigm applicable to other countries globalization and the knowledge driven technological revolution are important instruments for national economic progress. as a result, increasing innovation has emerged as a critical requirement for an organization's competitiveness and sustainability in both domestic and global markets. small sized enterprises are crucial to the creation of each nation's gross domestic product in the modern economy. due to the numerous amounts of small businesses, changes in the business environment have mitigated the structural disadvantages of small-sized businesses (živanović, abramović, živanović, & smolović, 2023). this paper aims to examine the current landscape of commercial offerings for intrusion detection provided to small businesses and compare the total cost of ownership against an intrusion detection solution we will build by choosing the proper face recognition algorithm. the solution is free of charge to small businesses. in this paper, we have a close look at the most popular face recognition methods and compare them against each other. we will choose two algorithms to implement our solution. in future work, we will conduct a series of tests on the chosen algorithms to check their accuracy and validate that this is the right choice to address the video surveillance security of small businesses. current video security solutions catering to small businesses we have conducted market research and selected a list of the most predominant security alarm companies in the usa that cater to small businesses:  adt: they provide custom-built security systems with features like 24/7 professional monitoring, intrusion detection, fire protection, and even cybersecurity options. while on the costlier side, they offer a comprehensive security solution. (adt, 2024)  simplisafe: known for affordability and diy installation, simplisafe offers businessfriendly packages with features like entry sensors, security cameras, and environmental monitoring. (simplisafe, 2024)  vivint specializes in high-end security systems with features like smart home integration, access control, and video surveillance. it offers professional installation and monitoring. (vivint, 2024)  frontpoint: another diy option, frontpoint provides scalable security systems for small businesses. their features include entry sensors, security cameras, and medical alert options. (frontpoint, 2024)  guardian alarm: offers monitored security systems with features like 24/7 video surveillance, intrusion detection, and fire protection. they cater to businesses of all sizes. (guardian security, 2024) since the paper's objective is to evaluate the total cost of ownership and find out if there is scope for a tailored solution for small businesses, we also looked at the costs associated with each of the solutions mentioned above. a comprehensive evaluation of face recognition software: balancing total cost of ownership, accuracy and speed 242 these are estimated costs based on publicly available information and may vary depending on chosen packages, equipment needs, and additional services. for each individual small business, the best way is to get quotes directly from each company for the most accurate pricing for their specific business needs. however, this does not change the validity of our analysis since we will be looking at the starting prices offered to small businesses and not at the more expensive custom-made prices. the following table is a summary based on the market research; to get some of the quotes, we had to use different zip codes; otherwise, the information is not possible to obtain from public sources. table 1 summary based on the market research company equipment cost monitoring cost (monthly) total yearly cost adt starts at ~$600 starts at ~$37 starts at ~$1,044 simplisafe starts at ~$500 starts at ~$25 starts at ~$800 vivint starts at ~$1,000 starts at ~$40 starts at ~$1,480 frontpoint starts at ~$400 starts at ~$35 starts at ~$820 guardian alarm starts at ~$400 starts at ~$30 starts at ~$760 source: author own elaboration. (2024) for the sake of completeness, there are some additional factors to consider when choosing a small business security system, such as: ● security needs: is it physical security of the premises only, or shall it include fire, environmental hazards, etc.? ● business size and layout are important factors in choosing a system that can effectively cover the entire building. ● scalability, the security needs might grow in the future, and a system that can adapt. ● integration: whether the system integrates with other business tools you use (e.g., access control systems or productivity tools such as a work calendar). face recognition algorithms face recognition approaches have evolved over the years. there are two broad categories: traditional methods and deep learning methods. deep learning methods are specialized versions of the most generic object detection algorithms. we will first describe the fundamentals of the most popular object detection and face recognition algorithms and then focus on their differences. we will use three criteria for the evaluation: computation power (directly related to cost), accuracy, and speed. fundamentals before we dive in, let's start with the main concept of face recognition. the steps involved in a typical face recognition system are as follows: ● data collection: kledia tirana 243 ○ this step is fundamental since it is the algorithm's baseline. the idea is to acquire a dataset of facial images. this dataset should include images of various individuals under various conditions, such as different lighting, poses, and expressions. ○ the more diverse and representative the dataset, the better chance for the system to generalize to new faces. ● preprocessing: ○ normalize the images to ensure consistency in terms of lighting conditions, resolution, and facial expressions. in simple terms, we need to compare apples to apples. ○ perform face detection and alignment to locate facial features accurately. this step is very important for standardizing the position and orientation of faces in the images. ● feature extraction: ○ extract relevant features from the preprocessed facial images. different techniques are used, such as principal component analysis (pca), linear discriminant analysis (lda), and convolutional neural networks (cnns). ○ generate a feature vector that represents the unique characteristics of each face in the dataset. ● training the model: ○ use the extracted features to train a face recognition model. this step can use traditional machine learning algorithms or deep learning neural networks. ○ the model learns to differentiate between different individuals using the unique feature vectors that were generated during the previous phase. ● dimensionality reduction: ○ this step is optional and aims to make the algorithm more efficient and less prone to overfitting. the goal is to reduce the complexity of the feature space. ● face encoding: ○ face encoding serves as a unique identifier for each person. for each individual in the dataset, a compact representation of their facial features is generated. ● testing phase: ○ there are similarities between the training phase and the testing phase. the preprocessing, feature extraction and dimensionality reduction in the testing phase are accomplished in the same way as in the training phase. ○ the trained model is used to compare the new face encoding with the stored encodings of known individuals. ● decision making: ○ this is decision time, so we apply a rule to determine the individual's identity. we look at the similarity between the new face encoding and the stored encodings. ○ in addition to the rule, a similarity score threshold must be used to decide whether the face belongs to a known individual or is an unknown face. ● verification / identification: ○ there is a slight difference between verification and identification. a comprehensive evaluation of face recognition software: balancing total cost of ownership, accuracy and speed 244 ○ in verification scenarios, the decision is binary; the presented face matches a specific individual's encoding. ○ in identification scenarios, the presented face is compared against the dataset of all known encodings to find the closest match. ● post-processing: ○ this is the time when we need to close the feedback loop. the goal is to refine the recognition results and/or update the model with new data. as with any machine learning algorithm, the effectiveness of a face recognition system depends on the quality and diversity of the training data, the choice of features, and the robustness of the algorithm (osowski & siwek, 2020). eigenfaces the primary goal of eigenfaces is to represent facial features in a lower-dimensional space by capturing the principal components of the face images. it aims to preserve as much variance as possible, making it suitable for general facial recognition applications. the eigenfaces algorithm uses principal component analysis (pca) to represent facial features in a lower-dimensional space. pca recognizes the directions of maximum variance in the data, and the corresponding eigenvectors form the basis for the reduced-dimensional space (peng, portugal, alencar, & cowan, 2021). the representation obtained by eigenfaces is based on the principal components of the face images. "these components are linear combinations of the original pixel values, capturing the overall variance in the dataset (omer, 2024). the drawback of pca is the sensitivity to variations in lighting conditions, as it tends to capture overall variance, which can include variations caused by illumination. fisherfaces fisherfaces emphasizes the differences between individuals rather than capturing the overall variance in the dataset. it employs linear discriminant analysis (lda) to find a projection that maximizes individual separation while minimizing variations within the same individual. fisherfaces use linear discriminant analysis (lda) for dimensionality reduction. "lda aims to find a projection that maximizes the ratio of the between-class scatter to the within-class scatter, focusing on the discriminative power of the features". the representation obtained by fisherfaces is designed to maximize the differences between individuals. the features selected by lda are most effective in discriminating between different classes (individuals). fisherfaces can be sensitive to class variations, especially when dealing with small datasets or when the within-class scatter is high. in situations where there is significant variability in the images of the same individual (such as different facial expressions, poses, or lighting conditions), fisherfaces may not effectively capture the essential features that distinguish between individuals. local binary patterns (lbp) local binary patterns (lbp) are commonly used in face recognition as a texture descriptor to capture discriminative features from facial images. the technique is particularly kledia tirana 245 robust to variations in lighting conditions, making it suitable for handling challenges often encountered in face recognition applications. the basis of lbp is on local neighborhood definition (define a local neighborhood by specifying a radius and the number of sampling points on the circumference of a circle) and lbp calculation (create a binary pattern by concatenating the 0/1 values obtained from the comparisons in a specific order around the center pixel). while lbp is effective in certain scenarios, it may not capture complex spatial relationships or be robust to other variations, such as pose changes. in practice, lbp is often combined with other feature extraction techniques or used as part of a more comprehensive face recognition system to improve overall performance. support vector machines (svm) it's a supervised machine learning algorithm renowned for effectively categorizing data elements into two groups. svms come in two primary categories: linear and non-linear svms. linear svm is applied when data is perfectly separable by a straight line, while nonlinear svm handles scenarios where data points aren't linearly separable. in such cases, advanced techniques like kernel tricks are employed to facilitate classification. since linear separability is rare in real-world applications, kernel tricks are commonly utilized to address these complexities. svm works faster and more accurately when the data is linearly separable, and when we employ the kernel trick any complex problem can be solved. however, some issues in face recognition must be considered, such as the difficulty of choosing a good kernel, the inaccuracy for big datasets, and the difficulty of tuning the hyper-parameters. deep learning (cnn-based) deep learning proves immensely valuable in object classification tasks, notably in face recognition algorithms. the initial approach employed was the convolutional neural network (cnn). the essence of this algorithm involved segmenting the image into multiple regions and subsequently classifying each region into distinct categories. however, a challenge arises due to the considerable number of regions necessitating accurate prediction, resulting in prolonged computation times. subsequently, the region-based convolutional neural network (rcnn) emerged as an advancement over cnn. built upon the foundation of cnn, rcnn integrates selective search to generate regions, thereby reducing their number to around 2000 per image. although this marks an improvement over cnn, the computational requirement remains high. each region is individually passed to the cnn, resulting in processing times of 40 to 50 seconds per image—rendering it unsuitable for real-time applications. the next algorithm was fast rcnn. it resolves the main issue of the rcc so that each image (1) is passed only once to the cnn, (2) feature maps are extracted, and (3) selective search is used on these maps to generate predictions (rajeshkumar et al., 2023). it reduces the time to 2 seconds per image, but the computation time is still high (jiang et al., 2021). the next algorithm was faster rcnn. the main difference to the fast rcnn is that “the selective search method is replaced with a region proposal network (faulkner, 2021). this had a dramatic positive impact on the algorithm speed, going down to 0.2 seconds per image. a comprehensive evaluation of face recognition software: balancing total cost of ownership, accuracy and speed 246 you look only once (yolo) deep learning methods such as rcnn, fast rcnn, and faster rcnn are categorized as two-stage object detectors. the main concept is that they need several passes to the image. two additional algorithms, yolo (you only look once) and ssd (single shot detectors), are categorized as one-stage object detectors, where the image is taken all at once. the other object detection algorithms work on a classification problem, while yolo works on a single regression problem (redmon, divvala, girshick & farhadi, 2016). the system only looks at the image once to detect (a) what objects are present and (b) where they are. the system divides the image into a grid of cells. each grid cell predicts b bounding boxes and confidence scores for these boxes. the confidence score considers the probability that the box contains an object and the accuracy of what box it is predicting (cortes & jose, 2021). each grid cell predicts c conditional class probabilities, producing a single set of class probabilities per cell irrespective of the number of boxes b. in the testing phase, these conditional class probabilities are combined with individual box confidence predictions. this multiplication yields class-specific confidence scores for each box, indicating both the class's probability and the box's fit to the object (zhang & cloutier, 2022). the algorithm uses the concept of iou to consider a bounding box. by default, the value is set at 0.5, and setting it to higher values will reduce the false positive while increasing the false negatives. the bounding box is not considered when the corresponding iou is less than the predefined threshold (pham, courtrai, friguet, lefèvre & baussard, 2020). another pillar of the algorithm is non-max suppression. depending on the specific circumstances, the algorithm may find multiple detections of the same object; however, using non-max suppression, the object will be detected only once. yolo has been in several iterations, from yolov1 to yolov7, and each iteration has brought major advancements in features and overall performance. several key features, such as anchor boxes, intersection over union, and non-max suppression, offer great help in detecting objects of various sizes and classes. single shot detectors (ssd) ssd and yolo exhibit numerous parallels. both partition the input image into grids, assessing the presence of objects within each cell. however, their primary difference lies in how they tackle bounding box regression. ssd treats each bounding box prediction as a regression problem, commencing with the anchor box possessing the highest iou and progressively adjusting towards the ground truth bounding box while calculating loss. conversely, yolo predicts multiple bounding boxes for each recognized object, employing non-max suppression to eliminate redundant boxes while preserving the final box coordinates. we have kept the same criteria for evaluating the object detection and face recognition algorithms: total cost of ownership, speed, and accuracy. if we have to compare ssd and yolo against each other, ssd is somewhat more accurate, most of which occurs because of its ability to recognize things of different sizes. however, yolo speed is faster than ssd (sun, 2023). as part of our future work, we will implement both these algorithms in our solution and compare them against each other. we will use available python libraries for both algorithms and check out both cpu and gpu options (kumari sirivarshitha, sravani, priya, & bhavani, 2023). kledia tirana 247 comparison between algorithms deep learning algorithms (cnn-based) generally offer the best accuracy but at the cost of higher computational power (additional steps) and slower processing times. in general, simpler algorithms might be a better choice for speed-critical applications or those with limited resources, but with a trade-off in accuracy. the optimal choice depends on the specific application and its requirements. the table below summarizes the comparison between today's algorithms used for face recognition (to be fair, there are other dimensions to add to the comparisons, such as data set size and complexity, so we are considering an "average" size dataset): table 2 summarizes the comparison between today's algorithms used for face recognition category algorithm computational power accuracy speed traditional eigenfaces low moderate fast fisherfaces low moderate fast local binary patterns (lbp) low moderate moderate support vector machines (svm) low moderate moderate deep learning two stage detection deep learning (cnn-based) ● cnn ● rcnn ● fast rcnn ● faster rcnn high high slow deep learning one stage detection single shot detectors (ssd) moderate high fast you look only once (yolo) moderate high fast source: author own elaboration. (2024) based on the research results and industry feedback, we will consider using one of the deep learning algorithms with one-stage detection since they check all our evaluation criteria. if we stack them against each other (ssd vs yolo), the ssd algorithm provides slightly better accuracy but at the cost of the speed of detection. both these algorithms are implemented in python and provide a practical approach to being utilized in real-life scenarios. comparison between solutions (commercial offerings vs ours) now that we have selected the best-suited algorithm to build our solution, we need to compare it against commercial offerings for small businesses. in the “current video security solutions catering small businesses” chapter, we examined the estimated costs based on publicly available information on the most popular security companies catering to small businesses. a comprehensive evaluation of face recognition software: balancing total cost of ownership, accuracy and speed 248 as we mentioned our solution will be free of charge so we need to consider only the initial costs which include the cost of ip cameras and the computer where the software will be running. there are no specific requirements for ip cameras, so generic ones will be considered adequate for the job. the cost of such cameras is about 30 usd per unit. based on the layout of the building, we believe that a maximum of eight (8) cameras will cover all the spots. buying the cameras in bulk changes the unit economics to 25 usd per unit. the overall cost of cameras is about 200 usd. the computer running the software does not have any stringent requirements. furthermore, this computer is not dedicated to intrusion detection only and can be used for other tasks. for better performance, we can use gpu in addition to cpu, but it is not mandatory. we consider an estimated cost of 800 usd for the computer to cover the highend demand. the following table can be used to compare the commercial offerings versus the solution we are building: table 3 compare the commercial offerings versus the solution we are building company equipment cost monitoring cost (monthly) total yearly cost adt starts at ~$600 starts at ~$37 starts at ~$1,044 simplisafe starts at ~$500 starts at ~$25 starts at ~$800 vivint starts at ~$1,000 starts at ~$40 starts at ~$1,480 frontpoint starts at ~$400 starts at ~$35 starts at ~$820 guardian alarm starts at ~$400 starts at ~$30 starts at ~$760 our solution starts at ~$1,000 free of charge free of charge source: author own elaboration. (2024) while there is an initial investment in hardware (ip cameras and the computer), the solution, which is free of charge, can help small businesses address physical security via intrusion detection. conclusions our initial goal was to find two face recognition algorithms best suited for intrusion detection applications. we evaluated three criteria: total cost of ownership, accuracy, and speed. based on the research results and industry feedback, we will consider using one of the deep learning algorithms for our next research step. having selected our algorithms (deep learning with one-stage detection), we critically examined whether this solution outperformed existing commercial offerings, thereby justifying its use in our research. we believe that our solution addresses the need for intrusion detection. offering it free of charge and having small businesses only purchase the hardware is a valid option for small businesses to address physical security.from an implementation perspective, we will use standard ip cameras (inexpensive) connected to a computer (either cpu or gpu), several linux utilities to convert the video stream to images (we will configure the sampling rate), and kledia tirana 249 then analyze the images. in future work, we will conduct a series of tests on the chosen algorithms (ssd and yolo) to check their accuracy and validate that they are their accuracy and validate that they are the right choice to address the video surveillance security of small businesses. the goal is to exceed 99% accuracy if the person is captured on camera for more than one minute (non-contiguous). we will tune the system to find the ideal sampling video rate and the number of cameras covering an indoor space. based on that, we will calculate the platform's cost and compare it to the current offerings for smaller businesses. references 1. cortes, v., & jose, c. (2021). joint neural networks for one-shot object recognition and detection. 2. faulkner, h. (2021). general and fine-grained video understanding using machine learning & standardised neural network architectures. 3. jiang, l., chen, j., todo, h., tang, z., liu, s., & li, y. (2021). application of a fast rcnn based on upper and lower layers in face recognition (vol. 2021). 4. kumari sirivarshitha, a., sravani, k., priya, k., & bhavani, v. (2023). an approach for face detection and face recognition using opencv and face recognition libraries in python. 2023 9th international conference on advanced computing and communication systems, icaccs 2023. 5. luca, a.-v., simon-várhelyi, m., mihály, n.-b., & cristea, v.-m. (2023). fault type diagnosis of the wwtp dissolved oxygen sensor based on fisher discriminant analysis and assessment of associated environmental and economic impact (vol. 13). mdpi. 6. omer, f. m. (2024). application of principal component analysis to vehicle sales: case study at ibm company. . journal of humanity sciences. . 7. osowski, s., & siwek, k. (2020). cnn application in face recognition (vol. 96). 8. peng, p., portugal, i., alencar, p., & cowan, d. (2021). a face recognition software framework based on principal component analysis. plos one, 16(7 july). 9. pham, m., courtrai, l., friguet, c., lefèvre, s., & baussard, a. (2020). yolo-fine: one-stage detector of small objects under various backgrounds in remote sensing images (vol. 12). 10. rajeshkumar, g., braveen, m., venkatesh, r., josephin shermila, p., ganesh prabu, b., veerasamy, b., jeyam, a. (2023). smart office automation via faster r-cnn based face recognition and internet of things (vol. 27). 11. rajeshkumar, g., braveen, m., venkatesh, r., shermila, p., prabu, b., veerasamy, b., . . . jeyam, a. (2023). smart office automation via faster r-cnn based face recognition and internet of things (vol. 27). elsevier. 12. redmon, j., divvala, s., girshick, r., & farhadi, a. (2016). you only look once: unified, real-time object detection. 13. sun, f. (2023). face recognition analysis based on the yolo algorithm (vol. 2). 14. zhang, h., & cloutier, r. (2022). review on one-stage object detection based on deep learning (vol. 7). 15. živanović, s., abramović, n., živanović, m., & smolović, s. (2023, 4). innovation management on the way to business excellence (vol. 17). 16. business protection from a leader in business security, https://www.adt.com/business accessed 04/04/2024 17. the simplisafe difference, https://www.adt.com/business accessed 18/03/2024 18. security cameras designed to deter real threats, https://www.vivint.com/ppc/cameras accessed 26/02/2024 19. video surveillance, https://www.myshield.org/video-surveillance accessed 20/02/2024 agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 17, no. 2 (2023), pp. 105-109 105 enhancing banking systems through blockchain technology: a currency situation study b. leka (moçka), d. leka, a. malaj blerta leka (moçka)1, daniel leka2, ariet malaj3 1agricultural university of tirana, albania orcid no.: 0009-0000-6734-8237, e-mail: bmocka@ubt.edu.al 2 special court of first instance for corruption and organized crime, albania 3 university college of business, albania abstract: blockchain technology, initially designed for cryptocurrencies like bitcoin, has emerged as a powerful tool in the financial sector. this study explores its potential integration into the albanian banking system. the albanian banking sector, like others worldwide, faces challenges in currency management, security, and efficiency. the research assesses how blockchain can address these issues and aligns with albania's existing regulatory framework. the study begins with an overview of albania's banking sector, highlighting key regulations and practices. it emphasizes the limitations of traditional banking systems, particularly related to transparency, security, and crossborder transactions. blockchain technology's key attributes, such as immutability and transparency, are examined as potential solutions. specific blockchain applications in albania, like cross-border payments, digital identity verification, and supply chain finance, are considered. the comparative analysis evaluates how blockchain can enhance efficiency, reduce transaction costs, and increase access to financial services in the albanian banking system. it also highlights the need for regulatory adjustments to accommodate this technology. challenges, including regulatory compliance, cybersecurity concerns, and interoperability, are addressed, along with strategies to mitigate them. this research provides a comprehensive view of the opportunities and challenges of blockchain technology in albania's banking system, aiming to inform policymakers, financial institutions, and stakeholders about the potential benefits of adopting blockchain solutions while considering regulatory adjustments to create a secure and efficient financial landscape in albania. keywords: blockchain technology, albanian banking system, financial operations and permissioned blockchains. introduction blockchain technology has emerged as a disruptive force in the global financial industry, offering potential solutions to various challenges faced by traditional banking systems. this literature review aims to provide insights into the application of blockchain technology in the banking sector, specifically focusing on currency management and financial operations. additionally, it will shed light on the regulatory framework and current currency management practices within the albanian banking system. numerous studies and case analyses have explored the various applications of blockchain technology in the banking sector. blockchain's role in facilitating secure and transparent transactions, particularly cross-border payments, has been a subject of extensive research. studies by tapscott and tapscott (2016) and mougayar (2016) have highlighted the benefits of blockchain in reducing transaction costs, settlement times, and counterparty risks. furthermore, kshetri (2017) mailto:bmocka@ubt.edu.al enhancing banking systems through blockchain technology: a currency situation study 106 emphasized blockchain's potential to foster financial inclusion by providing secure and accessible banking services, even in underserved regions. in the context of the albanian banking sector, this study seeks to build upon this existing body of knowledge by investigating how blockchain technology can address the specific challenges and opportunities within the albanian financial landscape. it will analyze the potential alignment of blockchain solutions with albanian financial regulations and operational practices, offering valuable insights for policymakers, financial institutions, and stakeholders aiming to harness the transformative power of blockchain while considering necessary adjustments to regulatory frameworks. this research aims to provide a comprehensive view of the opportunities and challenges presented by blockchain technology in the albanian banking system. currency management and financial operations currency management, a critical aspect of banking operations, involves the efficient handling of fiat currencies, liquidity management, and currency exchange. blockchain's application in this domain has attracted attention due to its ability to streamline processes and minimize operational risks. research conducted by böhme et al. (2015) and natarajan and ali (2017) have explored blockchain's role in optimizing liquidity management through real-time settlement systems and tokenization of assets. these studies indicate that blockchain can enhance the liquidity and management of currencies within the banking ecosystem. regulatory framework and currency management practices in albania the albanian banking system operates within a specific regulatory framework influenced by national laws and international standards. to understand the context in which blockchain technology may be integrated, it is essential to analyses the existing regulatory environment and currency management practices in albania. the albanian financial supervisory authority (afsa) plays a pivotal role in overseeing the banking sector's compliance with regulations. the banking law of albania, as of the last knowledge update in september 2021, provides the legal framework for banking activities in the country. currency management in albania encompasses currency issuance, exchange rate policies, and foreign exchange market operations. the albanian central bank, the bank of albania, is responsible for formulating and implementing these policies. blockchain technology blockchain technology has gained prominence in the financial sector as a potential solution to various operational challenges. to assess the suitability of blockchain for the albanian banking system, it is imperative to evaluate its technical aspects, including scalability, security, and interoperability with existing banking systems. additionally, we will explore specific blockchain platforms and solutions that could be relevant in the albanian context. scalability blockchain technology's scalability has been a subject of concern, particularly in public blockchains like bitcoin and ethereum. these platforms face limitations in transaction throughput and processing speed, which can hinder their use for high-volume banking operations. however, blerta leka (moçka), daniel leka, ariet malaj 107 several blockchain projects have focused on addressing scalability issues. solutions like sharding, layer 2 protocols (e.g., lightning network for bitcoin), and consensus algorithm enhancements (e.g., proof of stake) have shown promise in increasing blockchain scalability. it is crucial to assess the scalability of blockchain platforms and solutions in the context of albanian banking operations to ensure they can handle the expected transaction volumes efficiently. security security is a paramount consideration in the banking sector. blockchain technology offers inherent security features, such as cryptographic encryption and immutability, which can enhance data protection and transaction security. however, blockchain is not immune to security threats, and it is vital to assess the risks associated with its implementation. potential security risks in blockchain include smart contract vulnerabilities, 51% attacks (for proof-of-work blockchains), and private key management. the assessment should explore how these risks can be mitigated and how the use of blockchain can improve overall security within the albanian banking system. interoperability interoperability is a critical factor for integrating blockchain technology into the existing banking infrastructure in albania. many blockchain solutions operate on distinct networks, and achieving seamless interaction with legacy banking systems is essential. interoperability protocols and standards, such as interledger protocol (ilp) and token taxonomy framework (ttf), aim to bridge the gap between different blockchain networks and traditional financial systems. the assessment should examine how these interoperability solutions can facilitate the integration of blockchain technology into the albanian banking ecosystem. advantages of using blockchain in the banking system the technical assessment of blockchain technology in the albanian banking context must focus on scalability, security, and interoperability while exploring blockchain platforms and solutions that align with regulatory requirements and operational needs. this evaluation will inform the feasibility and potential benefits of adopting blockchain within the albanian banking system.  blockchain offers potential benefits: the evaluation of blockchain technology indicates that it holds significant potential for enhancing various aspects of the albanian banking system, including currency management, security, and efficiency. its inherent features, such as immutability and transparency, can address existing challenges.  scalability remains a consideration: while blockchain scalability has improved with the introduction of various solutions, it remains a consideration, especially for high-volume banking operations. careful selection of blockchain platforms and scaling solutions is crucial to ensure they meet the demands of the albanian banking sector.  security enhancement: blockchain's cryptographic security features can enhance data protection and transaction security within the albanian banking system. however, it is essential to be aware of potential vulnerabilities, such as those associated with smart contracts and private key management, and implement robust security measures. enhancing banking systems through blockchain technology: a currency situation study 108  interoperability is key: interoperability between blockchain networks and existing banking systems is critical for successful integration. interoperability protocols and standards, such as ilp and ttf, should be explored to ensure seamless communication and data exchange.  customization for regulatory compliance: blockchain platforms like corda, hyperledger fabric, and ethereum enterprise offer customization options to align with regulatory requirements in albania. tailoring blockchain solutions to meet specific regulatory standards is essential to ensure compliance.  consider permissioned blockchains: given the regulated environment of the albanian banking sector, permissioned (private) blockchains or consortium networks may be more suitable than public blockchains. these solutions provide control and privacy while benefiting from blockchain technology.  mitigating risks: implementing blockchain in the banking system should be accompanied by robust risk management strategies. identifying and addressing potential risks associated with blockchain adoption, including regulatory compliance and cybersecurity, is crucial.  pilot projects and regulatory adjustments: to fully realize the benefits of blockchain technology, pilot projects should be initiated to test its feasibility in specific banking operations. regulatory adjustments may be necessary to accommodate blockchain innovations while maintaining a secure and compliant financial ecosystem.  collaboration and education: collaboration between banking institutions, regulatory authorities, and technology experts is essential for a successful blockchain adoption journey. furthermore, continuous education and training programs can help stakeholders understand and harness the potential of blockchain technology effectively.  long-term vision: the adoption of blockchain technology in the albanian banking sector should be viewed as a long-term strategy. as the technology continues to evolve, it is essential to adapt and refine blockchain solutions to meet the changing needs of the financial industry. conclusions blockchain technology offers a promising avenue for improving currency management, security, and efficiency within the albanian banking system. blockchain technology holds substantial promise for enhancing various facets of the albanian banking system, including currency management and operational efficiency. however, scalability and interoperability remain challenges to address. security measures must be robustly implemented, and customization for regulatory compliance is essential. consideration of permissioned blockchains, pilot projects, and regulatory adjustments is prudent. collaboration and education are key to successful adoption, emphasizing a long-term vision for blockchain integration in the albanian banking sector. furthermore, the potential advantages of implementing blockchain in the albanian banking system extend beyond the specific focus areas mentioned. blockchain technology can also foster financial inclusion, offering secure and accessible banking services in underserved regions. it has the potential to reduce settlement times, lower transaction costs, and minimize counterparty risks. moreover, it enables efficient cross-border payments, easing international transactions for businesses and individuals. to fully harness these benefits, it is essential for the albanian banking sector to engage in continuous research and development, staying attuned to blockchain's evolving landscape. blerta leka (moçka), daniel leka, ariet malaj 109 embracing this technology requires a proactive approach, with financial institutions and regulatory bodies working together to create a supportive environment. this collaborative effort, combined with ongoing education and training initiatives, will empower stakeholders to make the most of blockchain technology's transformative potential. in conclusion, in spite of the challenges that arise, the incorporation of blockchain technology into the albanian banking sector demonstrates substantial potential. through the thorough scrutiny and proactive pursuit of the factors and opportunities outlined, albania stands poised to establish a financial landscape that is not only more efficient and secure but also more inclusive. such efforts harmonize with prevailing global trends within the financial industry. references 1. bank of albania. (2021). "decisions by the supervisory council of the bank of albania", publication date: 24.11.2021, https://www.bankofalbania.org/press/press_releases/decisions_by_the_supervisory_council_ of_the_bank_of_albania_24_november_2021.html 2. böhme, r., christin, n., edelman, b., & moore, t. (2015). "bitcoin: economics, technology, and governance." journal of economic perspectives, 29(2), 213-238. 3. charles, v., emrouznejad, a. & gherman, t. a critical analysis of the integration of blockchain and artificial intelligence for supply chain. ann oper res 327, 7–47 (2023). https://doi.org/10.1007/s10479-023-05169-w 4. khalil, m., khawaja, k.f. & sarfraz, m. the adoption of blockchain technology in the financial sector during the era of fourth industrial revolution: a moderated mediated model. qual quant 56, 2435–2452 (2022). https://doi.org/10.1007/s11135-021-01229-0 5. kshetri, n. (2017). "can blockchain strengthen the internet of things?" it professional, 19(4), 68-72. 6. malkar vinod ramchandra, krishan kumar, abhijit sarkar, samrat kr. mukherjee, kirti agarwal, assessment of the impact of blockchain technology in the banking industry, materials today: proceedings, volume 56, part 4, 2022, pages 2221-2226, issn 2214-7853, https://doi.org/10.1016/j.matpr.2021.11.554 7. marr, b., 2023,"the 5 biggest problems with blockchain technology everyone must know about", forbes, https://www.forbes.com/sites/bernardmarr/2023/04/14/the-5-biggest-problemswith-blockchain-technology-everyone-must-know-about/?sh=3980547955d2 8. milo, a., coku, o., 2023, "cee legal matters comparative legal guide: banking/finance albania 2023", cee legal matter, www.ceelegalmatters.com 9. mougayar, w. (2016). "the business blockchain: promise, practice, and application of the next internet technology." wiley. 10. tapscott, d., & tapscott, a. (2016). "blockchain revolution: how the technology behind bitcoin is changing money, business, and the world." penguin. agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 18, no. 1 (2024), pp. 250-261 250 strategies for the development of inernational trade in ukraine t. zubko tetiana zubko state university of trade and economics, ukraine https://orcid.org/0000-0002-8950-1797, e-mail: t.zubko@knute.edu.ua abstract: foreign economic security is one of the key aspects of the stable development of the economy of any country, including ukraine. to strengthen it, it is necessary to develop and implement strategic directions aimed at ensuring reliable and sustainable functioning of the economy and reducing its dependence on external risks. the practical significance of the study of strategies for the development of the state's foreign economic activity is to identify the main guidelines for ukraine's further development in the context of post-war recovery. the purpose of the study is to identify the main strategic directions for the further development of ukraine's foreign trade operations caused by the development of the european integration process, the complication of the political and legal situation, and changes in partnership relations between countries. the following priority areas of action have been identified for ukraine's foreign trade in view of european integration: adherence to and acceleration of the strategic sequence of reforms, taking into account changes in the state of political and economic relations; increasing financial and technical support from the eu, subject to the conditions for increasing the transparency of cash flows and the efficiency of their use; increasing partnership with non-european countries. keywords: international trade, european integration, neo-protectionism, war, development. introduction the intensification of international relations and trade is driven by their dynamics and the growing integration of states. the number of strategic alliances in international business is steadily increasing. for ukraine, this issue is relevant because there is a growing need to develop partnerships in modern business under martial law and integration processes in the global economy. at the same time, there is a phenomenon of neo-protectionism that significantly complicates ukraine's foreign trade, weakened by russia's aggression, which has destroyed most logistics connections. the purpose of the study is to identify the main strategic directions for the further development of ukraine's foreign trade operations caused by the development of the european integration process, the complication of the political and legal situation, and changes in partnership relations between countries. to achieve this goal, the tools of theoretical generalization, analysis and synthesis were used. based on the results of research by leading scholars, the main challenges accompanying the development of ukraine's trade with partner countries are identified. https://orcid.org/0000-0002-8950-1797 mailto:t.zubko@knute.edu.ua tetiana zubko 251 foreign economic security is one of the key aspects of the stable development of the economy of any country, including ukraine. to strengthen it, it is necessary to develop and implement strategic directions aimed at ensuring reliable and sustainable functioning of the economy and reducing its dependence on external risks. the practical significance of the study of strategies for the development of the state's foreign economic activity is to identify the main guidelines for ukraine's further development in the context of post-war recovery. ukraine's international trade with eu a country's foreign economic activity is important in addressing a number of issues related to the sustainable functioning of the economy and preventing crises. this sector is responsible for providing the necessary resources, technologies, and innovations required for the production of goods. the development of foreign trade helps to build up the resource potential and ensures the growth of national income. the need to improve ukraine's foreign economic activity is caused by the problems of the economy's dependence on monopoly markets for imports of goods and resources, the quality of exported goods, and the expansion of their supply. ukraine cannot stay away from the integration processes taking place in the global economic space. the decline in gdp and the corresponding depreciation of key economic assets limits the creation of added value at ukrainian enterprises and significantly reduces their economic security. however, there is an increase in ukraine's commodity trade with the eu member states; since 2016, there has been a gradual increase in cooperation with the eu in both exports and imports of goods, which is shown in table 1. table 1 exports and imports of ukrainian goods from the eu and other countries in 2014-2023, usd billion years exports import the eu other countries total the eu other countries total 2014 17,00 36,90 53,90 21,07 33,36 54,43 2015 13,02 25,11 38,13 15,33 22,19 37,52 2016 13,50 22,86 36,36 17,40 21,85 39,25 2017 17,53 25,73 43,26 20,80 28,81 49,61 2018 20,16 27,17 47,33 23,22 33,97 57,19 2019 20,75 29,30 50,05 25,01 35,79 60,8 2020 18,61 30,60 49,21 23,50 30,59 54,09 2021 26,79 41,30 68,09 28,30 44,52 72,82 2022 27,80 16,40 44,20 27,00 28,30 55,30 2023 22,69 13,50 36,19 43,20 20,36 63,56 resource: zubko, 2021. the decline in the volume of domestically produced goods was accompanied by a corresponding decline in its export potential. by the end of 2023, the share of ukraine's strategies for the development of inernational trade in ukraine 252 merchandise exports in global exports decreased to 0.19%, which is half of the 2014 year’s figures. the decline in exports also affected the ability to supply imported goods. the share of domestic imports in world trade fell to 0.2% in 2023, which is also half the level of 2014. the aggressive expansion of commodity imports has led to a significant deformation of the domestic commodity market, causing the decline of key industries and a critical accumulation of the trade deficit: -2.9% of gdp in 2014, -12.8% of gdp in 2023. analyzing the state of ukraine's foreign trade relations in 2014-2023, it can be concluded that ukraine's commodity trade with the eu member states retains its potential. the current globalization of trade processes presents a number of challenges for ukraine, related to the search for new sources of competitiveness and the creation of new economic partnerships, in cooperation with which our country could accelerate the modernization of the national economy. russia's war has caused problems for exports, brought about new economic aspects of such a war, and necessitated new comprehensive economic deterrence measures and tools to counteract aggression. this problem is exacerbated by the need to reconsider the concept of ensuring ukraine's economic security in the context of military aggression unleashed since 2014. the deterioration of the socioeconomic situation in our country caused by the war with russia, the pandemic, and the unfavorable external environment have led to a decrease in ukraine's foreign trade. in 2022, ukrainian business exported goods worth usd 44.1 billion. this is a third less than in the previous year. in the year 2023, ukraine encountered a significant shortage of goods amounting to more than usd 26 billion owing to logistical challenges and defense requirements. in 2023, our country mainly exported the following groups of goods: cereals (18.5%), fats and oils (13.1%), and ferrous metals (12.7%). ukraine mainly imported the following categories of goods: fuel (mineral 17.2% and nuclear 8.1%), means of land transport (10.8%), electrical machinery, equipment, and parts thereof (9.4%), plastics, polymeric materials and products thereof (6.1%). economic instability as an environment for the formation of neo-protectionism according to analysts (world bank, 2023), trade liberalization in the period 1990-2008 allowed for the intensification of international trade relations and increased the incomes of countries. this process contributed to the formation of the global economy and reduced poverty in many countries. the current state of international trade is characterized by increasing transformations in commodity market relations and the phenomenon of neo-protectionism. many scholars have studied the development of international trade in the context of neo-protectionism (zalizniuk, 2024; kaliuzhna, 2023; abboushi, 2010; lang, 1984; mazaraki & melnyk, 2019). based on the analysis of the works of these scholars, several main conclusions can be drawn. firstly, protectionism (hager, 1982) is a means of ensuring state autonomy in the spheres of national production from unauthorized competitive actions. this statement implies that neoprotectionism provides advantages for the state trade and export sector to increase the state budget and improve the situation of commodity producers in a given country (lang, 1984). secondly, according to research by scholars (zalizniuk, 2024; ishchuk, 2021), neoprotectionist tools include the establishment of different quality standards for foreign producers, the introduction of additional export restrictions, and rules for granting subsidies. tetiana zubko 253 third, neo-protectionism manifests itself in a variety of ways, in different areas: environmental, integration and disintegration, trade in goods and raw materials, customs and tariffs, fuel, and others. fourth, the trade war is one of the manifestations of neoprotectionism. although it has a negative sound, the restriction of exports of certain groups of goods and services by states associated with trade giants is a means of weakening competition in international trade and at the same time is an incentive for national producers. in turn, this causes the development of innovations within the framework of national development strategies. strategic determinants of ukraine's foreign trade in the postwar period the development of the global economic system and its subsystems at different levels (countries, economic sectors, enterprises) is taking place in the context of increasing globalization and international strategic partnership. there is a need to review and improve international integration processes. growing global and regional competition, intensifying rivalry for markets and resources pose new challenges, but also opportunities for the emergence of new joint associations at different levels. today, the priority in ukraine is to save the population and restore the country's economy to a healthy state. russia's invasion has shown which countries have become our partners and will continue to be so. most of the world (140 out of 184 countries) condemn russia's aggression and are trying to reduce trade ties with it. this gives ukraine an opportunity to increase its exports. the selection of priorities is essential for a consistent and sustainable transition to the conditions of operation defined by the association agreement and the establishment of a deep and comprehensive free trade area. in the current state of political, economic, and social crisis, a novel paradigm for the advancement of the nation, society, and individuals is being established. in view of ukraine's european integration, the following priorities are set for foreign trade accelerating and maintaining the sequence of reforms, taking into account changes in political and economic relations; increasing financial and technical support from the eu, fulfilling the conditions for increasing the level of transparency of cash flows and the efficiency of their use; improving partnerships with non-european countries. the first direction is acceleration of strategic reforms includes the following provisions: identify and accelerate institutional transformations related to the business environment; to facilitate relations between business communities in the eu and dcfta countries; ensure the consistency of reforms aimed at addressing the problems of competitiveness of ukrainian products and their access to markets. the second area is to increase the eu's financial and technical support for the fulfillment of cooperation and reform conditions. according to the pulse of the agreement resource, 3 billion euros were planned to be allocated in 2022 to help ukraine implement reforms to join the eu (laptіev & sidak, 2019). under the horizon europe program, ukraine will receive additional funds for grants and research (horizon europe, 2024). the eu-ukraine association agreement has a significant impact on ukraine's pursuit of its interests in the context of globalization. as a supplement to the dcfta, the agreement strategies for the development of inernational trade in ukraine 254 has contributed to the formation of trade preferences and an increase in tariff quotas for key export items. accordingly, the share of foreign trade turnover with the eu increased significantly from 21.6% (in 2020) to 44.8% (in 2021), in exports from 32.1% to 39.8%, and in imports from 33.6% to 44.6%. in 2022, the share of eu exports in total exports from ukraine was 63%, and in 2023 62.7%. increasing trade with the eu is fully in line with ukraine's national interests. this has determined the main vectors of economic, technological, and innovation progress that led to ukraine's accession to the eu's “four unions”: energy and customs unions, the introduction of the digital market, and the association with the schengen area. the largest volumes of foreign direct investment (fdi) were invested by non-residents from eu countries. this facilitates the movement of investment and credit capital. in 2021, fdi in ukraine's economy amounted to usd 6.747 billion. most fdi came from the netherlands is usd 922.8 million and germany is usd 242.9 million. at the same time, investors from switzerland returned usd 112.7 million of investments, and usd 83 million was withdrawn from ukraine by cyprus. prior to that, cyprus was the largest source of foreign investment in ukraine. most investments came from the following countries: cyprus, the netherlands, the united kingdom, germany, france, and austria. this was facilitated by the adoption of the law of ukraine "on the regime of foreign investment." however, as of today, the volume of foreign investment has declined significantly due to russian intervention. in 2022, the volume of foreign direct investment in ukraine amounted to usd 1,152 million. however, integration and globalization processes have a number of challenges in addition to their benefits. macroeconomic threats include increased political and economic dependence, accelerated changes in market conditions, and increased competition for sources of raw materials and markets. this process is based on the uneven socio-economic, technical and technological development of different regions. ukraine has chosen the path of european integration, which requires balanced changes and transformations in many aspects of public life. the main challenges today are: the unsatisfactory efficiency of the governance system in ukraine, certain complications within the eu, russia's war against our country, and the consequences of the covid-19 pandemic. at the same time, we can feel the eu's support in this difficult time for ukrainians, as evidenced by the launch of the eu candidate status procedure. for successful cooperation with the eu, ukraine should work in the following areas:  updating the agreement to liberalize the conditions for mutual trade;  changes in product certification in accordance with eu legislation;  creation of a common aviation area;  deepening cooperation in science and technology;  cooperation in the healthcare and pharmaceutical sectors;  increased business collaboration and employment. the third direction is to build up strategic partnerships with non-european countries: the united states, turkey, china, israel, and japan. these countries are powerful technological and financial centers. tetiana zubko 255 as the events of the last year have shown, in the military-political and economic spheres, it is important to build a strategic partnership with the united states. this supports ukraine in its efforts to integrate into european and north atlantic structures. currently, ukraine receives perhaps the largest financial assistance from the united states, especially through the pentagon's military aid. in recent years, cooperation in the it, agricultural, energy, and military sectors has increased. at the same time, the volume of investments in ukraine's economy and ukrainian exporters' access to the american market has increased. ukraine has been perceived as an outpost of democratic states, but not all-american politicians understand this. most asian countries have great potential for partnerships. china, japan, and south korea are friendly partners for ukraine. over the past decade, china has been ukraine's second-largest trading partner. our country closely cooperates with china in agriculture, medicine, and electronics. china buys grain, meat, and meat products from ukraine, for which it has introduced its own certification of ukrainian agricultural products. among asian countries, turkey is worth mentioning. in recent years, turkey's role as both a political and economic partner of ukraine has grown significantly. to this end, a free trade agreement was signed, and cooperation in the military-technical and defense-industrial sectors was established. to study the possibilities of realizing ukraine's export potential in the eu and asian markets, we calculated the relative comparative advantages in the structure of exports and imports by commodity groups using the formula: 𝐶𝐴𝑖𝑗 = ln [ 𝐸𝑥𝑖𝑗 𝐼𝑚𝑖𝑗 𝐸𝑥𝑖 𝐼𝑚𝑖 ] , where caij is the indicator of the comparative advantage of the i-th country for the jthproduct; exi, imi exports and imports of the i-th country; exij, imij exports and imports of the j-th product of the i-th country. if caij>0, then for the j-thproduct it means that the i-th country has a comparative advantage in exports to other countries. if caij<0, it means that it is not advisable for ukraine to export this product (mazaraki, 2019, p. 360). calculations of the comparative advantages of ukraine's commodity groups in 20172021 (zubko, 2022). it has been determined that in ukraine, among the 96 product groups listed in the nomenclature, only 28 have comparative advantages and so far only they are expedient to sell on the world market. the highest coefficient of comparative advantages in 2021 is observed in the following product groups: cereals (4.38), ore, slag, and ash (3.03), fats and oils of animal or vegetable origin (2.83), plant materials for the manufacture of wickerwork (2.55), ferrous metals (2.27), natural and artificial fur (2.14), products of plant origin (2.05), wood and wood products, etc. as of 2022 and 2023, the situation has changed, with the following commodity groups having comparative advantages: cereals (4.69), ore, slag, and ash (5.63), plant materials for the manufacture of wicker goods (4.28), and products of the flour and cereal industry (2.45). this calculation provides the basis for determining the product groups that are economically feasible for export. strategies for the development of inernational trade in ukraine 256 the leaders in export value in 2022 were: corn (usd 5.94 billion), sunflower oil (usd 5.46 billion), iron ore (usd 2.9 billion), wheat (usd 2.6 billion), and rapeseed (usd 1.54 billion). therefore, it is advisable to increase exports of those commodity groups that have greater comparative advantages and higher added value. to identify problems and directions for the development of export potential, we have analyzed the volume of imports from the eu-27 and asia in 2020-2023 by commodity groups (according to ukraine's code) in value terms and ukraine's comparative advantages in each of these markets. the share of exports from ukraine to eu countries and the coefficient of comparative advantages of ukrainian exports are shown in table 2. table 2 share of exports from ukraine to the eu and the coefficient of comparative advantage of ukrainian exports code and name of the product item ukraine's share of eu imports, % cais of ukraine in the eu market, units. 2020 2021 2022 2023 2020 2021 2022 2023 10. grain crops 9,46 10,13 7,2 7,7 3,84 4,28 3,2 3,0 26. ores, slag, and ash 7,69 8,2 4,1 2,6 2,3 2,93 1,7 1,4 15. fats and oils of animal or vegetable origin 9,80 10,2 5,1 2,3 2,9 2,73 1,6 1,5 14. plant materials for the manufacture of wicker products 0,24 0,23 0,2 0,1 4,09 2,45 2,0 1,7 72. ferrous metals 13,32 14,2 2,1 0,5 1,88 2,17 1,8 0,3 43. natural and artificial fur 0,11 0,11 0,08 0,05 1,63 2,04 0,78 0,66 12. seeds and fruits of oil seeds 6,65 7,2 4,2 4,0 1,44 1,66 1,4 1,2 23. residues and waste from the food industry 2,48 2,51 1,7 0,6 1,62 1,58 1,2 1,05 44. wood and wood products 5,25 5,8 5,1 4,1 1,41 1,51 1,4 1,4 the following groups had the largest share in the volume of imports to the eu in 2022-2023: 1. cereals in 2021 amounted to 10.13%. in 2022, grain exports from ukraine were limited to 500 thousand tons per month due to russia's invasion, which is ten times less than the pre-war volume. this season, the volume of exports from ukraine will decrease. the balance of grain to be exported, according to the ministry of agrarian policy, was 17 million tons. this included 10 million tons of corn, 6,700 thousand tons of sunflower and its products, and 730 thousand tons of soybeans. at the end of 2022, these products were exported. the government has established new rules for the export of agricultural goods, in particular, it is forbidden to export: oats, millet, buckwheat, sugar, salt, rye, cattle, and meat of domestic animals. this means a de facto export ban. the following can be exported under the specified declarative licensing: wheat and a mixture of wheat and rye, corn, chicken meat, tetiana zubko 257 chicken eggs, sunflower oil (www.ukrstat.gov.ua). however, grain crops are not final products and have no added value. ukraine's exports are focused on raw materials, the markets for which are not stable and cannot generate significant profits. 2. in 2021, ukraine exported vegetable oils (sunflower, soybean, rapeseed, mustard, linseed), margarine, and products from vegetable and animal fats and oils, as well as animal fat, for usd 7.05 billion. this is 22.2% higher than in 2020. exports of sunflower oil in 2021 amounted to 6.05 billion usd. this is 90.8% of the total revenue in this product group. soybean and rapeseed oil were also supplied to foreign markets — by usd 0.29 billion (4.1%) and usd 0.29 billion (4.1%). usd (4.1%) and usd 0.22 billion (3.2%), respectively. usd (3.2%), respectively. in 2021, margarine and products from vegetable and animal fats and oils were exported for usd 87 million (2%). usd (1.2%), and pork and poultry fat by usd 14.5 million (0.2%) (zubko, 2022). in 2022, sunflower oil was exported for 5.46 billion usd. usd, which was slightly less than in 2021. 3. exports of seeds and fruits of oil seeds in 2020 amounted to 7.42%. there was an increase in this indicator during the entire study period, before the start of full-scale aggression. in 2022, rapeseed seeds and cake were sold for usd 1.54 billion. this is less than the pre-war level (in 2021 1.67 billion usd). 4. exports of ferrous metals in 2021, according to the state customs service, increased by usd 6.3 billion. (+81.4%) to usd 13.96 billion on the world market. the company's share of the global market is up to usd 96 billion. customs statistics show that the revenue of ukrainian metallurgical enterprises from the export of ferrous metals in january-november 2021 increased by 81% compared to january-november 2020, to usd 12.62 billion. however, in 2022, this figure dropped to almost zero for obvious reasons. 5. exports of ore, slag and ash to the global market increased by usd 2.98 billion. (+77%) to usd 6.9 billion in 2021. usd in 2021. price pressure in the iron ore markets prevents significant profits from the sale of this product. in 2022 and 2023, trade in these products decreased by 90%. in 2022, ukraine received usd 2.9 billion for the sale of iron ore. 6. exports of wood and wood products in 2021 amounted to 5.8%. the situation in 2022-2023 also affected this product, as the share of exports decreased significantly. an analysis of ukraine's merchandise exports to the eu shows that most of these goods are not final products and are used for intermediate consumption. accordingly, all these items do not create significant added value, and this confirms the current focus of ukraine's exports on raw materials. table 3 calculates ukraine's share of asian imports and the coefficient of relative comparative advantage of ukrainian exports. ukraine's main trading partners in asia are china, india, turkey (97% of the country's area is in asia and 3% in europe), indonesia, and saudi arabia. in 2021, the shares of some commodity items changed. table 3 share of exports from ukraine to asian countries and the coefficient of relative comparative advantage of ukrainian exports in the asian market item code and name of the ukraine's share in asian caij of ukraine in the strategies for the development of inernational trade in ukraine 258 product imports, % asian market, units. 2020 2021 2022 2023 2020 2021 2022 2023 10. grain crops 24,33 18,56 6,7 6,5 3,87 4,25 2,56 1,46 26. ores, slag, and ash 15,3 8,30 0,54 0,34 2,32 2,9 1,25 1,15 15. fats and oils of animal or vegetable origin 16,98 3,52 4,80 2,0 2,93 2,7 2,8 2,8 14. plant materials for the manufacture of wicker products 0,001 0,003 0,2 0,2 4,12 2,42 3,14 2,14 72. ferrous metals 14,63 36,24 0,64 0,01 1,91 2,14 1,99 0,69 12. seeds and fruits of oil seeds 1,81 3,55 1,1 0,8 1,47 1,63 1,7 1,7 23. residues and waste from the food industry 4,51 4,38 1,3 1,1 1,65 1,55 1,2 1,39 44. wood and wood products 1,88 1,67 0,49 0,34 1,44 1,48 1,4 1,2 02. meat and edible offal 1,81 0,6 0,51 0,33 1,28 1,32 1,51 1,51 11. products of the flour and milling industry 0,58 0,31 1,23 1,24 1,39 0,86 1,69 1,69 28. inorganic chemical products 0,623 1,675 0,03 0,8 0,82 0,77 0,68 0,68 the following items account for the largest share of imports in the asian market: 1. exports of ferrous metals amounted to 36.24% in 2021. in recent years, the share of ferrous metals in total exports of goods to the asian market has increased 22 times. as can be seen from table 3, ukraine has currently reduced the exports of this item. 2. the volume of grain exports in 2021 was 18.56%. in 2021, the turnover of trade in agri-food products between ukraine and asia increased by 22% compared to the previous year's figures for the corresponding period and reached $ 10.8 billion. at that time, the largest volumes of exports in the asian direction were made to pakistan, south korea, thailand, israel, bangladesh, indonesia, jordan, the philippines, and yemen. among the largest consumers of barley in asia are saudi arabia (70% of total exports), turkey, iran, and israel. the high demand for barley in the middle east is primarily due to its use for feed, including for camels in the arabian peninsula. the asian market is the second-largest buyer of corn in ukraine. in 2023, this figure decreased to 6.5%. 3. the volume of trade in ore, slag, and ash in 2021 was 8.3%, and in 2022 and 2023 this figure decreased significantly. 4. exports of food industry residues and waste in 2021 amounted to 4.38%. this group of exports includes waste and residues from starch production, beet pulp, soybean, sunflower, rapeseed, flax, beer production waste, etc. these residues and wastes are used in the production of animal feed, fertilizers, and as raw materials in chemistry and pharmaceuticals. 5. the export volume of the item “fats and oils of animal or vegetable origin" in 2021 was 3.52%. during 2020-2021, there was a significant decrease in this indicator (from 16.98% in 2020 to 3.52% in 2021). comparing this indicator in 2022 and 2023 with the previous ones, there is a significant decrease. 6. exports of seeds and fruits of oil seeds were at 3.55% in 2021 and 2.1% in 2022. high economic growth rates and an increase in the population of middle-income asians are tetiana zubko 259 leading to an increase in the consumption of food products of both plant and animal origin. this indicates the prospects for expanding the market for ukrainian agricultural products (official site of the state statistics service of ukraine, 2024). this analysis makes it possible to identify the shares of domestic export commodity groups that are currently sold in the eu and asian markets, compare them with the values of relative comparative advantages, and identify the most priority commodity groups of ukraine's exports to the eu and asian markets. given the war, ukraine's export opportunities are severely limited. for developing economies, including ukraine, low global commodity prices pose significant challenges. under such conditions, global trade and investment will not grow. at the same time, as the share of middle-income people in asia and north africa increases, consumption of both plant and animal food will rise. this opens up significant prospects for expanding the market for domestic agricultural products. as of 2022, there have been many innovations in eu phytosanitary regulations. ukraine has prospects for increasing the flow of agricultural products to the eu, only if it complies with them. cooperation with china, which has simplified phytosanitary protocols for agricultural products, is also promising. ukrainian farmers can export corn, soybeans, barley, and sunflower oil to china. it is necessary to expand the range of goods and services that can be supplied to this country. in addition to the chinese market, the markets of japan and south korea are of great interest to ukraine in the southeast asian region. due to the practical unsuitability of their territories for growing grain, demand for agricultural products will be high. the prospects for southeast asia are complemented by the high potential for suppliers of oil seeds and fruits. the attack on ukraine in february 2022 and ukraine's focus on eu accession have led to a redistribution of export commodity groups, as well as to the emergence of challenges and benefits of the european integration process. accordingly, the indicators for assessing it have changed. as of today, ukraine's export opportunities are significantly limited. comparing the state and opportunities for foreign trade in 2021 and 2023, it is clear that ukraine's economy is only partially able to export commodity products. according to forbes ukraine magazine, in january-august 2023, ukraine exported goods worth $24.5 billion, of which the budget received uah 465.8 million as a result of export duties. exporters received 15% less revenue compared to the same period in 2022 ($28.9 billion) and 41% less compared to $41.8 billion in the first eight months of 2021. the decline in revenue in 2023 is due to the fact that in january and february 2022, before the full-scale invasion of russia, ukrainian exports were record-breaking. comparing the six-month period from march to august, exports in 2023 grew by 2% compared to the same period in 2022 (hvozdeva, 2023). the most important categories of goods from ukraine in the first eight months of 2023 are:  food ($14.6 billion)  metals and metal products ($2.7 billion)  machinery, equipment, and transport ($2.1 billion). exports of agricultural products are five times higher than exports of metallurgical goods, although for decades they have been quite equivalent channels for bringing foreign exchange earnings to ukraine. strategies for the development of inernational trade in ukraine 260 also, such commodity groups as mineral products, chemicals, and wood are insignificantly represented in exports. in fact, ukraine is present on the export market as a country that trades in food. the other items listed above continue to decline, as most of the territory is either occupied or unable to function economically at the proper level. the situation can be improved by investments of friendly countries in innovations and development of ukrainian industry, and the end of the war. conclusions ukraine's foreign trade has been dynamically reoriented toward european markets and new logistics routes, which has significantly eased the restrictions imposed by the aggressor's blockade of black sea ports. this was facilitated by the decisions of the eu and a number of other important trading partners to liberalize access for ukrainian goods, as well as important decisions to improve the transportation of ukrainian goods through the eu. ukraine has taken influential steps to restart the work of its export credit agency. the main determinants of the negative impact on ukraine's trade are: the war with russia, lower prices on global commodity markets, the raw material orientation of our country's exports, the lack of political and economic reforms, the decline in the purchasing power of the population. and the epidemics that have accompanied our lives over the past decade. the redistribution of levers of influence in the global arena continues, which increases uncertainty and complicates any decision-making in the economy. priority areas of action for ukraine's foreign trade have been identified: accelerating reforms, increasing requests for financial and technical support from the eu, and strategic partnerships with noneuropean countries. ukraine should work in all the proposed areas, taking into account the advantages and challenges of each. the main direction is conditioned by the signing of the association agreement and involves continuing reforms and adjusting the provisions of the agreement to correct the asymmetry of trade flows that has developed at this time. changes in the agreement will allow ukraine to supply goods with more added value than raw materials to the world markets. another direction is also already available in ukraine through the horizon europe program and provides opportunities to increase the country's innovation potential and, accordingly, trade flows in the future. the article identifies the possibilities of realizing ukraine's export potential in the eu and asian markets by calculating relative comparative advantages by product groups. it is established that trade with the eu does not provide significant benefits for ukraine, since most export items do not create sufficient added value. accordingly, it is necessary to correct the deformation of the commodity structure of exports and imports from the eu. the study of the comparative advantages of ukrainian exports in the asian market identified those commodity groups that have prospects for development, such as plant materials, natural and artificial fur, ships, lead and lead products, meat and offal. these commodity groups have a slightly higher added value than those currently sold. the findings will be used to substantiate state policy to support national producers of higher value-added products in order to create conditions for the formation of new and joining existing global value chains, which should significantly increase the level of economic security of ukraine's trade. tetiana zubko 261 references 1. abboushi, suhail. (2010). trade protectionism: reasons and outcomes. competitiveness review: an international business journal incorporating journal of global competitiveness. 20. 384-394. 10.1108/10595421011080760. 2. hager, w. (1982). protectionism and autonomy: how to preserve free trade in europe. international affairs (royal institute of international affairs), vol. 58 (3), p. 413-428. 3. horizon europe. research and innovation. url: https://research-andinnovation.ec.europa.eu/funding/funding-opportunities/funding-programmes-and-opencalls/horizon-europe_en (date of access: 29.03.2024). 4. hvozdova, o., kornyliuk, r. (2023). the strong shoulder of farmers. electronic magazine «forbes ukraine». https://forbes.ua/money/silne-pleche-agrariiv-za-visim-misyatsiv-2023go-agrosektor-prinis-ukraini-u-pyat-raziv-bilshe-viruchki-nizh-metalurgiya-zagalom-mieksportuvali-tovariv-na-245-mlrd-yaki-kraini-kupuyut-ukrainske-dosli-11102023-16579 (accessed march 11, 2024). 5. ishchuk, yu. (2021). mechanisms of neo-protectionism in modern commodity markets. eastern europe: economics, business and governance. 6 (33). p. 22-30. 6. kalyuzhna n., kudyrko l. (2023). effectiveness of trade and economic integration of asymmetric countries: assessment methods and tools. journal of economy and technology. 2023. 11. p. 119 – 126. retrieved from https://www.sciencedirect.com/science/ article/pii/s2949948823000124 7. lang, f. p. (1984). neo-protectionism and economic growth. intereconomics: verlag weltarchiv, vol. 19 (3), p. 129-133. 8. laptіev s., sidak v., mihus i., koval y. threats to economic security of ukrainian emitents after placement of shares on foreign markets. management mechanisms and development strategies of economic entities in conditions of institutional transformations of the global environment: collective monograph. przeworsk (poland), 2019. 186-195 р. 9. mazaraki, a.a., melnyk, t., m. @ oth. (2019). strategic partnership in terms of economic security of ukraine. monograf, kyiv. 752 p. 10. official site of the state statistics service of ukraine. official site of the state statistics service of ukraine. url: http://www.ukrstat.gov.ua (date of access: 02.02.2024). 11. world bank group. protectionism is failing to achieve its goals and threatens the future of critical industries. world bank. url: https://www.worldbank.org/en/news/ feature/2023/08/29/protectionism-is-failing-to-achieve-its-goals-and-threatens-the-futureof-critical-industries (date of access: 30.03.2024). 12. zaliznuik, v. (2024). influence of neo-protectionism on formation international trade alliances. current issues in modern science. 2(20), p. 37 –46. url:. current issues in modern science. 2(20). p. 37–46. retrieved from https://scholar.google.com.ua/citations?view_op=view_citation&hl=uk&user=lpsn88saaa aj&sortby=pubdate&citation_for_view=lpsn88saaaaj:nmxildl6lwmc 13. zubko, t.l. (2021). european integration: benefits and threats to ukraine's foreign trade. in foreign trade. 6 (119). p. 69–86. https://doi.org/10.31617/zt.knute.2021(119)06 retrieved from http://zt.knute.edu.ua/files/2021/06(119)/8.pdf 14. zubko, t.l. (2022). assessment of ukraine's place in the international business system. black sea economic studies. 76. 30–38. http://bses.in.ua/journals/2022/76_2022/6.pdf https://research-and-innovation.ec.europa.eu/funding/funding-opportunities/funding-programmes-and-open-calls/horizon-europe_en https://research-and-innovation.ec.europa.eu/funding/funding-opportunities/funding-programmes-and-open-calls/horizon-europe_en https://research-and-innovation.ec.europa.eu/funding/funding-opportunities/funding-programmes-and-open-calls/horizon-europe_en https://forbes.ua/money/silne-pleche-agrariiv-za-visim-misyatsiv-2023-go-agrosektor-prinis-ukraini-u-pyat-raziv-bilshe-viruchki-nizh-metalurgiya-zagalom-mi-eksportuvali-tovariv-na-245-mlrd-yaki-kraini-kupuyut-ukrainske-dosli-11102023-16579 https://forbes.ua/money/silne-pleche-agrariiv-za-visim-misyatsiv-2023-go-agrosektor-prinis-ukraini-u-pyat-raziv-bilshe-viruchki-nizh-metalurgiya-zagalom-mi-eksportuvali-tovariv-na-245-mlrd-yaki-kraini-kupuyut-ukrainske-dosli-11102023-16579 https://forbes.ua/money/silne-pleche-agrariiv-za-visim-misyatsiv-2023-go-agrosektor-prinis-ukraini-u-pyat-raziv-bilshe-viruchki-nizh-metalurgiya-zagalom-mi-eksportuvali-tovariv-na-245-mlrd-yaki-kraini-kupuyut-ukrainske-dosli-11102023-16579 https://www.sciencedirect.com/science/%20article/pii/s2949948823000124 https://www.sciencedirect.com/science/%20article/pii/s2949948823000124 http://www.ukrstat.gov.ua/ https://www.worldbank.org/en/news/%20feature/2023/08/29/protectionism-is-failing-to-achieve-its-goals-and-threatens-the-future-of-critical-industries https://www.worldbank.org/en/news/%20feature/2023/08/29/protectionism-is-failing-to-achieve-its-goals-and-threatens-the-future-of-critical-industries https://www.worldbank.org/en/news/%20feature/2023/08/29/protectionism-is-failing-to-achieve-its-goals-and-threatens-the-future-of-critical-industries https://scholar.google.com.ua/citations?view_op=view_citation&hl=uk&user=lpsn88saaaaj&sortby=pubdate&citation_for_view=lpsn88saaaaj:nmxildl6lwmc https://scholar.google.com.ua/citations?view_op=view_citation&hl=uk&user=lpsn88saaaaj&sortby=pubdate&citation_for_view=lpsn88saaaaj:nmxildl6lwmc https://doi.org/10.31617/zt.knute.2021(119)06 http://zt.knute.edu.ua/files/2021/06(119)/8.pdf http://bses.in.ua/journals/2022/76_2022/6.pdf agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 17, no. 2 (2023), pp. 170-180 170 main directions of accelerating regional socioeconomic development in the digital era a. t. ruhangiz, a. f. zaur aliyeva tofik ruhangiz1, aliyev zaur farid2 1 azerbaijan architectural and construction university (azacu), azerbaijan, orcid id 0000-0002-5214-006x, e-mail: ruhangiz.aliyeva@azmiu.edu.az 2 azerbaijan state economic university (unec), orcid id 0009-0003-1190-6991 abstract: international experiences show that one of the most important indicators for the sustainable and balanced development of each country is the socio-economic development level of the country's regions. the digital information presented by the digital economy is widely used in the direction of solving the socio-economic problems of the regions and opens great opportunities for increasing the effectiveness of the economic policy of the regions. ensuring sustainable economic and social development of regions is part of the regional economic policy implemented by the state. currently, in the international practice, the regional policy of the state is evaluated as an activity of managing economic and social development in the country through the creation of economic relations between the state and the regions of the country. despite the implementation of a number of state programs in the field of socioeconomic development of regions in the country, as well as the attention paid to regional development issues in a some program documents of the government and the achievement of certain progress in this direction, sharp differences and inequality between the levels of socioeconomic development of the country's regions continue. does. this difference is particularly sharp between the baku-absheron zone and all other regions of the country. in the article, the current state of inequality in regional socio-economic development is analyzed based on official statistical data and its causes are investigated. then, the policy steps implemented by the government so far in order to eliminate this problem are examined.the article examines the impact of measures resulting from the analysis of state programs and strategic road maps on the socio-economic development of regions. in the end, the economic benefits of digitization in economic regions were specified and presented in the form of recommendations. keywords: region, socio-economic development, economy, international experience, digital technologies. introduction in the digital era, equal development of regions remains the main way of economic development. it has become the main source of sustainable economic development in developed countries by creating conditions for attracting the natural, labor and financial resources of underdeveloped regions to the economic cycle in order to ensure interregional equal development. the cheap labor reserves of underdeveloped regions, rich natural resources, and favorable geographical location require investors to invest in these regions. even today, the issue of ensuring the balanced development of the country's regions has become one of the very important factors that ensure the fairness and usefulness of the state's regional policy in our country. this, in turn, ensured that the solution of a number of issues related to economic development was brought to the fore both theoretically and practically. mailto:ruhangiz.aliyeva@azmiu.edu.az aliyeva tofik ruhangiz, aliyev zaur farid 171 the main goal of the article is to develop economically sound scientific and methodological approaches to identifying the socio-economic aspects of sustainable development of regions in the digital economy. research methodology the methodological basis of the study was research by domestic and foreign scientists on various aspects of assessing the socio-economic development of regions, and articles from specialized journals. the article used research methods: comparative and swot analysis, systems approach. the regions are diverse according to their potential, according to the structure of their natural resources, according to the level of employment. the main factors that distinguish economic regions from the economic, geographical and historical point of view can be shown as follows: natural conditions and resources; economic-geographic location; territorial and field structure of regions; population settlement level; historical development features. (ağayev, mehtiyev, 2021) one of the stimulating forces of the economic development of any country is the organization of state regulation in the economic sphere. today, at a time when economic subjects are given maximum freedom in the conditions of market economic relations, state intervention in the economy can only be done with certain regulatory instruments. we can note that for the realization of optimal public administration, it is necessary to ensure the full and careful use of the existing potential in this sphere, as well as to ensure the sustainable development of this field. as a result of the implemented economic policy, our country has progressed on the international level and the per capita national income has increased significantly. according to the classification based on the world bank's atlas methodology, our country is included in the group of poor countries according to the level of national income per capita. according to that classification, azerbaijan was then included in the group of low-middle-income countries, and then in the group of upper-middle-income countries. one of the important conditions for sustainable and balanced development in the country is ensuring that the general social and economic development of the country affects all its population and all regions at the same level. (qasımov, i̇srafilov, hacızadə & ağayev, 2006) the territory of azerbaijan seems to be divided into 2 parts, which differ from each other according to the level of socio-economic development and economic potential: 1) approximately 75-80% of the country's economic potential is concentrated in the city of baku and the absheron-khizi peninsula, which is only 6.8% of the country's territory and where up to 32% of its population lives; 2) only 20-25% of the country's economy is formed in other areas covering 93.2% of the country's geography and 68% of its population. (azərbaycanın regionları,2023) at the same time, serious differences are observed between the mentioned individual regions according to the level of socio-economic development and economic potential. to better see and understand these differences, first, let's look at the regional territory and population structure of azerbaijan by economic regions. main directions of accelerating regional socio-economic development in the digital era 172 table 1. regional territory and population structure of azerbaijan by economic regions in 2022 (data as of january 1, 2023) territory territory 100 0 m2 share in the total, % number, thousand people share of total,% baku city 2,14 2,5 2336,6 23,1 nakhchivan autonomous republic 5,50 6,3 465,7 4,6 absheron-khizi economic region 3,73 4,3 874,1 8,6 nagorno-karabakh shirvan economic district 6,13 7,1 317,8 3,1 ganja-dashkasan economic region 5,27 6,1 596,0 5,9 karabakh economic region 8,99 10,3 736,4 7,3 gazakh-tovuz economic region 7,03 8,2 674,4 6,6 guba-khachmaz economic region 6,96 8,0 543,8 5,3 lankaran-astara economic region 6,07 7,0 930,6 9,2 central aran economic region 6,69 7,8 716,2 7,1 mil-mugan economic region 5,67 6,5 520,2 5,1 sheki-zagatala economic region 8,84 10,2 623,6 6,2 east zangezur economic region 7.47 8,6 300,4 3,0 shirvan salyan economic region 6,08 7,1 491,3 4,9 republic of azerbaijan, total 86,6 100 10127,1 100 source: azərbaycanın reqionları ,2023 the main differences in regional development in azerbaijan are primarily reflected more prominently between the city of baku and other economic regions. the differences between the regions in terms of the level of economic well-being of the population in the republic arose primarily as a result of the development of relevant production and service areas concentrated in baku and the baku suburbs. the development of regions requires large investments. however, the majority of foreign companies and enterprises are concentrated in the absheron-khizi economic region, especially in the capital city of baku, therefore, the creation of a system for promoting the attraction of foreign investments to the regions remains relevant. the observed situation in the development of the regions in the country requires raising the level of socio-economic development of the regions and minimizing the difference between them by using the existing potential effectively. the fact that the problems of the development of the regions are closely related to each other implies their systematic solution, which acts as an important condition for the development of the regions. in this regard, at the current stage of development, the need for fuller use of the potential of the regions and their effective coordination requires the implementation of complex measures aimed at the socio-economic development of the regions. this could be achieved through the development and implementation of a new effective regional policy system. aliyeva tofik ruhangiz, aliyev zaur farid 173 the existence of differences in socio-economic development between the regions of the country depends on many factors. the disproportionate distribution of productive forces between regions has created a sharp difference in the level of their socio-economic development. thus, the concentration of the main part of the economy, especially the industry, infrastructure areas in baku city, along with its faster development than in the regions, led to the worsening of the socio-economic situation in the regions and the flow of the population from the regions to baku. (azərbaycan respublikasının iqtisadiyyat nazirliyi, 2023). the economic policy implemented in the country in recent years has contributed to the comprehensive development of the country as a whole and the regions, to the rise of the special quality of the regions in macroeconomic indicators across the country, to the improvement of the provision of infrastructure in the regions, to the improvement of the level of communal services, to the creation of new production and processing facilities, socio-cultural facilities, investments, employment. has led to the increase, the further acceleration of the development of local entrepreneurship, the opening of new jobs, as a result, the reduction of poverty and the further improvement of the population's standard of living. (əliyev,2016) it should be noted that during the period covering the last 5 years, the real gdp increased by an average of 6.4 percent (fig. 1). we can note that the nominal gdp has increased by 65 percent. a 62 percent increase in the volume of gdp per person was observed during this period of time, with which our country rose from the 134th to the 85th place among the countries of the world. the social status of the population has changed significantly, and the poverty level has decreased from 40.2 percent to 4.9 percent in 10 years. (azərbaycanın statistik göstəriciləri, 2023) figure 1. gross domestic product growth dynamics (in million manats) source: ar state statistical committee,2023 the economic growth model implemented during the period of increasing oil revenues has created conditions and opportunities for the creation and increase of strategic currency reserves on a large scale, and as a result, it will be able to ensure the elimination of possible threats that the republic's economy may face. in addition, it should not be forgotten that it can be an important tool for the process of financing future economic growth. according to the information provided by the state statistics committee, the growth rate of economic development in the period covering the years 2018-2022 was 7.9 percent on average. the level of investment decreased by 6 percent compared to previous years. the fact that the economic growth model successfully implemented during 2018-2022 has reached the limit of "saturation" 0,0 20000,0 40000,0 60000,0 80000,0 100000,0 120000,0 140000,0 2018 2019 2020 2021 2022 üdm 80092,0 81896,2 72578,1 93203,2 133825,8gdp main directions of accelerating regional socio-economic development in the digital era 174 has revealed the importance of switching to a qualitatively new economic growth approach. (dövlət statistika komitəsi,2023) historically, the oil sector has been the main factor of economic development in azerbaijan for many years. from 2018-2022, the contributions of non-oil sectors to economic development began to increase. according to statistical data, in 2022, an increase of 6.2 percent in the non-oil sector, 8.8 percent in the construction sector, and 7.6 percent in the service sector were observed. in addition, 11.5 percent economic growth was recorded as a result of the reforms carried out in the non-oil sector. (dövlət statistika komitəsi, 2023) swot analysis is widely used in the analysis of the current state of economic development in the strategic road map. (azərbaycan respublikasında kiçik və orta sahibkarlığın inkişafına dair strateji yol xəritəsi,2016) the swot analysis of the regions of the republic of azerbaijan is given in the table below (table 2). table 2. swot analysis of the current economic situation in the regions of the republic of azerbaijan strengths weaknesses -ensuring the stabilization of the macroeconomic environment in the regions high labor force -development of telecommunications infrastructure availability of wide opportunities for lifelong learning low labor costs satisfactory level of food self-sufficiency in the regions -it is difficult to get initial capital for entrepreneurship lack of interregional transport facilities at any level inability to develop the regional infrastructure at the desired level low state support for research and development inadequate coordination between the educational institution and the labor market high military costs opportunities threats access to the european market international cooperation and research opportunities in the field of science -opportunities for new investors to enter development of local branches of foreign companies being able to stimulate regional economic growth with low taxes and low costs the possibility of running out of natural resources low profitability of non-oil sector areas release of skilled workers to another country directing investments to infrastructure projects rather than to production areas as it is known from the analysis, there are wide opportunities and conditions for the regions of the republic of azerbaijan to reach a high level of economic development. so, today, the main strengths in the economic development of the country's regions are the stability of the macroeconomic environment, the abundance of the workforce, the development of the telecommunication infrastructure at a certain level, the availability of wide opportunities for lifelong education, low labor costs, and the satisfactory level of food self-sufficiency of the regions. which is one of the factors that create opportunities and conditions to overcome a number of obstacles in front of economic development. however, currently, the biggest potential opportunity of the country's regions is that the non-oil products produced in these aliyeva tofik ruhangiz, aliyev zaur farid 175 regions are competitive in the european markets due to their quality and ecological purity. on the other hand, the creation of research and development centers by the state in the regions can be one of the main factors that stimulate development. in the country, the social development of the regions is as important as the economic development. one of the main factors of social development is the income level of the population. as a result of the economic development of the regions, the attraction of investments, especially in the non-oil sector, creates conditions for the creation of new jobs in this field and the employment of more people. figure 2. model for developing a forecast of socio-economic development of regions study of the problem of socio-economic development of regions analysis of the region's competitive advantages • natural resource potential • production potential • human potential • infrastructure potential  institutional potential analysis of the development of the region's external environment • consumer regions • supplier regions • competitor regions • intermediary regions • factors of national and world market swot-analysis strengths and opportunities of the external environment weaknesses and threats from the external environment using opportunities and minimizing threats forecast of socio-economic development of regions analysis and assessment of regional development alternatives economic and social consequences of regional development development of regional development scenarios main directions of accelerating regional socio-economic development in the digital era 176 the following laws, decrees, orders and instructions were adopted by the president of the republic of azerbaijan, the milli majlis of the republic of azerbaijan and the government of the republic in accordance with their authority to implement the regional policy and regulate the internal economic development of the republic. 1. law of the republic of azerbaijan on environmental safety. 2. law of the republic of azerbaijan on environmental protection. 3. law of the republic of azerbaijan on specially protected natural areas and objects. 4. law of the republic of azerbaijan on municipalities. 5. state program of socio-economic development of the regions of the republic of azerbaijan (2004-2008) 6. the state program for the socio-economic development of the regions of the republic of azerbaijan (2009-2013) 7. state program for socio-economic development of the regions of the republic of azerbaijan (2014-2018 years) 8. state program on poverty reduction and economic development (2005-2015) 9. state property privatization program 10. state program of small and medium business development 11. we can give an example of laws as the main directions of the strategic roadmap for the national economy and the main sector of the economy. despite the extensive development of the large-scale areas of the republic, there are still many unsolved problems in the field of state regulation and management of regions. such problems are related to the new establishment of a single central authority for the management and regulation of regional development in many countries, including the republic of azerbaijan. various functions of the state are performed by local and regional administrative bodies, that is, committees, ministries, national councils, and local self-government bodies. the state's regional management bodies are considered the main management bodies created in democratic societies. (azərbaycan respublikası regionlarının 2019–2023-cü illərdə sosialiqtisadi inkişafı dövlət proqramı,2019) four state programs on socio-economic development of regions were adopted and implemented: the first state program (2004-2008); the second state program (2009-2013); the third state program (2014-2018); the fourth state program (2019-2023). the main goals set in the framework of this program are to support the development of business entities, especially to support the activities of small, medium, and micro entrepreneurial entities, to continue infrastructure projects, to increase the income level of the population, to develop the non-oil sector, to increase the activity of young people in the regions, to increase personnel training, to support the development of tourism services, to ensure the availability of financial services, to further strengthen social protection, to improve the environmental situation, to improve road infrastructure, and to carry out protection measures. (babayev,2022) in recent years, digitalization has become one of the key areas of socio-economic development of regions. access to digital technologies in the regions changes: the quality of life of people, makes the activities of industrial enterprises and agriculture more efficient, aliyeva tofik ruhangiz, aliyev zaur farid 177 simplifies access to information, and simplifies access to clients for small and medium-sized businesses. (sadıqov, balayev,2020) the economic benefits of digitalization in the regions are: an open and accessible market; rapid receipt and processing of data, significant contribution to economic growth; creation of new jobs in industries; increase in labor productivity; accelerating the pace of small and medium-sized businesses; simplifying financial transactions for businesses; the emergence of new organizations interested in qualitatively new technological solutions. (samara, andronikidis, komninos,bakouros&katsoras,2022) social benefits from digitalization in the regions are: creation of digital public services; overcoming social inequality; the emergence of new opportunities to ensure people's lives; automation and robotiс of treatment processes, thereby improving the quality and accessibility of medical care; poverty reduction; reducing negative impact on the environment; increasing the availability of financial services. [батракова,2019] it should be noted that the digital economy is a new type of economic relations in the regions. for its development, it is necessary to create digital infrastructure, new business models, build trust in the reliability and security of digital infrastructure, assess risks, train specialists, and increase the level of proficiency in information technology. in recent years, azerbaijan has focused on such large projects as the creation of “smart” regions, cities, streets, and houses. with the deoccupation of karabakh, the relevance of these ideas has increased. president ilham aliyev has repeatedly stated that such “smart” cities and villages will be created in the liberated territories. “cities and villages in the liberated territories must be created based on the concept of “smart-city”, “smart-village”, that is, “smart city”, “smart village”. work is already being carried out to ensure that the most advanced technologies in the world are used when carrying out urban planning and implementing projects there. (azərbaycan 2030: sosial-iqtisadi inkişafın milli prioritetləri, 2021) it is planned that the karabakh region will become a center of interest for technological investments, and will also play the role of an experiment in the application of smart urban and rural technologies in other regions of the country. currently, 54% of the world's people live in cities, and the global population is projected to reach up to 9.7 billion people in 2050. along with overall population growth, urbanization will add another 2.5 billion people to cities over the next three decades. as migration from regions to cities continues, urban overcrowding is becoming a real threat to the quality of life of the people living in them. if optimal solutions are not implemented, cities will face many challenges in the near future. among them are growing economic crises, poverty, environmental pollution, disease and others. (corchado &trabelsi, 2022) the concentration of large numbers of people in cities has become one of the main causes of climate change. cities account for more than 70 percent of global greenhouse gas emissions, according to a united nations development program report. urban residents themselves are more susceptible to many of the impacts of climate change caused by urbanization, especially heat stress, floods and health emergencies. the creation of smart cities and regions in the modern world can also eliminate many of the problems caused by globalization and the 4th industrial revolution. in addition, making main directions of accelerating regional socio-economic development in the digital era 178 cities and regions more resilient, inclusive and safe is identified as one of the united nations sustainable development goals. it should be noted that for the concept of a “smart city” to become a reality in territories liberated from occupation, it is necessary to first study sustainable international practices, apply and promote them at the next stage, and make extensive use of information and communication technologies. [quliyeva,2021]by implementing «smart city» solutions, it is possible to influence various quality of life indicators such as safety, time and convenience, health, environmental quality, social connections and civic participation, jobs and cost of living. [corchado &trabelsi, 2022] as an analysis of scientific literature has shown, it is possible to distinguish 5 areas in which the implementation of the “smart region” is taking place: 1. mobility of the population (road infrastructure, means of transport). 2. economics (support for innovative entrepreneurship, local initiatives, creative industries, providing citizens with opportunities for personal growth). 3. environment (rational use of natural resources, their efficient consumption, waste management and prevention of negative impacts on the environment). 4. human potential (special education opportunities, social awareness, collaboration opportunities). 5. living conditions (safety, health, cultural opportunities, housing, leisure activities, availability of general education). analysis of each area allowed us to identify certain problems. increasing the level of digitalization of the region requires the identification of measures to ensure the necessary conditions for sustainable development. however, there are certain problems in the development of digitalization of regions. among the main ones, we highlight the following: insufficient funding for it projects in the regions, personnel shortages, inconsistency of actions between different levels of government. in addition, in remote and sparsely populated regions there is a problem associated with the absence or poor development of regional information and telecommunications infrastructure. results as a result of the study, the most significant factors influencing the socio-economic development of the regions were identified and classified. the dependence of these factors on the development of regions in the digital economy has been established. a forecast model for the socio-economic development of regions has been developed. the conducted analysis leads to the conclusion that despite the implementation of 3 state programs aimed at the socioeconomic development of regions in azerbaijan since 2004, as well as the completion of the implementation period of the "azerbaijan 2020: vision of the future" development concept, the socio-economic development of the regions in the country there are still serious problems in the field of elimination of sharp differences. summarizing the analysis, it can be said that there are still sharp differences between the country's regions on all socio-economic development parameters of the country. therefore, in order to ensure a more efficient and balanced development of the socioeconomic development of regions in the country, we consider it appropriate to implement measures in the following directions, both in the field of regional development management aliyeva tofik ruhangiz, aliyev zaur farid 179 and regulation, and in the field of mechanisms for stimulating the economic development of digital technologies in the regions: 1. it is important to use digital technologies in the regions. with this aim, it was possible to provide resource saving and control system in the regions by computerization and skillful use of information technologies. 2. in order to speed up social and economic development in the regions, a separate "economic analysis and information center" should be established in each region in order to regulate financial problems and detect its activity based on deep economic analysis. such centers should be created in the regional centers first of all. 3. special programs should be prepared in economically problematic regions. proper distribution of key manpower between regions should be ensured and also sustainable development of this manpower should be ensured. using digital technologies will save people time, money and energy. 4. production or processing facilities in each economic region should be located close to the sources of raw materials. with this, we will be able to use the resources efficiently and economically. 5. competitiveness of regions should be assessed. naturally by using the resources properly, additional income will be obtained. we must ensure that this income is invested in other sectors. however, at this time, it is also necessary to ensure the protection of ecology. 6. plans should be prepared for optimal use of labor resources. in order to ensure the sustainable development of regions in the digital era, we need to approach each region separately, analyze it, and draw up development plans based on this. references 1. azərbaycanın statistik göstəriciləri. statistik məcmuə bakı 2023. https://www.stat.gov.az/ 2. azərbaycanın regionları” statistik məcmuə/bakı 2023 s22-27. https://www.stat.gov.az/source/regions/ 3. “azərbaycan respublikası regionlarının 2019–2023-cü illərdə sosial-iqtisadi inkişafı dövlət proqramı”, bakı 2019 https://e-qanun.az/framework/41320 4. azərbaycan respublikasının i̇qtisadiyyat nazirliyinin rəsmi saytı https://www.economy.gov.az 5. azərbaycan respublikasında kiçik və orta sahibkarlığın inkişafına dair strateji yol xəritəsi”–6.12.2016-cıil. https://azertag.az/store/files/strateji_yol_xeritesi /ki%c3%a7ik_v%c9%99_orta_sahibkarl%c4%b1q_s%c9%99viyy%c9%99sind%c9 %99_istehlak_mallar%c4%b1n%c4%b1n_istehsal%c4%b1na_dair.pdf 6. “azərbaycan 2030: sosial-iqtisadi inkişafa dair milli prioritetlər”in təsdiq edilməsi haqqında, azərbaycan respublikası prezidentinin cənab i̇.əliyevin sərəncamı bakı, 2.02.2021 https://e-qanun.az/framework/46813 7. ağayev r., mehtiyev a. (2021) sosial-iqtisadi inkişafda regional qeyri-bərabərlik problemi. https://idi-aze.org/files/pdf/2023-0516/iqzx2ucntv5k7ywq0kxjo5psw7srssqhvlnnatsl.pdf 8. babayev a.p. (2022, iyun ) rəqəmsallaşma şəraitində sosial iqtisadi proseslərin tənzimlənməsində dövlətin dəyişən rolu. https://unec.edu.az/application/uploads/2015/03/unec-ex-2022.2.pdf https://e-qanun.az/framework/41320 https://azertag.az/store/files/strateji_yol_xeritesi https://idi-aze.org/files/pdf/2023-05-16/iqzx2ucntv5k7 https://idi-aze.org/files/pdf/2023-05-16/iqzx2ucntv5k7 main directions of accelerating regional socio-economic development in the digital era 180 9. qasımov ə.c., i̇srafilov h.a., hacızadə e.m., ağayev e.a. regionların sosial – iqtisadi inkişaf problemləri. http://anl.az/el/r/rs-iip.pdf 10. quliyeva g. (2006, fevral 01) qarabağ "smart region"a çevriləcək. https://ereforms.gov.az/az/ekspert-yazilari/qarabag-quot-smart-region-quot-a-cevrilecek10 11. əliyev ü.q. (2016, oktyabr-dekabr) i̇qtisadiyyatın şahələnməsi və sahibkarlıq formalarının inkişafı. https://unec.edu.az/application/uploads/2015/03/adiu-ex-2016-4.pdf 12. sadıqov m.m., balayev r.ə. (2020, iyul-sentyabr) rəqəmsallaşma iqtisadi inkişafın strateji istiqaməti kimi. https://unec.edu.az/application/uploads/2015/03/unec-ex-20203-taza.pdf 13. батракова л.г., (2019) развитие цифровой экономики в регионах россии. ж.социально-политические исследования. https://cyberleninka.ru/article/n/razvitietsifrovoy-ekonomiki-v-regionah-rossii/viewer 14. samara e., andronikidis a., komninos n., bakouros y&katsoras e, ( 2022) the role of degital technologies for regional development:a system dynamics anaiysis knowledge economy https://link.springer.com/article/10.1007/s13132-022-00951-w 15. corchado j.m., trabelsi s. (2022) advances in sustainable smart cities and territories// electronics. vol. 11. p.1280 https://www.mdpi.com/2079-9292/11/8/1280 https://ereforms.gov.az/az/ekspert-yazilari/qarabag-quot-smart-region-quot-a-cevrilecek-10 https://ereforms.gov.az/az/ekspert-yazilari/qarabag-quot-smart-region-quot-a-cevrilecek-10 https://link.springer.com/article/10.1007/s13132-022-00951-w agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 18, no. 1 (2024), pp. 32-43 32 neets integration into social and economic activity in a context of sustainability o. dluhopolskyi, t. dluhopolska oleksandr dluhopolskyi¹, tetiana dluhopolska² ¹west ukrainian national university, ukraine; wsei university, poland https://orcid.org/0000-0002-2040-8762, e-mail: dlugopolsky77@gmail.com ² west ukrainian national university, ukraine https://orcid.org/0000-0003-1925-963x, e-mail: tetianadluhopolska@gmail.com abstract: this article examines the integration of “not in education, employment, or training” (neets) into social and economic activities within the context of sustainability. neets represent a significant challenge for societies, as their exclusion from these activities can have adverse economic, social, and environmental consequences. the article explores sustainable approaches to address this issue, considering the potential of social entrepreneurship, green jobs, and environmentally friendly initiatives in fostering the integration of neets in different countries. additionally, it discusses the importance of education and training programs that align with sustainable development objectives and empower neets to actively participate in a sustainable economy. the factor and regression analysis were used for this research. by exploring the nexus of neets integration, social and economic activities, and sustainability, this article offers insights and recommendations to policymakers and stakeholders aiming to promote inclusive and sustainable societies from the perspectives of examined countries. keywords: neets, education, employment, training, entrepreneurship, integration. introduction neets (the acronym for “not in education, employment, or training”) refer to individuals who are not engaged in any form of education, employment, or vocational training. this phenomenon typically applies to young people, often in the age range of 15 to 29, who are not enrolled in school, are unemployed, and are not participating in any training programs (rahmani & groot, 2023). the term neets was first introduced by the organisation for economic co-operation and development (oecd) in the late 1990s. now the oecd played a significant role in popularizing and conceptualizing the neet category as a way to measure the disengagement of young people from education, employment, and training. the concept gained traction as researchers, policymakers, and international organizations began to recognize the importance of addressing the challenges faced by young people who are neither in education nor employed (dluhopolskyi & zhukovska, 2023; zatonatska et al., 2022). this study proposes an analysis of integration pathways into social and economic activity among neets representatives based on case studies from various eu countries. the research question consists in clarifying the differences in the trends of distribution of neets in european countries and generalizing the methods of their socio-economic adaptation. https://orcid.org/0000-0002-2040-8762 mailto:dlugopolsky77@gmail.com https://orcid.org/0000-0003-1925-963x mailto:tetianadluhopolska@gmail.com oleksandr dluhopolskyi, tetiana dluhopolska 33 literature review the country that is most famous for researching the neet phenomenon is japan. neet as a term gained rapid popularity in japan after the publication of the “white paper on labor economy 2004” by the japanese ministry of health, labor, and welfare (mhlw). mass-media, researchers, tabloids, newspapers, and ngos made neet definition popular and buzz (rahman, 2007; rahmani & groot, 2023). the depletion of human capital, known as “scarring effect”, frequently leads to recurrent periods of unemployment and reduced future earning potential (gangl, 2006). the article (schmidt, 2021) explores the phenomenon of neets in japan, where there has been a notable increase in young people choosing unemployment, contrary to traditional social norms. while japan has long upheld the ideal of lifelong employment, many young individuals are opting out of this conventional path due to various factors, including dissatisfaction with the demanding work culture, personal circumstances such as health issues or caregiving responsibilities, and changing economic realities. however, society often stigmatizes those who opt out of traditional employment, viewing them as lazy or even criminal. this stigma is deeply ingrained, to the extent that some individuals continue to maintain the facade of employment even after losing their jobs. additionally, chosen unemployment is perceived as detrimental to the workforce and economy, exacerbating labour shortages in japan. despite societal disapproval, there is a growing trend of “neoneets” who reject traditional employment but still find ways to earn income, often through online platforms or freelance work. while they may not conform to the conventional work ethic, they demonstrate a willingness to contribute to society on their terms (schmidt, 2021). some researchers argued (kosugi, 2005a; kosugi, 2005b; hoang, 2016; rahman, 2007), that neets in japan have different attributes from those in other countries, defining them in few categories (table 1): yankee; hikikomori; tachisukumi; tsumazuki, and regard them as japanese-style neets. others, like k. rahman (2007), y. hori (2005) define neets based on their background and values, namely reluctance to assume responsibility, socially reclusive, parasite single, ambition indifferent, and family ruining. table 1 japanese-style neets № type of neets characteristics 1. yankee-type antisocial type but seeks pleasure 2. hikikomori-type unable to build social relationships type and remains confined at home (reclusive or unsociable). “those who are neither in work nor school, do not have social interactions and are socially withdrawn for more than 6 months”. 3. tachisukumi-type overly conscientious in job-hunting type but ultimately breaks down after failure (fear paralyzed) 4. tsumazuki-type job quitter type who finds employment, yet soon quits, loses confidence after a while, and then plunges into despair source: developed based on (kosugi, 2005a; kosugi, 2005b; hoang, 2016; rahman, 2007; norasakkunkit & uchida, 2012; uchida & norasakkunkit, 2015). to gain a comprehensive understanding of the diverse neet cohort, eurofound (2016) suggests categorizing them into distinct subgroups (table 2): economically active and economically inactive neets. neets integration into social and economic activity in a context of sustainability 34 table 2 neets classification (eurofound) economically active neets economically inactive neets unemployed neets – those actively seeking and available for work: long-term unemployed neets – individuals unemployed for over one year; short-term unemployed neets – individuals unemployed for less than one year. discouraged neets – individuals who believe no work is available despite their willingness. neets with a disability – those unable to work due to incapacity, illness, or disability. care-giving neets – individuals with family responsibilities, such as caring for children or relatives. re-entrants – individuals awaiting imminent re-entry into employment, education, or training. other neets – a residual group encompassing: 1) voluntary neets engaged in individual activities like traveling, volunteering, or informal study; 2) those reliant on family financial support; 3) youth facing more complex life challenges. source: developed based on (eurofound, 2016; assmann & broschinski, 2021) the study (assmann & broschinski, 2021) delves into the concerning rise of young people categorized as neet across european countries over the past decade. by utilizing fuzzy-set quantitative comparative analysis (fsqca) on aggregated eu labour force survey data from 2018 across 26 european countries, the study uncovers the intricate relationship between institutional configurations and the prevalence of various neet subgroups. the findings underscore that the institutional drivers of neet status are as varied as the group itself. for instance, countries with insufficient family-related services coupled with weak formalized long-term care tend to exhibit higher rates of young neets with care responsibilities, particularly evident in central eastern european nations. conversely, northern european countries with generous yet ineffective disability benefit schemes tend to have elevated proportions of neets with disabilities, fostering disincentives for labour market participation. additionally, countries experiencing economic crises alongside labour market rigidities and inadequate vocational training policies, such as southern and some central eastern european countries, tend to have higher rates of unemployed and discouraged young neets. the article (avagianou et al., 2022) presents a theoretically grounded empirical investigation into the uneven spread of young individuals categorized as neets across the eu south, specifically in italy, spain, greece, and cyprus, spanning from 2008 to 2018. through the lens of “youth spaces”, the analysis critically evaluates the economic, social, and political dimensions shaping the intricate relationship between youth and the labour market, particularly addressing the persistent prevalence of neets in the eu south. the forms of labour precariousness experienced by young people vary spatially and encompass unpaid internships, low-paying contracts, family labour without compensation, and non-standard or informal employment arrangements (gialis et al., 2020; avis, 2014; quintano et al., 2018). these practices evolve from eroded collective social bonds and exclusionary labour market structures, shaping the reproduction of young labourers. notably, southern european countries within the eu are often characterized as fragmented socio-economic entities within semi-peripheral yet advanced capitalist systems (gambarotto et al., 2019; surmanidze oleksandr dluhopolskyi, tetiana dluhopolska 35 et al., 2023; hajiyeva et al., 2023; zvarych & brodovska, 2023; zvarych & rivilis, 2023). these economies are service-oriented, historically providing limited well-paid permanent positions for young individuals (leontidou, 2012; ruesga-benito et al., 2018). labor precarity, informal employment practices, and insecure flexibility have long been prevalent among younger generations in these societies (gialis & leontidou, 2014; okulich-kazarin et al., 2024). the paper (maynou et al., 2022) examines the convergence of neet rates across 274 european regions from 2000 to 2019. this study contributes to understanding regional differences in neet rates and highlights the importance of tailored policy measures to address youth inclusion and employability. but further research is needed to explore the neets integration in social and economic activity in a context of sustainable development. methodology the methodology employed in the article involves k-means clustering within the eu and further analyzing pathways for neets integration into the socioeconomic activities of their countries. k-means clustering, a technique rooted in vector quantization originating from signal processing, endeavors to segregate a set of n observations into k distinct clusters, with each observation assigned to the cluster possessing the closest mean, commonly referred to as cluster centers or cluster centroids, thus serving as an archetype of the respective cluster (sharma, 2024). the overall objective of k-means clustering is to minimize the within-cluster sum of squared distances, making it particularly useful for partitioning data into compact, well-separated clusters, which can be mathematically represented as (sharma, 2024): ∑k j=1∑xi∈cj∣∣xi−μj∣∣2, (1) where the outer summation goes over all clusters and the inner summation calculates the sum of squared distances between data points and their respective cluster centroids within each cluster. however, its performance can be sensitive to the initial selection of centroids and may not be optimal for datasets with non-linear or irregular cluster shapes. the k-means clustering algorithm can be summarized by the following steps: 1) initialization – randomly select k data points from the dataset as the initial cluster centroids; 2) assignment step – assign each data point to the cluster with the nearest centroid. this can be represented mathematically as: argminj∣∣xi−μj∣∣2, (2) where xi represents the ith data point, μj represents the centroid of the jth cluster. 3) update step – recalculate the centroids of the clusters by computing the mean of all data points assigned to each cluster. this can be represented mathematically as: μj=1/nj∑xi∈cjxi,, (3) where cj represents the set of data points assigned to cluster j, nj represents the number of data points assigned to cluster j. 4) convergence – repeat the assignment and update steps iteratively until convergence criteria are met, such as minimal change in cluster assignments or reaching a maximum number of iterations; 5) final clustering – once convergence is achieved, the final clustering is obtained, where each data point belongs to one of the k clusters based on its proximity to the cluster centroids. neets integration into social and economic activity in a context of sustainability 36 results currently, the phenomenon of neet poses a significant national challenge, characterized by a notable lack of clarity regarding both its prevalence and the fundamental factors driving it. effective solutions and interventions remain elusive, awaiting further exploration and understanding. to cluster the countries based on their neet rate dynamics, we can use the k-means clustering algorithm. as a result, we can group countries into three clusters (figure 1, table 3): cluster 1 – countries with consistently low neet rates or positive changes; cluster 2 – countries with high neet rates in 2013 but significant reductions by 2022; cluster 3 – countries with relatively high neet rates and minimal improvements or even increases over the period. figure 1 neets clusters cluster 1 cluster 2 0 2 4 6 8 10 denmark germany luxembourg netherlands austria slovenia finlandsweden iceland norway switzerland chechia malta 2013 2022 0 5 10 15 20 25 hungary poland slovakia uk belgium bulgaria ireland greecespain croatia italy cyprus latvia portugal serbia 2013 2022 oleksandr dluhopolskyi, tetiana dluhopolska 37 cluster 3 source: own research based on (eurostat, 2023). table 3 neets dynamics 2013-2022 countries 2013 2022 change, % cluster 1 denmark 6,6 6,7 0,1 germany 6,3 6,8 0,5 luxembourg 5,0 7,0 2,0 netherlands 5,6 2,8 -2,8 austria 7,3 8,1 0,8 slovenia 9,2 8,2 -1,0 finland 9,3 7,8 -1,5 sweden 7,5 4,9 -2,6 iceland 5,5 4,1 -1,4 norway 5,6 6,4 0,8 switzerland 7,3 6,4 -0,9 chechia 9,1 8,0 -1,1 malta 9,9 7,1 -2,8 cluster 2 hungary 15,5 9,9 -5,6 poland 12,2 8,0 -4,2 slovakia 13,7 9,6 -4,1 uk 13,2 10,5 -2,7 belgium 12,7 6,6 -6,1 bulgaria 21,6 12,5 -9,1 ireland 16,4 6,9 -9,5 greece 20,4 10,7 -9,7 0 5 10 15 20 25 30 estonia france lithuania romaniamontenegro north macedonia turkey 2013 2022 neets integration into social and economic activity in a context of sustainability 38 spain 18,6 10,5 -8,1 croatia 19,6 11,9 -7,7 italy 22,2 15,9 -6,3 cyprus 18,7 12,9 -5,8 latvia 13,0 8,6 -5,0 portugal 14,1 6,6 -7,5 serbia 19,5 13,0 -6,5 cluster 3 estonia 11,3 10,7 -0,6 france 11,2 10,1 -1,1 lithuania 11,1 9,7 -1,4 romania 17,0 17,5 0,5 montenegro 18,5 21,1 2,6 north macedonia 24,2 19,6 -4,6 turkey 25,5 28,3 2,8 source: own research based on (eurostat, 2023). referring to the experience of the countries of the cluster 1, we can note several features of integration neets into the socio-economic life of communities. over the past decade, numerous policy initiatives in the nordic nations have been dedicated to addressing and providing assistance to neets. a multitude of projects, spanning local, regional, and national levels, have been implemented to facilitate the integration of this demographic into educational and employment opportunities. in recent years, both national and regional authorities in denmark have made significant efforts to address the re-engagement of marginalized young people. one notable initiative is the establishment of guidance centres, mandated to reach out to early school leavers up to the age of 25 (karlsdóttir, 2024). these centres aim to assist youths by providing a range of education programs and facilitating their transition to suitable educational pathways, training opportunities, or employment prospects. challenges faced by young dropouts in danish rural areas include a lack of role models, particularly in socially deprived small towns characterized by high unemployment rates and a need for skills enhancement. additionally, certain groups, such as individuals with mental health issues or radicalized youth at risk of criminal involvement, present further complexities. another project, operating across six centres in denmark, predominantly in rural areas, adopts the philosophy of consequence pedagogy, encapsulated in the principles of proactive action, accountability, and forward-thinking. this approach has demonstrated effectiveness in engaging the most vulnerable segment of young people. referred to as tamu (karlsdóttir, 2024), this program offers personalized consultations and real work opportunities to participants aged 18–30, many of whom possess limited formal education. participants receive housing, meals, and a structured environment akin to military discipline. tamu aims to empower these individuals to become valued members of the workforce, regardless of past challenges such as criminal backgrounds or substance abuse histories. the program emphasizes the development of essential life skills alongside practical work experience across various sectors. municipalities play a crucial role in funding both projects, contributing to trainee salaries and reinforcing the significance of these initiatives in promoting youth re-engagement and rehabilitation. oleksandr dluhopolskyi, tetiana dluhopolska 39 in 2019, finland enacted national legislation known as nuorisolaki 1285/2016, which mandates municipalities to employ proactive social workers tasked with actively reaching out to marginalized young individuals. finland has garnered positive experiences through its proactive outreach efforts aimed at youths who have become disengaged from conventional support systems (halvorsen et al., 2013). one-stop guidance centres, also known as low-threshold services, have been established in finland to cater to young individuals who are unemployed, not engaged in training, or out of education. these guidance centres offer comprehensive support services encompassing general guidance, specialized education, social care, healthcare, and employment assistance, all conveniently available in a single location and free from bureaucratic complexities. referring to the experience of the countries of the cluster 2, for example, italy stands out in the european union for its high rate of neet. in response to this problem, the italian government introduced a “neet plan” in january 2022 aimed at addressing the more than 3 million young people in the country who are neither working nor in education or training. the plan focuses on reinforcing existing measures such as the youth guarantee, establishing youth desks at employment centers, and providing informational support through campaigns like giovani2030 (montasser, 2022). additionally, efforts are being made to promote the inclusion of young people with fewer opportunities in programs like erasmus+ and the european solidarity corps. despite these efforts, further action is needed to effectively tackle the neet issue. a survey among italian neet individuals revealed that many had never visited employment centers, indicating a need for broader outreach initiatives. additionally, investment in childcare and care facilities is crucial, as many neets cite family responsibilities as a barrier to employment or education. moreover, targeted education programs with practical training components can better prepare young people for the job market (quintano ey al., 2018). neet phenomenon in italy is marked by regional disparities, with southern italy being particularly affected, as well as gender inequality, disproportionately impacting women. by identifying different groups within the neet population and implementing targeted measures, such as the neet plan, italy aims to reduce the number of young people facing economic inactivity. however, additional efforts, including promotional campaigns and support for young mothers, are essential to fully address the complexities of the issue. according to spain and portugal, however, age is positively associated with long-term unemployment across countries. additionally, higher educational attainment is associated with a lower likelihood of long-term unemployment but a greater likelihood of short-term unemployment. the research (o’higgins & brockie, 2024) highlights the relationship between vulnerability to poverty or social exclusion, individual characteristics, and neet subgroups. it reveals that vulnerability is more pronounced among young neets compared to young workers or students and varies significantly across different types of neets. particularly, vulnerability is notably high among young people neet due to family responsibilities, primarily young women, and this vulnerability has increased over time. referring to the experience of the countries of the cluster 3, researchers (işık, 2016; özdemir et al., 2023) investigated the challenges of youth unemployment and neet phenomenon within the turkish context. the research comprehensively addressed various aspects such as workforce demographics, gender-specific data analysis, and the interconnected issues of education, unemployment, and economic stagnation affecting the young labour force. findings highlighted neets integration into social and economic activity in a context of sustainability 40 turkey’s leading position in neet rates among oecd nations (table 3), primarily attributed to gender disparities. according to turkey, romania, higher education correlates with lower instances of low digital skills. access to education and digital skills training is crucial, especially for rural youth facing barriers to traditional mobility. gender disparities persist, with women disproportionately represented among neets, reflecting broader global trends of gender discrimination in education and employment. addressing these disparities is essential for achieving gender equality and empowering women and girls, particularly in rural communities (neagu et al., 2021; kiziloglu et al., 2023). improving access to education and digital skills can break the cycle of poverty and enhance civic engagement. however, rural populations in romania and turkey face numerous challenges, including limited education access and job opportunities, contributing to a significant portion of youth being classified as neets. the government of the republic of north macedonia since 2018 introduced the youth guarantee to provide neets for 4 months, offering employment, continuing education and training, or internship. having in mind the success of the implementation of the youth guarantee 2018-2019, the plan for the implementation of the youth guarantee 2020-2022 was adopted. in 2023, a new plan for the implementation of the youth guarantee for the period of 2023-2026 was adopted, continuing the commitment to enhancing young people’s access to the labour market (integration of young people, 2024). the youth guarantee in the republic of north macedonia provides the following services: professional orientation and career counselling; motivational training; individual and group counselling; and job search training. the youth guarantee foreseen the following employment measures: subsidies for the employment of young people; and incentives for hiring young people with disabilities. discussions and conclussions the limitations of the scientific article are that the problem of neets is a relatively new phenomenon in behavioral research, affects several state policies (demographic, social, educational, economic) and in each country its challenges are overcome with its own set of tools. that’s why we made an attempt to cluster countries, highlighting common best practices. strengthening social protection emerges as crucial in discouraging youth from becoming neets, emphasizing the need for comprehensive public policies covering various domains like health and education to foster youth development without disparities. future research should adopt a dynamic perspective, analyse a broader range of years, and delve deeper into the influence of specific policies on youth engagement and social inclusion to foster sustainable development. moreover, further investigation into country-specific social policies’ impact on including neets is warranted. by employing a combination of different methods and tailoring interventions to the specific needs and circumstances of neets (mentorship and support networks, employer engagement, career counselling and guidance, financial incentives, youth employment programs, et.), policymakers, employers, and community organizations can work together to facilitate their successful integration into the labour market. each country, as it turns out, develops its own mechanisms of social and economic integration of neets depending on the needs and goals of its own development. oleksandr dluhopolskyi, tetiana dluhopolska 41 references 1. assmann, m.l., broschinski, s. (2021). mapping young neets across europe: exploring the institutional configurations promoting youth disengagement from education and employment. journal of applied youth studies, 4, 95-117. https://doi.org/10.1007/s43151-021-00040-w 2. avagianou, a., kapitsinis, n., papageorgiou, i., strand, a. h., gialis, s. (2022). being neet in youthspaces of the eu south: a post-recession regional perspective. young, 1-30. https://doi.org/10.1177/11033088221086365 3. avis, j. (2014). beyond neet: precariousness, ideology and social justice: the 99%. power and education, 6, 61-72. https://doi.org/10.2304/power.2014.6.1.61 4. dluhopolskyi, o., zhukovska, a. (2023). inclusive development as an instrument to overcome economic inequality and discrimination. economics, 11(1). 3923. https://doi.org/10.2478/eoik2023-0016 5. eurofound (2016). exploring the diversity of neets. luxembourg. https://digitalcommons.ilr.cornell.edu/intl/594 6. eurostat (2023). young people neither in employment nor in education and training by sex (neet). https://ec.europa.eu/eurostat/databrowser/view 7. gambarotto, f., rangone, m., solari, s. (2019). financialization and deindustrialization in the southern european periphery. athens journal of mediterranean studies, 5(3), 151-172. https://doi.org/10.30958/ajms.5-3-2 8. gangl, m. (2006). scar effects of unemployment: an assessment of institutional complementarities. american sociological review, 71(6), 986-1013. https://doi.org/10.1177/000312240607100606 9. gialis, s., leontidou, l. (2014). antinomies of flexibilization and atypical employment in mediterranean europe: greek, italian and spanish regions during the crisis. european urban and regional studies, 23, 716-733. https://doi.org/10.1177/0969776414538983 10. gialis, s., paitaridis, d., seretis, s., ioannides, a., underthun, a. (2020). in what terms and at what cost resilient? “unregulated flexibilization” in regional “troubled waters”. european planning studies, 28, 166-191. https://doi.org/10.1080/09654313.2019.1677563 11. hajiyeva, n.a., huseynov, r.t., huseynova, m.r., mammadova, a.v., mammadov, s.j. (2023). digitalization of education in azerbaijan. agora international journal of economical sciences, 17(2), 130-136. https://doi.org/10.15837/aijes.v17i2.6450 12. halvorsen, b., hansen, o.j., tägtström, j., flø, r. (2013). creating an inclusive labour market. in inclusion on youths, people with disabilities and seniors. copenhagen: nordic council of ministers. https://doi.org/10.6027/tn2013-547 13. hoang, l. (2016). japanese neet and freeter: a representation of the relationship between social changes and youth’s employment pattern. honors theses, 158. https://digitalworks.union.edu/theses/158 14. honda, y. (2005). “freeters”: young atypical workers in japan. japan labor review: the transition from school to working life issues, 2(3), 5-25. https://www.jil.go.jp/english/jlr/documents/2005/jlr07_honda.pdf 15. hori, y. (2005). solutions of social network of jobless youth and assistance measures. japan labor review: the transition from school to working life issues, 2(3), 26-48. https://www.jil.go.jp/english/jlr/documents/2005/jlr07_hori.pdf https://doi.org/10.1007/s43151-021-00040-w https://doi.org/10.1177/11033088221086365 https://doi.org/10.2304/power.2014.6.1.61 https://doi.org/10.2478/eoik-2023-0016 https://doi.org/10.2478/eoik-2023-0016 https://digitalcommons.ilr.cornell.edu/intl/594 https://ec.europa.eu/eurostat/databrowser/view https://doi.org/10.30958/ajms.5-3-2 https://doi.org/10.1177/000312240607100606 https://doi.org/10.1177/0969776414538983 https://doi.org/10.1080/09654313.2019.1677563 https://doi.org/10.15837/aijes.v17i2.6450 https://doi.org/10.6027/tn2013-547 https://digitalworks.union.edu/theses/158 https://www.jil.go.jp/english/jlr/documents/2005/jlr07_honda.pdf https://www.jil.go.jp/english/jlr/documents/2005/jlr07_hori.pdf neets integration into social and economic activity in a context of sustainability 42 16. integration of young people in the labour market (2024). republic of north macedonia. https://national-policies.eacea.ec.europa.eu/youthwiki/chapters/republic-of-north-macedonia/36integration-of-young-people-in-the-labour-market 17. işık, v. (2016). türkiye’de genç işsizliği ve genç nüfusta atalet. hak i̇ş uluslararası emek ve toplum dergisi, 5(11), 130-145. https://dergipark.org.tr/tr/download/article-file/263390 18. karlsdóttir, a. (2024). enabling meaningfulness with young neets in the nordic region. the social contexts of young people – engaging youth and young adults. intechopen. https://doi.org/10.5772/intechopen.114103 19. kiziloglu, m., dluhopolskyi, o., laskowski, j., laskowska, a. (2023). creating agile institutions with organizational trust in the finance sector of turkey: the mediating role of psychological empowerment in times of covid-19. sustainability, 15, 3019. https://doi.org/10.3390/su15043019 20. kosugi, r. (2005). considering the response to freeter and jobless youth issues. labor situation in japan and analysis: detailed exposition. tōkyō: jiplt. https://www.jil.go.jp/english/lsj/detailed/2005-2006/chapter1.pdf 21. kosugi, r. (2005). the problems of freeters and neets under the recovering economy. social science japan, 32, 6-7. https://newslet.iss.u-tokyo.ac.jp/ssj32/index.html 22. leontidou, l. (2012). athens in the mediterranean ‘movement of the piazzas’ spontaneity in material and virtual public spaces. city, 16, 299-312. https://doi.org/10.1080/13604813.2012.687870 23. maynou, l., ordóñez, j., silva, j.i. (2022). convergence and determinants of young people not in employment, education or training: an european regional analysis. economic modelling, 110, 105808. https://doi.org/10.1016/j.econmod.2022.105808 24. montasser, m. (2022). the neet problem in italy – a complex phenomenon to be solved. european student think tank. https://esthinktank.com/2022/04/19/the-neet-problem-in-italy-a-complexphenomenon-to-be-solved 25. neagu, g., berigel, m., lendzhova, v. (2021). how digital inclusion increase opportunities for young people: case of neets from bulgaria, romania and turkey. sustainability, 13, 7894. https://doi.org/10.3390/su13147894 26. norasakkunkit, v., uchida, y. (2012). marginalized japanese youth in post-industrial japan: motivational patterns, self-perceptions, and the structural foundations of shifting values. values, religion, and culture in adolescent development, 211-234. cambridge university press. https://doi.org/10.1017/cbo9781139013659.013 27. okulich-kazarin, v., artyukhov, a., skowron, ł., artyukhova, n., dluhopolskyi, o., cwynar, w. (2024). sustainability of higher education: study of student opinions about the possibility of replacing teachers with ai technologies. sustainability, 16, 55. https://doi.org/10.3390/su16010055 28. o’higgins, n., brockie, k. (2024). the youth guarantee, vulnerability, and social exclusion among neets in southern europe. politics and governance, 12, 7469. https://doi.org/10.17645/pag.7469 29. özdemir, m.o., özcan, k.m., üçdoğruk birecikli, ş. (2023). youth not in employment, education, or training (neet) in turkey: a regional analysis. ege academic review, 23(3), 409-426. https://doi.org/10.21121/eab.1178984 30. quintano, c., mazzocchi, p., rocca, a. (2018). the determinants of italian neets and the effects of the economic crisis. genus, 74(5). https://doi.org/10.1186/s41118-018-0031-0 31. quintano, c., mazzocchi, p., rocca, a. (2018). the determinants of italian neets and the effects of the economic crisis. genus, 74(1), 5. https://doi.org/10.1186/s41118-018-0031-0 https://national-policies.eacea.ec.europa.eu/youthwiki/chapters/republic-of-north-macedonia/36-integration-of-young-people-in-the-labour-market https://national-policies.eacea.ec.europa.eu/youthwiki/chapters/republic-of-north-macedonia/36-integration-of-young-people-in-the-labour-market https://dergipark.org.tr/tr/download/article-file/263390 https://doi.org/10.5772/intechopen.114103 https://doi.org/10.3390/su15043019 https://www.jil.go.jp/english/lsj/detailed/2005-2006/chapter1.pdf https://newslet.iss.u-tokyo.ac.jp/ssj32/index.html https://doi.org/10.1080/13604813.2012.687870 https://doi.org/10.1016/j.econmod.2022.105808 https://esthinktank.com/2022/04/19/the-neet-problem-in-italy-a-complex-phenomenon-to-be-solved https://esthinktank.com/2022/04/19/the-neet-problem-in-italy-a-complex-phenomenon-to-be-solved https://doi.org/10.3390/su13147894 https://doi.org/10.1017/cbo9781139013659.013 https://doi.org/10.3390/su16010055 https://doi.org/10.17645/pag.7469 https://doi.org/10.21121/eab.1178984 https://doi.org/10.1186/s41118-018-0031-0 https://doi.org/10.1186/s41118-018-0031-0 oleksandr dluhopolskyi, tetiana dluhopolska 43 32. rahman, k.m. (2007). neets’ challenge to japan: causes and remedies. japanstudien, 18(1), 221244. https://doi.org/10.1080/09386491.2007.11826943 33. rahmani, h., groot, w. (2023). risk factors of being a youth not in education, employment or training (neet): а scoping review. international journal of educational research, 120, 102198. https://doi.org/10.1016/j.ijer.2023.102198 34. ruesga-benito, s.m., gonzález-laxe, f., picatoste, x. (2018). sustainable development, poverty, and risk of exclusion for young people in the european union: the case of neets. sustainability, 10, 4708. https://doi.org/10.3390/su10124708 35. schmidt, b. (2021). meet japan’s neet: young people choosing to be unemployed. guidable. https://guidable.co/work/meet-japans-neet-young-people-choosing-to-be-unemployed 36. sharma, p. (2024). the ultimate guide to k-means clustering: definition, methods and applications. https://www.analyticsvidhya.com/blog/2019/08/comprehensive-guide-k-means-clustering 37. surmanidze, n., beridze, m., amashukeli, m., tskhadadze, k. (2023). empowering small businesses in georgia: access to finance, economic resilience, and sustainable growth. agora international journal of economical sciences, 17(2), 158-169. https://doi.org/10.15837/aijes.v17i2.6453 38. uchida, y., norasakkunkit, v. (2015). the neet and hikikomori spectrum: assessing the risks and consequences of becoming culturally marginalized. frontiers in psychology, 6, 1117. https://doi.org/10.3389/fpsyg.2015.01117 39. zatonatska, t., klapkiv, y., dluhopolskyi, o., fedirko, o. (2022). forecasting of the employment rate in the eu ict field. comparative economic research. central and eastern europe, 25(3), 7-25. https://doi.org/10.18778/1508-2008.25.19 40. zvarych, i., brodovska, o. (2023). global trends of modern inclusive economy. agora international journal of economical sciences, 17(1), 145-154. https://doi.org/10.15837/aijes.v17i1.5772 41. zvarych, r., rivilis, i. (2023). social responsibility of business as sustainable development approach in management. agora international journal of economical sciences, 17(1), 154-161. https://doi.org/10.15837/aijes.v17i1.5773 https://doi.org/10.1080/09386491.2007.11826943 https://doi.org/10.1016/j.ijer.2023.102198 https://doi.org/10.3390/su10124708 https://guidable.co/work/meet-japans-neet-young-people-choosing-to-be-unemployed https://www.analyticsvidhya.com/blog/2019/08/comprehensive-guide-k-means-clustering https://doi.org/10.15837/aijes.v17i2.6453 https://doi.org/10.3389/fpsyg.2015.01117 https://doi.org/10.18778/1508-2008.25.19 https://doi.org/10.15837/aijes.v17i1.5772 https://doi.org/10.15837/aijes.v17i1.5773 agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 17, no. 2 (2023), pp. 158-169 158 empowering small businesses in georgia: access to finance, economic resilience, and sustainable growth n. surmanidze, m. beridze, m. amashukeli, k. tskhadadze natia surmanidze1, mariam beridze2, maia amashukeli3, keti tskhadadze4 university of georgia, georgia 1 orcid no. 0000-0003-2116-6571, e-mail: n.surmanidze@ug.edu.ge 2 orcid no. 0009-0001-9100-2153 3 orcid no. 0009-0000-8466-379x 4 orcid no. 0009-0005-1051-5168 abstract: the role of small businesses in the global economy is pivotal, characterized by their flexibility, rapid adaptability, and significant contribution to job creation. small businesses worldwide often need help securing funding, particularly in regions with the most pronounced financing gap. the article discusses small business financing, emphasizing the importance of capital access and the challenges posed by limited options. the covid-19 impact underscores the critical role of financial support for small business resilience. georgia serves as a case study, exemplifying the concerted efforts of government agencies and international organizations in promoting small business development. the article examines initiatives like "enterprise georgia," the rural development agency, and the innovation and technology agency. the banking sector's role in facilitating small business growth and the significance of financial awareness initiatives is examined. the article highlights various measures, including the credit guarantee scheme and commercial banks' role in enhancing financial access and awareness. green banking and capital market development for sustainable economic growth are emerging priorities. green financing initiatives and partnerships with organizations like the fund for green growth exemplify a growing commitment to sustainability.however, the article also emphasizes the need for a comprehensive approach to capital market development in georgia to diversify financing sources and reduce reliance on the banking sector. in summary, this article underscores the indispensable role of access to finance in sustaining small businesses worldwide, focusing on the proactive efforts and collaborative endeavors in georgia, providing a blueprint for enhancing small business development and financial sustainability. keywords: access to finance, small businesses, financial awareness, green banking, capital market development. introduction small business is the driving force of the market economy; it plays an essential role in developing the global economy. small businesses' flexibility and decision-making autonomy allow entrepreneurs to respond to changes in the environment quickly, expand to new markets, consider customer requirements, quickly change directions, and ensure the creation of new jobs because they are the leading employers in developing countries. it is the beginning of the process of stabilization of the economic situation. improving access to finance for small businesses is a topic of great interest to policymakers and academics. mailto:n.surmanidze@ug.edu.ge natia surmanidze, mariam beridze, maia amashukeli, keti tskhadadze 159 the government, financial institutions, and donors invest in programs to finance small businesses. the priority direction of the development of the economic system of georgia should be the creation of appropriate conditions for starting a small business and its development. the existence of the mentioned vision will be reinforced by the coordinated actions of the public and private sectors in crises, which stimulate the growth of access to finance for businesses and the mobilization of finance, in particular, during the covid-19 pandemic, on the one hand, banks offered the opportunity to borrowers to benefit from the condition of deferring the fulfillment of obligations (national bank of georgia 2023), on the other in turn, the government provided tax subsidies, which would allow businesses to reduce costs (government of georgia, 2020). in order to increase access to finance, the ministry of economy and sustainable development of georgia created development-oriented agencies. these are georgia's innovation and technology agency, enterprise georgia, and rural development agency, whose primary goal is to promote small and medium-sized businesses and strengthen competitiveness. agencies provide financial support to small businesses. starting a business in georgia is easy, as the world bank's 2020 study shows. georgia ranks 7th among 190 countries regarding ease of business, while georgia's neighboring countries are far below this indicator. for example, armenia ranks 47th in the rating. due to the ease of business in georgia, the number of startups is high. according to the results of the july 2023 survey of the national statistics service of georgia, a total of 949,779 enterprises are registered in georgia, of which 233,864 enterprises are active, including 198,812 registered small businesses. accordingly, small and medium-sized enterprises in georgia make up 97% of economic entities. a significant part of the population of georgia is employed in small businesses. the number of employees is 313,125, which is 43% of the total number of employees. these indicators confirm that small business plays a significant role in the development of the economy and employment (geostat, 2023). for business, it is necessary to mobilize a certain amount of money for development. for the smooth functioning of current business activities, it is crucial to pay off the current obligation quickly, purchase technologies, establish a modern entrepreneurial culture, and introduce international quality standards. these factors are related to business sustainability, measured by one of the indicators, financial leverage, which means financing assets with debt. proper cash management and the ability to meet current liabilities on time can contribute to the financial sustainability of a company and reduce its dependence on short-term debt. although modern entrepreneurial culture is not directly related to financial leverage, it can indirectly affect a company's ability to attract investors or secure financing. a strong entrepreneurial culture that encourages innovation can make a company more attractive to lenders or investors, increasing the financial sustainability of the business. modern technologies contribute to the adequate performance of small and medium-sized businesses. due to a lack of cash flow, they must use outdated technologies, affecting their competitiveness. unlike georgia, external financing sources, especially bank loans, are more accessible to small businesses in poland. in poland, at the end of 2020, the percentage of firms that did not have liquidity problems reached a historical high. more than 62% of companies reported that they had cash liquidity at least at a safe level (i.e., 20%), and more than 94.5% of enterprises paid their credit obligations on time. there is also a relatively sustainable growth trend in the volume of long-term loans for small and medium-sized businesses (oecd-library 2023). empowering small businesses in georgia: access to finance, economic resilience, and sustainable growth 160 it should be noted that today's world is actively discussing issues of sustainable development, the main component of which is eliminating environmental damage. the green economy model, which reduces environmental risks and ecological problems, aims at sustainable development and reducing negative environmental impacts. green economy financing programs are becoming more relevant. currently, banks do not separate green loans in their analytical data. a taxonomy of sustainable financing was created under the leadership of the national bank of georgia, which involves granting loans according to the classification of activities, which means that business activities will be classified according to green, social, or sustainable development criteria. the sustainable financing taxonomy aims to provide financial support to businesses. small businesses can use financing methods such as a loan from a bank or obtain grants from various donor organizations to accumulate the necessary funds. there are no diversified sources of access to finance in georgia, and the primary way for business is bank loans or leasing. it is also worth noting that bank credit for entrepreneurs is minimal; as a rule, the smaller the business, the more it cannot meet the credit requirements for securing the loan; it cannot even confirm the income. entrepreneurs are forced to apply to microfinance organizations and take loans with high interest rates, which hurts their current and future development dynamics. small businesses need help attracting investments necessary for their activities and further development. access to finance is seen as one of the most critical constraints to firm growth. access to external finance is positively related to the growth of small businesses and the dynamics of their development. entrepreneurs need knowledge, skills, and experience to help them obtain finance from formal and informal sources. when entrepreneurs are unsatisfied with bank credit, they are deprived of opportunities for business development, expansion, and digitization because innovative technologies, acquiring new markets, and raising quality standards in production require financial resources. although there are ways to raise funds related to the state, they need more knowledge or often the resources to raise grants. that is why the starting point is informing entrepreneurs about the proper communication methods. deciding on financing in a small business is a crucial step, during which entrepreneurs must evaluate different sources of financing and be able to select the most relevant source of financing for their business. the paper aims to study, analyze, and evaluate the challenges and prospects of access to finance to ensure the sustainable development of small businesses in georgia, which includes loans and grants issued by institutions responsible for mobilizing finance: banks, microfinance organizations, and state and donor organizations. they are responsible for creating an effective financing system as the promotion of the sme sector develops small businesses. the research questions are as follows: 1. what are the reasons why entrepreneurs cannot get financial support? 2. what is the role of banks in small business development? 3. how easy can entrepreneurs find information about financing projects in their region? the crucial role of access to finance in sustaining small businesses amidst economic challenges access to finance is vital for small businesses, playing a crucial role in their startup, operation, expansion, and development. in an international context, small and medium-sized enterprises (smes) natia surmanidze, mariam beridze, maia amashukeli, keti tskhadadze 161 significantly contribute to economies, employing millions of people and generating a substantial portion of the gdp. small businesses often need help accessing finance, and this constraint can hinder their growth potential. in particular, regions like latin america, the middle east, and north africa face a significant financing gap, with nearly half of small businesses in need of assistance in securing loans (oecd, 2022). access to capital for small businesses can take various forms, including debt financing and equity financing, and the availability of such financing options varies across countries. small businesses resort to debt financing in countries where equity financing is limited. however, even debt financing options can be limited, pushing small entrepreneurs to seek informal sources of financing from friends, family, or community savings and loan associations, known as roscas (durst, 2021). overcoming information asymmetry is critical in increasing access to financial resources for small businesses. timely, accurate, and complete information empowers entrepreneurs to explore different avenues for business development, ensuring they are independent of bank credit. the covid-19 pandemic had a profound impact on small businesses worldwide. lockdowns, social distancing, and business closures led to a sharp contraction in global economic growth, affecting small businesses that lacked financial resources the most (maglakelidze, 2021). governments and banks were crucial in supporting these businesses through low-interest loans and other financial relief measures. many countries, including georgia, implemented payment deferrals, income tax deferrals, and debt restructuring measures to alleviate the financial burden on small businesses. collaborations with international organizations like the world bank and the european union provided additional support to small businesses, helping them weather the economic challenges posed by the pandemic. proactive support allowed many small businesses to survive and adapt creatively and innovatively to overcome the crisis. while the pandemic created challenges, it spurred resilience, adaptability, and innovation among small businesses worldwide. governments, international organizations, and financial institutions have played a crucial role in supporting these enterprises, highlighting the importance of facilitating access to finance and providing assistance during economic hardship (guenther, 2021). in conclusion, small businesses are essential components of economies globally, and access to finance is pivotal to their growth and survival. policymakers, international organizations, and financial institutions must work together to eliminate barriers to accessing finance, ultimately strengthening small businesses' resilience and growth potential. government support for small businesses in georgia: a comprehensive overview small businesses in georgia encounter multifaceted challenges, but government-sponsored programs play a pivotal role in supporting their growth. these initiatives aim to stimulate local entrepreneurship, enhance competitiveness, and foster innovation across various sectors, focusing on access to finance, real estate provisioning, and consultancy services. "enterprise georgia," initiated in 2014, serves as a cornerstone agency in the country, offering substantial support to small businesses. it includes facilitating access to credit, leasing options, and utilizing international brand names, helping entrepreneurs surmount financial obstacles. moreover, the program extends grants for technology adoption, product development, research, and the empowering small businesses in georgia: access to finance, economic resilience, and sustainable growth 162 promotion of exports. " enterprise georgia" has been crucial in cultivating a dynamic business environment, spurring growth, and attracting investments (enterprise georgia, 2023). the rural development agency, founded in 2012, directs its efforts toward providing resources and assistance to rural entrepreneurs, particularly in the agricultural sector. initiatives like the "preferential agro-credit program" subsidize loan interest, enhancing entrepreneurs' access to financial resources (rural development agency, 2023). georgia's innovation and technology agency (gita) supports startups and businesses by providing grants and educational programs. gita's involvement has been instrumental in fostering the growth of innovative businesses in georgia, with over 600 startups benefitting from their initiatives (innovation and technology agency, 2023). to facilitate the integration of georgian small businesses into the european market, the eu4business ebrd credit line assists in technology investment, aiding local companies in meeting european standards (eu4business, 2023). the united states agency for international development (usaid) has long advocated for business development in georgia. their "business development program," in collaboration with gazelle finance, extends interest-free loans and grants to small businesses. additionally, usaid, along with the kristal foundation, supports women's entrepreneurship through programs such as "supporting youth and women's entrepreneurship in georgia" (yes-georgia) (usaid, 2023). these government-backed programs play a pivotal role in supporting small businesses in georgia, enabling them to access financial resources, foster innovation, and contribute to economic growth (oecd, 2022). banking sector support and financial awareness initiatives for small businesses in georgia a well-functioning banking system catalyzes small business development and overall economic growth by providing liquidity and credit. banks play a vital role in lending to small enterprises, but they often need more information, leading to limited lending, high-interest rates, and collateral requirements. to bridge this gap, fostering strong relationships between small entrepreneurs and banks is essential (national et al. of georgia, 2023). one critical measure is the state-developed credit guarantee scheme, which enables entrepreneurs with insufficient collateral to access loans from commercial banks, agencies, or microfinance organizations with state guarantees. this scheme addresses the financing deficit small and medium-sized enterprises (smes) face. it mitigates market failures, a particularly pressing issue in developing countries like georgia (national et al. of georgia, 2023). interest rates on loans significantly affect small businesses' access to finance. georgia faces higher interest rates than some other countries, affecting the growth of small businesses. high bankruptcy rates further deter banks from lending to this sector (rakhmonovna, 2022). commercial banks dominate georgia's financial sector, and while alternative financing sources exist, their market share remains limited. access to bank credit is crucial for smes, and ongoing efforts to increase their financial capabilities and knowledge are essential. several banks in georgia offer free business courses covering topics like entrepreneurship, management, finance, and digital marketing. these courses aim to enhance financial awareness and strengthen the relationship between entrepreneurs and financial institutions (rakhmonovna, 2022). innovative services like tbc bank's "business guide" and liberty bank's "business dialogue" provide small entrepreneurs natia surmanidze, mariam beridze, maia amashukeli, keti tskhadadze 163 valuable information on financial and non-financial products, training, and business opportunities. these initiatives foster strong relationships between banks and small business owners (rakhmonovna, 2022). collaborative efforts between banks and international organizations have also played a significant role in alleviating challenges faced by smes. these partnerships have helped banks secure funding to support small and medium-sized businesses and encourage the adoption of modern technologies and eu standards (fif basisbank dcfta loan, 2020; credo bank, 2023). the proactive stance of georgian banks and their dedication to increasing financial awareness and education reflects their commitment to eliminating financing barriers for small entrepreneurs and promoting business growth in the country (netekoveni, 2019). green banking and capital market development for sustainable economic growth in georgia green banking, encompassing environmental and social protection elements, has become a growing priority in financing programs. while only a few georgian commercial banks have embraced green goals and strategies, the importance of green financing is recognized in international markets. in 2022, seven out of 13 commercial banks provided information on green loans, with "the bank of georgia" and "tbs bank" leading the way by presenting environmental, social, and governance (esg) strategies to align with british requirements (aslanishvili & omadze, 2019). procredit bank has demonstrated a solid commitment to the green economy by establishing an eco-department and obtaining the iso 14001 certificate. this bank funds small enterprises investing in energy-efficient, renewable energy, and environmentally friendly projects. their initiative fosters awareness and training on the significance of entrepreneurship in the green economy, offering valuable support to environmentally conscious entrepreneurs. the collaboration between the base bank and the fund for green growth in georgia is noteworthy. this partnership focuses on financing initiatives to enhance energy efficiency and reduce carbon emissions. the joint projects have already yielded substantial energy savings and emission reductions, contributing to sustainable development (jishkariani, 2021). developed countries, like the european union, actively support climate-related programs through various financial instruments such as grants, guarantees, and loans. sustainability initiatives, including creating the high-level expert group (hleg) and developing a sustainable development taxonomy, foster the transition to a resource-efficient economy. eu4business, in collaboration with the ebrd, prioritizes green business financing, aiming to reduce energy consumption and increase production efficiency (eu4business, 2023). however, georgia's capital market development strategy for 2023-2028 has some things that could be improved. it does not adequately address external market factors or risks, such as geopolitical events, economic trends, and regulatory changes, which can impact market development. furthermore, more emphasis on market infrastructure and regulatory framework improvement is needed. a robust regulatory framework is vital for investor protection and overall market growth. while the strategy recognizes the importance of the non-government bond and stock market, it needs comprehensive plans to diversify the range of financial instruments available. diversification can attract a broader range of investors and stimulate market growth, reducing the reliance on the banking sector. overall, capital market development in georgia is essential for creating a diversified source of financing, attracting investment, and reducing the dominance of the banking sector. initiatives that support small businesses, like venture capital funds and the development of green financing, can empowering small businesses in georgia: access to finance, economic resilience, and sustainable growth 164 contribute to economic growth and business sustainability (strategy for the development of small and medium enterprises of georgia, 2021-2025). research methodology qualitative research: qualitative research is an important part, within the framework of which information was collected through interviews with representatives of banks operating in georgia that provide business loans to small entrepreneurs. five bank representatives were interviewed. the existing research results are valid because, in georgia, eight commercial banks are operating in this segment, and the bank with the most extensive small business portfolio has been selected. results a qualitative study assessed access to finance for small businesses operating in georgia. according to the tax code of georgia, a business is called a small business if its annual combined income does not exceed 500,000 gel (parliament of georgia, 2010). qualitative research included interviews with representatives of five georgian banks that provide loans to small entrepreneurs, which provides valuable information. the objective of the qualitative research was to explore the opinion of bank representatives about the challenges and opportunities faced by small businesses in georgia in accessing finance. they assessed the barriers that prevent entrepreneurs from getting a loan and their level of awareness of various business opportunities. one respondent cited a need for more information and effort in collecting documents as a barrier to accessing finance. small businesses may need help to collect the necessary information banks require. the respondent perceives proper communication and cooperation between the bank and small entrepreneurs as critical. the second and fourth respondents highlighted insufficient solvency, sloppy accounting, unsound plans, and poor credit history as barriers to accessing finance (surmanidze, 2018). the mentioned respondent states that the most common reason among the barriers to access to finance is the insufficient financial situation of the entrepreneur, which leads to the inability to repay the loan on time. a third respondent highlighted several challenges: insufficient revenue, limited collateral, negative environmental impacts, and unfavorable business structures. the respondent noted that entrepreneurs are most often refused a loan due to insufficient collateral. the factor in which small business operates is also essential; whether business activities hurt the environment or human health, such areas are considered risky, and banks avoid financing. "business activity, for example, if it hurts the environment, human health (production of chemicals, bitumen, petroleum products, processing-extraction of high-risk inert material, etc.) a fifth respondent cited "excessive loan demand, expectations, and risk-taking." small businesses that request loan volumes beyond their revenue-generating capacity may need help obtaining financing. in addition, the lack of adequate risk assessment and analysis can prevent loan approval. entrepreneurs need to match the loan request with their financial capabilities and assess the risks associated with the loan (financing smes and entrepreneurs,2022). the respondents' responses reveal that banks significantly emphasize the borrower's financial ability to fulfill loan obligations. although banks are trying to promote financial literacy by providing various programs and training and helping small businesses strengthen their financial management capabilities, the study revealed that this factor still exists as a barrier to access to finance. these natia surmanidze, mariam beridze, maia amashukeli, keti tskhadadze 165 factors determine small businesses' financial stability and viability, which is crucial for banks. common factors that hinder the ability to secure financing for small businesses have been identified. among them are lack of information, insufficient solvency, unorganized accounting, unsound business plans, insufficient income, collateral limitations, lousy credit history, excessive liquidity, and inattention to risks. in almost all of the reasons listed, respondents' answers highlight the multifaceted nature of small businesses' challenges. all five respondents indicated that their bank loan helps small entrepreneurs expand their business and emphasized that this is one of the ways to use the received funds for improvements, such as upgrading the infrastructure, introducing new technologies, or improving the product/service offering. also, by investing in the business, entrepreneurs can increase efficiency, competitiveness, and customer satisfaction, ultimately leading to improved business profitability. in "business expansion," "business development, access to money." the fourth respondent called the loan a cheap resource for development. it indicates that the bank representatives believe that the availability of loans at low-interest rates allows small entrepreneurs to obtain the necessary funds for the growth of their business at an affordable price. this availability can facilitate investments in new equipment, expansion of production capacity, and other development initiatives. thus, respondents believe bank loans are crucial in providing cash to entrepreneurs. the study reveals the green financing policies of five banks operating in georgia and examines whether small businesses have an advantage in seeking green financing. four respondents indicated that there are special green financing programs in their banks. it shows that these banks recognize the importance of financing environmentally sustainable projects and have specific initiatives to support such enterprises. another respondent pointed out that green financing offers lower fixed and effective interest rates than standard financing. moreover, low-interest rates lower the cost of borrowing and increase the financial viability of green projects, making them more attractive to small businesses looking for financing. "for the most part, the benefit for the entrepreneur is expressed in lower fixed and effective interest rates compared to the standard." the fifth respondent said that banks encourage businesses to use green loans. accordingly, the bank actively supports small entrepreneurs to implement environmentally friendly practices by encouraging green loans. one respondent emphasized that the bank prioritizes financing energyefficient and environmentally friendly projects, as they positively impact the environment. in the answers of the bank representatives, several opinions were highlighted regarding the advantages of loan approval, which are available to small entrepreneurs who have grants from the state or donor organizations. however, some respondents emphasized that grant holders do not have an advantage. one respondent noted that small entrepreneurs who received government grants benefit from cofinancing benefits, especially regarding interest and collateral requirements. the existence of a grant allows entrepreneurs to obtain financing with a reduced financial burden, potentially improving their financial situation. reduced interest expenses can improve cash flow and profitability, which creates favorable conditions for the financial stability of the entrepreneur. on the contrary, one of the respondents mentioned that small businesses are not in an advantageous position if they own state grants because there are not enough conditions to meet the bank's requirements when taking a loan. "no, because it is not enough," one of the bank's representatives said that small entrepreneurs who received state grants enjoy relatively high trust in the bank. the grant acts as a form of guarantee, reducing the perceived risks of financing such entrepreneurs. this confidence can foster a more empowering small businesses in georgia: access to finance, economic resilience, and sustainable growth 166 favorable credit environment, allowing entrepreneurs to access finance more efficiently and with better loan terms. also, small businesses that have received grants from donor organizations are at an advantage, as having an organization that oversees the funds can enhance transparency and accountability, ensuring the bank's confidence in the proper use of the funds. such monitoring can further reduce the risks for the bank, potentially leading to more favorable credit terms for the entrepreneur. "yes, they are. as the project financing involves an organization that monitors the goals of spending funds", the existence of a grant-supported project can provide an additional guarantee of the bank, which will contribute to the entrepreneur's favorable position in seeking financing. the study also included examining the loan application behavior of grant entrepreneurs. analysis of their answers provides essential information about the practical frequency of loan requests by small entrepreneurs with grants. the answers of the bank representatives indicate that requests for loans with grants from small entrepreneurs are relatively rare. several respondents expressed that these entrepreneurs often do not seek additional funds through bank loans. "i have had contact with only one organization. therefore, organizations with grants have less frequent loan requests than other entrepreneurs." once entrepreneurs receive a grant, they can rely on the funds provided and do not need other resources to support their business activities. the responses of bank representatives about the ways and level of awareness of small entrepreneurs emphasize that banks use different methods to provide information about projects and loan opportunities to small entrepreneurs. bank representatives named such methods as posting information on the bank's website, personal communication with entrepreneurs, advertising campaigns, telephone offers, promos, use of internet banking platforms, and involvement in marketing activities. direct communication through channels such as social media and conferences/meetings are also mentioned as ways to provide information to entrepreneurs. the responses indicate that banks use multiple communication channels to connect with small businesses. this multi-channel approach ensures that information reaches the entrepreneur through various means, allowing for greater awareness and access. the combination of online platforms, direct communication, and marketing activities reflects the banks' efforts to ensure the dissemination of comprehensive and diverse information. bank representatives gave different assessments about the level of information among small entrepreneurs regarding how to obtain financing. some respondents rated it around 6-7 on the scale. "compared to previous years, the population is more aware of grant projects. which naturally increases the number of project beneficiaries". accordingly, according to the bank's representatives, the level of information among small entrepreneurs is moderately satisfactory, and some improvement has been observed over the years. however, banks should raise the level of information among entrepreneurs. continued efforts to educate and inform small business owners about financing opportunities can support their ability to make informed decisions and access the resources they need to grow and develop their businesses. the study will also examine the view of bank representatives regarding how business can be developed in georgia. the answers highlight several key factors contributing to the development of small businesses in georgia. according to one of the respondents, diversification of the economy is an essential factor. the development of various sectors and branches of the economy is considered a decisive factor for the growth of small businesses. a diversified economy gives entrepreneurs more opportunities to identify niches, explore new markets, and expand their businesses. "with the natia surmanidze, mariam beridze, maia amashukeli, keti tskhadadze 167 development of various branches of the economy, with the development of diverse sectors." according to the third respondent, practical business and development-oriented management practices are essential for small business success. emphasis is placed on acquiring the right skills, transferring new technologies, and applying global best practices. small businesses should adopt effective management strategies to improve their operations, productivity, and competitiveness. the fifth respondent was "competition, seeking more information about the business." competition plays a vital role in the development of small businesses. by actively seeking more information about their business sector, market dynamics, and customer preferences, entrepreneurs can identify areas for improvement and implement strategies to remain competitive. accordingly, taking into account these factors, small businesses in georgia can strengthen their competitiveness, expand their activities, and contribute to the country's overall economic growth. it is important for stakeholders, including government agencies, financial institutions, and business support organizations, to collaborate and create an enabling environment that supports small business development and success. conclusions small business development has played a crucial role in the socio-economic progress of georgia since its independence. the growth of small businesses led to the creation of jobs and a significant increase in the number of employees, and the growth helped to improve the overall level of wages, which reflects the positive impact of small businesses on the livelihood of the population in georgia. access to capital continues to be a significant barrier for small businesses, as georgia's capital market development strategy (2023-2028) must explicitly address market infrastructure development, such as stock exchanges. there needs to be more focus on the regulatory framework and more detailed information on improving it. the covid-19 pandemic has highlighted the vulnerability of small businesses and the importance of accessing finance in times of crisis. governments, financial institutions, and international organizations have implemented various measures to support small businesses during these difficult times. these initiatives, such as lowinterest rates, loan programs, payment deferrals, and tax relief, were intended to ease the financial burden and ensure the continuity of small businesses. in georgia, specific programs and initiatives have been implemented to meet the needs of small businesses, resulting in positive results such as reduced liquidation procedures and increased demand for loans. various agencies in georgia create an entrepreneurial environment that promotes business development. commercial banks mainly dominate the financial sector in georgia. therefore, banks are the main financiers of small businesses when receiving financing. according to the banks, the barriers that make it difficult for entrepreneurs to secure financing are lack of information, insufficient solvency, unorganized accounting, unsound operating systems, insufficient income, collateral limitations, lousy credit history, excessive liquidity, and risk inattention. the research revealed that banks have specific green financing policies and programs that enable small businesses to benefit from low-interest rates and favorable terms. small entrepreneurs who have received grants from donor organizations or state grants have an advantage in accessing bank loans; that is why it is essential to have a project supported by a grant, which represents an additional guarantee for the bank. based on the findings, the paper can give some recommendations to improve access to finance for small businesses in georgia. empowering small businesses in georgia: access to finance, economic resilience, and sustainable growth 168 they are strengthening financial education: developing and implementing comprehensive financial literacy programs for small entrepreneurs by the state and banks. banks should support credit improvement initiatives and provide financial education and advisory services. these programs should focus on increasing the business education of entrepreneurs, which includes learning about finance, marketing, management, and the loan application process. small businesses, on the other hand, should focus on improving their financial management practices. promotion of sustainable practices: banks should encourage businesses that engage in sustainable activities to minimize adverse environmental impacts. accordingly, it is essential to develop the supply of green loans further. they should conduct informational training because entrepreneurs will understand how much priority green business is today. the initial etpa banks need to give loans at interest-free rates because, in this respect, the environmental impact will be eliminated, as well as to promote the development of entrepreneurial activities in this regard. raising awareness: banks need to raise awareness in the regions, giving small entrepreneurs a voice about their opportunities because as their awareness increases, so does their involvement in programs and entrepreneurial activities. banks should create activities through which they can reach small entrepreneurs directly and provide comprehensive information about projects, as well as lending requirements and procedures, and small businesses should make a concerted effort to collect and submit the necessary documents. development of the capital market: the state should develop the capital market and consider factors such as geopolitical events, economic trends, and regulatory changes. significant attention should also be paid to developing market infrastructure, such as stock exchanges. diversifying the financial instruments available in the capital market is also essential, which can attract a broader range of investors and stimulate market growth. in conclusion, solving the challenges of access to finance for small businesses in georgia requires a multifaceted approach involving various stakeholders. by implementing the above recommendations, policymakers, banks, and small entrepreneurs can work together to create an enabling environment to support small businesses' growth and development. it, in turn, will contribute to the overall economic prosperity of georgia and create relevant business opportunities. references 1. amiran maglakelidze, ,. g. (2021). challenges of small and medium enterprises during the covid-19 pandemic: case of georgia. doi:https://www.proquest.com/openview/d730c185f4dc6832db91653ba97e5a51/1?pqorigsite=gscholar&cbl=4368393 2. bdo. (2019). study of the effectiveness of the results of the " enterprise georgia" program. tbilisi. retrieved 05/14/2023, from https://www.enterprisegeorgia.gov.ge/ uploads/files/publications/5c6bebc46258e-bdo-geo.pdf 3. 2021/dbg%202021_as%20of%2031%20march%202021.pdf 4. david aslanishvili, k. o. (2019). green economy and access to finance in georgia (going beyond the commercial banking sector to finance businesses in georgia). retrieved 05/14/2023 5. eu4business. (2023). retrieved 05/14/2023 from https://eu4business.ge/access-to-finance/. 6. fif basebank dcfta loan. (2020). 7. financing smes and entrepreneurs. (2022). doi:https://read.oecd-ilibrary.org/industry-andservices/financing-smes-and-entrepreneurs-2022_e9073a0f-en#page22 https://www.enterprisegeorgia.gov.ge/ natia surmanidze, mariam beridze, maia amashukeli, keti tskhadadze 169 8. guenther, m. b. (2021). economic effects of the covid-19 pandemic on entrepreneurship and small businesses. doi:https://link.springer.com/article/10.1007/s11187-021-00544-y 9. m. jishkariani, s. kumar ghosh. (2021). home circular economy: recent trends in global perspective chapter. doi:https://link.springer.com/chapter/10.1007/978-981-16-0913-8_11 10. oecd. (2022). financing smes and entrepreneurs. doi:https://read.oecdilibrary.org/industry-and-services/financing-smes-and-entrepreneurs-2022_e9073a0fen#page1 11. rakhmonovna, m. d. (2022). foreign experience in regulating and supporting small business by the state. doi:https://geniusjournals.org/index.php/ejhge/article/view/627 12. sasa bakhtiari, r. b. (2020). financial constraints and small and medium enterprises. doi:https://onlinelibrary.wiley.com/doi/abs/10.1111/1475-4932.12560 13. surmanidze, n. (2018). sme development institutions in georgia me development institutions in georgia. retrieved 05/14/2023 from file:///c:/users/user/desktop/admin,+80-83.pdf 14. susanne durst, (2021). risk and financial management article financing responsible smalland medium-sized enterprises: an international overview of policies and support programs. doi:https://www.mdpi.com/1911-8074/14/1/10 15. susanne durst, w. g. (2021). financing responsible smalland medium-sized enterprises: an international overview of policies and support programs. retrieved 05/14/2023 16. usaid. (2023). retrieved 05/14/2023, from https://www.usaid.gov/. 17. enterprise georgia. (2023). retrieved 05/14/2023 from https://www.enterprisegeorgia.gov.ge/ka. 18. bank, k. (2023). retrieved 05/14/2023, from https://credobank.ge/mediaroom/credobankma-blueorchard-microfinance-fundidan-63-milioni-laris-finansuri-resursi-moizida/. 19. innovation and technology agency. (2023). retrieved 05/14/2023, from https://gita.gov.ge/ 20. credo bank. (2023). retrieved 05/14/2023, from https://credobank.ge/mediaroom/credobank-ebrd-agreement/. 21. kurdzhalia, n. (2020). targeted programs promoting small and medium-sized businesses in eu countries. doi:file:////00732/user/93829/admin,+84-91.pdf 22. small and medium business development measures audit report. (2022). retrieved 05/14/2023, https://sao.ge/ka/%e1%83%9b%e1%83%aa%e1%83%98%e1%83%a0%e1%83%94%e1% 83%93%e1%83%90%e1%83%a1%e1%83%90%e1%83%a8%e1%83%a3%e1%83%90%e1%83%9a%e1 %83 %9d%e1%83%91%e1%83%98%e1%83%96%e1%83%9c%e1%83%94%e1%83%a1%e1% 83%98%e1%83% from a1-%e1%83%92%e1%83%90%e1%83%9c%e1%83%9. 23. netekoveni, h. h. (2019). the role of small and medium enterprises in development processes. doi:https://library.fes.de/pdf-files/bueros/georgien/15734.pdf 24. pro credit bank. (2023). retrieved from https://www.procreditbank.ge/ 25. research on credit terms. (2022). doi: https://nbg.gov.ge/financial-stability/credit-conditionssurvey 26. small and medium entrepreneurship development strategy of georgia. (2021-2025). doi:https://www.economy.ge/?page=ecopolitic&s=45 27. national statistical service of georgia. (2023). retrieved 05/14/2023 from https://www.geostat.ge/ka. 28. rural development agency. (2023). retrieved 05/14/2023 from http://www.rda.gov.ge/. 29. the parliament of georgia. (2010) tax code of georgia. retrieved 7.14.2023. agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 17, no. 2 (2023), pp. 137-141 137 international trade policies and markets e. qose, r. dibra enea qose, rezart dibra university college of business, albania 1 https://orcid.org/0009-0001-5990-486x, e-mail: eqose@kub.edu.al 2 https://orcid.org/0000-0003-3684-6633 abstract: in this paper, is presented an overview of the evolution of international trade, emphasizing its role in enabling the international division of labor and a brief examination between albania and western balkan countries foreign trade. the development of foreign trade is intrinsically linked to liberalization, which, in turn, fosters connectivity and mutual economic interdependence among nations. the performance exhibited in both exports and imports plays an important role in fostering sustainable development within the country's economy. active engagement in these initiatives broadens albania economy specialization possibilities but, simultaneously, necessitates a commitment to enhancing competitiveness. this development has been shaped by economic, social, political, and cultural factors, with significant advancements in recent decades due to industrialization, advanced transportation, globalization, and the emergence of multinational corporations. trade indicators for each country serve as a reflection of economic development and mutual benefit. the international markets of foreign countries serve as platforms for both generating additional income through exports and fulfilling the domestic economy's requirements through imports. keywords: international trade, exports, imports, etc. introduction society's development is significantly bolstered by the institution of the social division of labor, which initiates within the framework of the family unit and progressively extends into colonial and state structures, ultimately culminating in the contemporary globalized landscape. central to this societal evolution is the practice of trade, serving as the primary conduit not only for interpersonal communication but also for the exchange of goods and commodities among individuals. this exchange, governed by the mechanisms commonly referred to as markets, plays a pivotal role in facilitating economic interactions. as human communities expanded and states emerged, a compelling need arose for the exchange of products and services between these entities. consequently, novel mechanisms for facilitating trade on an international scale came into existence. the division of labor, marked by the specialization in the production of specific goods on an international scale, engenders connectivity and mutual economic interdependence among nations. the transition to international trade required gradual development over centuries, ultimately reaching an elevated state in recent decades. it has promoted greater interdependence between countries as well as integration and cooperation between various nationalities and https://orcid.org/0009-0001-5990-486x mailto:eqose@kub.edu.al https://orcid.org/0000-0003-3684-6633 international trade policies and markets 138 business organizations. recognizing the importance of international trade for a country's development is essential. a nation that successfully promotes exports over imports tends to exhibit a higher economic standard and an improved per capita income. conversely, countries with an import-heavy trade balance often face economic challenges and diminished living standards. the research methodology integrated both the analytical method, focusing on a detailed examination of recent and prior literature relevant to the subject, and the comparative method, which enabled comparisons to be made as needed. policies and factors affecting international trade trade costs are frequently regarded as a restraining factor in the advancement of global trade( anderson & eric van wincoop, 2004). these costs encompass all the expenses involved in facilitating the movement of goods to their final destination, encompassing not only the marginal costs of producing the goods themselves. within the view of this definition, trade costs has various components, which consist of distance-related costs, trade policies, transportation expenses, communication costs, procedural expenditures, and infrastructure outlays. geographical distance has been overlooked in traditional growth theories, focusing more on national characteristics and technological progress. however, proximity and neighboring countries significantly impact economic activities (carrère & schiff, 2003). nations farther from economic hubs may face developmental challenges. distance affects production, income (trade, investment, technology), directly raising transportation costs and creating trade barriers (berthelon & freund, 2004). proximity to global markets enhances resource utilization and economic opportunities, emphasizing the importance of geographical location in shaping economic development. trade policy is a set of legal decisions that directly influence a country's imports and exports of goods and services (motta & onida, 1997). these policies come in various forms, with the most prevalent being customs duties or taxes levied on imported goods and import quotas that impose quantitative restrictions on specific products (kim, 2010) . restrictive trade policies are prevalent globally, occasionally concealed or nuanced. one example of the intricate dynamics of international trade discussions is the ongoing pressure from the u.s. government on japan to limit the import of japanese automobiles into the country. a tariff is essentially a tax, or duty, levied on a commodity as it crosses national borders (balassa, 1965). import tariffs, which are taxes imposed on imported goods, are the most common form of tariffs (kostecki & tymowski, 1985). less frequently encountered are export tariffs, imposed on goods destined for foreign markets. developing countries, such as ghana for cocoa exports and opec13 for oil exports, sometimes employ export tariffs to bolster revenue or intentionally create global shortages, thereby raising the price of their exported products. enea qose, rezart dibra 139 albania's foreign trade foreign trade holds a significant position within the overall economic landscape, particularly in the foreign sector. this aspect is of vital importance for smaller economies, such as albania. in recent years, albania's foreign trade has undergone substantial changes, marked by a shift toward liberalization, leading to alterations in its principal indicators. despite the global economic crisis, the albanian economy managed to maintain stability in its macroeconomic indicators. the performance exhibited in both exports and imports plays a vital role in fostering sustainable development within the country's economy. additionally, it influences the trade balance, essential for addressing global competition. the growth rate of exports serves as a crucial data, indicating the stability and sustainability of the economy and its competence in international markets. however, this indicator is significantly influenced by the international economic environment. as a result, even though it is a useful indicator, its validity is strongly dependent on external factors. additionally, the countries strong trade relationships, remittances, and banking sector ties with greece and italy expose it to the consequences of debt crises and sluggish growth in the euro area. these external factors contribute to albania's economic vulnerabilities and call for prudent management to navigate these complexities effectively. international trade in goods of albania for the period 2010-2023 trade in goods within the balkan region has shown significant improvement. in the 10th month of 2022, albania's trade with the five neighboring countries accounted for 10% of its total trade, up from 6.5% in 2010 (instat, 2022). notably, albania has transitioned to a trade surplus between 2018 and october 2022, except in the case of serbia. albanian exports have taken precedence over imports in kosovo, north macedonia, montenegro, and bosnia-herzegovina. however, with serbia, the second-largest trading partner, the trade deficit has continued to expand. challenges persist as businesses contend that trade procedures have not experienced substantial simplification. it's important to recognize that long-term competitiveness may be at risk if support for the agriculture sector is not prioritized. accurate foreign trade statistics is important for the albanian economy, influencing economic policies and enabling in-depth analysis of market developments for various goods. this data provides valuable insights into trade dynamics and helps guide decision-making in the realm of international trade. as illustrated in figure 1, which depicts the dynamics of trade among western balkan countries and albania. international trade policies and markets 140 figure 1. trade among western balkan countries and albania source: revista monitor (2022). from 2018 through the end of october 2022, albania has consistently achieved a trade surplus with the five western balkan countries, except for serbia. this trend underscores that albania's exports have been expanding at a faster pace than its imports. as illustrated in figure 2, which show the weight of albania's total trade with each of the western balkan countries. figure 2. weight of albania's total trade with each of the western balkan countries trade with serbia and kosovo experienced the most significant growth, while with the other neighboring countries, the increases were more moderate. a closer examination of the data reveals that trade with serbia was notably bolstered by annual increases in imports of beverages, alcohol, dairy products, and live animals (instat,2022). this insight sheds light on the specific drivers of trade dynamics between albania and these western balkan nations. conclussions initiatives aiming at liberalizing and facilitating trade on a regional and global scale have been effortlessly incorporated into albania's economy. participating actively in these projects increases albania's economic specialization opportunities while also requiring a commitment to 31% 22% 35% 4% 8% serbia north macedonia kosovo bosnia&hercegovina montenegro enea qose, rezart dibra 141 improving competitiveness. each nation's trade indicators show how economically developed and mutually beneficial each nation is. today's market facilitates the exchange of products, ideas, concepts, and financial assets by embodying a complex web of relationships that have been established within certain temporal and physical frameworks. it's important to remember that the development of the market depends on imported goods and services providing clear benefits over those made in the country. government size is another variable positively related to trade, implying that the higher the performance in fiscal freedom and government spending, the more bilateral trade increases. fiscal freedom is a direct measure of the extent to which the government allows individuals and businesses to keep and manage their income and wealth. a government can impose fiscal burdens on economic activity through taxation or by creating public debt which is then repaid through taxation. this means that the better the government performs in this index, the more bilateral trade increases. also, excessive government spending carries a risk for commercial activity because an increase in public debt imposes high taxes on businesses. so the higher this variable is evaluated, the more inclined we are to evaluate commercial activity. market openness is also a variable that positively helps bilateral trade. this means that the removal of tariff and non-tariff barriers would help intensify bilateral trade. in conclusion, international trade has been critical to the development of the world economy and civilization. over time, a variety of political, social and economic factors have influenced its evolution; in the modern age, globalization has been the primary driver. since trade balances have a significant impact on a nation's economic growth, they remain important metrics. references 1. anderson, james, e., and eric van wincoop. 2004. "trade costs." journal of economic literature, 42 (3): 691-751. 2. balassa, b. (1965). tariff protection in industrial countries: an evaluation. journal of political economy, 73(6), 573-594. 3. berthelon, m., and freund, c. [2004]. “on the conservation of distance in international trade”, world bank policy research working paper no. 3293, washington dc. 4. carrère, c. and schiff, m. [2003], “on the geography of trade: distance is alive and well”, world bank policy research working paper no. 3206, washington dc. 5. instat,2022. foreign trade in goods.tirane, albania. https://www.instat.gov.al/en/themes/international-trade/international-trade-ingoods/#tab3 [september,2023]. 6. kim, j. (2010). recent trends in export restrictions. oecd trade policy working papers, no. 101, oecd publishing. doi: 10.1787/5kmbjx63sl27-en 7. kostecki, m. m., & tymowski, m. j. (1985). customs duties versus other import charges in the developing countries. j. world trade l., 19, 269. 8. motta, m., & onida, f. (1997). trade policy and competition policy. giornale degli economisti e annali di economia, 67-97. https://www.instat.gov.al/en/themes/international-trade/international-trade-in-goods/#tab3 https://www.instat.gov.al/en/themes/international-trade/international-trade-in-goods/#tab3 agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 17, no. 2 (2023), pp. 187-204 187 innovation management on the way to business excellence s. živanović, n. abramović, m. živanović, s. smolović slađana živanović1, nikola abramović2, miodrag živanović3, sanja smolović4 1 2 3 faculty of business economics and law, university adriatic bar, montenegro 1 https://orcid.org/0000-0002-6001-3685, e-mail: sladja.nautilus@gmail.com 2 https://orcid.org/0000-0002-7865-3592, e-mail: nikola.abramovic.fpe@gmail.com 3 https://orcid.org/0000-0003-3612-6230, e-mail: mico.zivanovic@gmail.com 4 faculty of maritime affairs and tourism, university adriatic bar, montenegro 4 https://orcid.org/0000-0002-9893-0593, e-mail: sanjasmolovic83@gmail.com abstract. the current conditions of the global economy have caused innovative changes to be the main condition for a good, sustainable, competitive business of the organization. the solution to the problem can be seen in innovation management, of course with information technology. the goal of this work is the development of innovation with practical software solutions through the innovation management process, i.e. increasing business excellence in the organization. researchers in organizations use original experience in the implementation of developed software solutions in the field of document management and business innovation. in recent times with globalization and the technological revolution, knowledge has become a key resource for the economic growth and development of nations. accordingly, the improvement of innovation has become a key condition for the sustainable development and competitiveness of organizations on the local and international market. the results of the conducted research are presented through author-developed programs for statistical data processing and for assessing economic sustainability and achieved business excellence (based on the efqm 2013 methodology). keywords: management system, quality, innovation, document management 1. introduction in order for the economy to progress, strategic investments for the development of technology that lead us to innovation must be increased. knowledge and innovation have the greatest importance in the development of society, since the very beginnings of human civilization. the assessment of economic sustainability is a special form that expresses the overall performance of the business. only with a fundamental concept can the company achieve good results and show business excellence with the maximum involvement of all interested parties, with knowledge management. globalization and the technological revolution with knowledge represent a key resource for the economic growth and development of nations. accordingly, the improvement of innovation has become a key condition for the sustainability and competitiveness of organizations on the local and international market. in the modern economy, small and mediumsized organizations play a significant role in creating the gross domestic product of individual countries. changes in the business environment have reduced the structural disadvantages of small and medium-sized enterprises, due to the small business volume. the end of the last century and the beginning of this century are marked by general globalization around the world. the increase in industrial production and the devastation of the human environment created an obligation for numerous national and international institutions t o https://orcid.org/0000-0002-6001-3685 mailto:sladja.nautilus@gmail.com https://orcid.org/0000-0002-7865-3592 mailto:nikola.abramovic.fpe@gmail.com https://orcid.org/0000-0003-3612-6230 mailto:mico.zivanovic@gmail.com https://orcid.org/0000-0002-9893-0593 mailto:sanjasmolovic83@gmail.com innovation management on the way to business excellence 188 introduce new approaches for restructuring economic flows. the need to organize sustainable development with intergenerational solidarity, which implies the responsible use of natural resource potential, is increasingly emerging. skilled managers transform their knowledge through ideas into a new product and service with added value as part of research activities. the innovation process must be well planned and clearly oriented towards obtaining a positive final result. large investments in research and development as well as other elements of the innovation process do not necessarily result in successful innovations. innovation efforts and activities can be misdirected. there is a possibility that good ideas will not be implemented due to the creation of a bottleneck in some part of the innovation process. the innovation process first requires an idea, with a focus on the conceptual solution, innovation modeling (invention), evaluation of alternatives, decision-making and innovation implementation. rapid changes, great competitive advantages, increasing expenditures for research work, influence the small economy to search for new, more open types of innovation, as well as to cooperate with external partners and develop new products or services on the mark et before its competitors. the main concern of this economy is to make the best use of the internal possibilities of research and development in order to maximize the advantage through the model of open innovation. a successful open innovation strategy for small and medium-sized enterprises must use the internal innovation potential for good development innovation solutions. on the other hand, there are also problems that limit the use of the open investment model in small and medium sized enterprises. this often does not allow an aggressive market presence at the right time and with the right product. 1.2 methodological approach research objective. one of the possible approaches to solving the problem of determining and activating the innovative potential of small and medium-sized enterprises assumes the development of a model for the management of quality system documentation. however, this model requires expansion to a level that will represent a prototype platform for initiating, modeling and testing business process innovations. therefore, the model must provide data on the success of the tested processes, as well as a methodology for their transition from a successful prototype to an operational version. the work shows, through the author's conceptual model and a practical software solution in the food industry, the process of modeling, making and implementing a possible solution to this problem. also, the conceived model provides a solution for efficient, effective and sustainable implementation in a real business environment:  tools for training staff and management to get involved as bearers of business system redesign according to the new service oriented architecture (soa)/business activity monitoring (bam)/complenx event processing (cep) paradigm, with the help of benefits obtained from the implementation of iso 9000 + business excellence (be);  the logic of the new paradigm into existing business solutions and its prototype testing by staff and management, with the support of information technology (it) staff and consultants;  new and changed it solutions that are designed according to the new paradigm, but also logically tested through prototype application. slađana živanović, nikola abramović, miodrag živanović, sanja smolović 189 this would test the potential of a synergistic innovative effect for the creation of benefits obtained by the complementary application of quality management system (qms) and information technology (it) to the business system (enterprise). and with the help of documentation of quality management system (dqms) as a catalyst for innovat ing business processes. theoretical foundations of research. innovations, knowledge and entrepreneurship represent a key determinant of economic growth and improving the competitiveness of companies and countries [1]. enterprise innovation means the ability to produce and commercially valorize goods and services based on the use of new knowledge and skills [2]. improving innovation is a key condition for the economic progress of countries, while innovation policy is the most important instrument of long-term economic development strategies and improving the competitiveness of countries in the knowledge-driven global economy [3]. in today's conditions, it is possible to ensure a satisfactory development performance of the company, as well as the respectable competitive position of the country on the world market, only under the assumption of satisfactory innovativeness of its economy. a good example of bam/cep implementation for haccp purposes is the alifarm dairy farm management software solution of the israeli company afimilk [4]. although it is not structured as soa architecture, the program creates in real time a cloud of events, compares it with historical data and, based on predefined scenarios, predicts complex events (such as the occurrence of mastitis in the throat) and automatically initiates corrective action to treat the throat and informs the farm manager. business excellence is a creative framework that naturally follows the implementation of the iso 9000 series quality standards [5]. business excellence is a term that implies the systematic use of the basic principles and tools of quality management with the aim of improving organizational performance. the concretization of this concept in practice is the european foundation for quality management (efqm) model of business excellence as the most popular quality tool in europe. the model is based on nine basic elements, which at the first level are divided into two groups: a) criteria that enable the realization of results and b) results. a) the criteria that enable the realization of results are: k1. leadership, k2. strategy k3. people (directly or indirectly involved in the functioning of the organization) k4. partnership and resources k5. processes, products and services b) the group of results includes results related to: r1. customers r2. people (directly or indirectly involved in the functioning of the organization) r3. social community r4. business the model is dynamic in nature and is based on learning, creativity and innovation that improve the first five criteria, which automatically affects the improvement of results. by implementing this model in practice, companies achieve the following goals:  permanent creation of added value for their customers and clients by understanding, predicting and satisfying their needs and expectations.  constantly improving their own performance, thereby positively influencing their innovation management on the way to business excellence 190 environment, creating a sustainable future for the environment by improving its economic, ecological and social conditions.  improvement of organizational potential and timely response to changes within or outside the boundaries of the business system.  market growth using the creativity and innovation of all employees.  creating leadership with a vision that shapes the future of the organization and guides it towards the realization of that vision.  ability to identify and respond efficiently and effectively to both opportunities and threats.  valuing employees and aligning individual progress with organizational growth.  effectiveness in achieving long-term and short-term plans with maximum efficiency in the use of own resources. from the above, it can be concluded that innovation is one of the key assumptions for the realization of the model of business excellence [6]. this is the reason that the central topic addressed in this paper belongs to the innovation management process. in this paper, an original methodology, a new model and a software solution for expanding the quality document management system (qdms) domain are proposed in order to increase the innovative capacity of smes with the aim of reaching a higher level of business excellence. basic hypotheses. the development of the approach to designing a permanent model integrated into the process with the support of the innovation management process proposed in this paper is based on theoretical assumptions and practical achievements of modern cybernetics, decision theory, production management, industrial, information and software engineering. based on that, the following hypotheses are defined in the paper based on modern paradigms in the field of management and information technologies:  h1: by applying the proposed model, it is possible to reduce the time that passes from the idea to the implementation of the innovation (incubation period).  h2: by applying the proposed model, it is possible to increase the number of initiated, and therefore implemented, innovations and thus increase the efficiency of the innovation process.  h3: by applying the proposed model, it is possible to raise the level of business excellence (measured according to the efqm methodology), which shows the growth of the effectiveness of the innovation process. methods, models, techniques, approaches and tools applied in research. in the research, which precedes the implementation of the proposed approach to designing an original model for dynamic evaluation and support for the innovation management process, the theories of system-oriented scientific disciplines of knowledge management will be used. the scientific basis should be provided by the methods on which the model will be developed. in addition to the general scientific methods that will be applied, including: the method of analysis and synthesis, the method of abstraction and concretization, the method of generalization and specialization, the method of description, etc., certain models, techniques, approaches, concepts and tools will be applied within the framework of individual methodology. expected results. in accordance with the objectives of the research and the basic scientific hypotheses set in this work, relevant theoretical, methodological and, above all, practical results are expected. slađana živanović, nikola abramović, miodrag živanović, sanja smolović 191 2. the function of the quality concept leads to business excellence quality is the result of a carefully constructed environmental culture. it must be the fabric from which the organization is sewn, not a button sewn onto the fabric. philip b. crosby [7]. in modern business conditions, quality is considered a factor in the survival and development of every company, which significantly determines competitive ability, success and vitality of the economy as a whole. the vision of the future consists in the implementation of quality. but there are certain changes taking place that arise from the shift from the concept of product quality to quality management. innovation is a key assumption for the functioning of organizations in the 21st century. but in order to know how to build an innovative organization, companies must first "climb on the shoulders of the great" [8]. the iso 9000 series of standards defines the requirements of quality management as fundamental conditions for achieving the best practices of successful companies while continuously approaching the goals of business excellence [5]. evolution of the quality management system. quality management includes measures for organization, planning, control and monitoring of numerous aspects relevant to quality. the evolution of the quality management system is continuously controlled by stages: controlling and determining quality control, quality assurance, quality management (iso 9000), total quality management (tqm) and, in modern conditions, the business excellence (be) phase, which at the highest level strives for the concept of quality-of-life management (qol) [9]. the qol phase is the most comprehensive and consistent approach to quality management and represents the last instance in the evolution of quality management. the first phase, the phase of control and testing, has its roots already at the end of the 19th century thanks primarily to the affirmation of mass production. the first forms of industrial quality control appear in the sense of articulated, primarily production activity. phase ii – quality control. the result was an orientation towards meeting the required quantities of goods on the market. at this stage, the primary activity within quality management was product control. phase iii quality assurance. the increase in production capacity and produced quantities due to technological progress has led to a balance between supply and demand in terms of quantities. at the moment of equilibrium, the customer gets the opportunity to choose the goods, that is, to choose the producer. the customer's ability to choose also initiates the possibility to set certain requirements to the manufacturer. the requirements are defined in the form of statistical indicators of the quality of deliveries acceptable quality level (aql). the practical application of this new approach to quality comes to full expression with the introduction of the iso 9000 series standard in the next phase. phase iv quality management. the tightening of competition among suppliers positions the customer to be able to demand the product without error. the customer determines what the quality of the product is, and requires that it be ensured by statistical methods (testing batches, etc.). furthermore, the customer insists on the supplier's quality system, so that there are no errors in production and delivery. large users (automotive industry, manufacturers of electronic parts, etc.) in this period began to introduce predefined quality assurance systems of suppliers, which ensured their verification in a certain way [10]. phase v total quality management (tqm) phase. as product quality becomes the default condition of competitiveness, the market differentiation of companies shifts towards services [11]. almost every production activity is accompanied by services. in the perception of product quality by users, service has a very important place. innovation management on the way to business excellence 192 phase vi phase of qol and business excellence. the phase of qol (quality of life) and business excellence as a creative framework represents the social aspect of quality. that is, that the process activities of each company produce products that are healthy for people, as well as the environment, suitable for customers and saving natural resources. business excellence is based on the concept of sustainable competitiveness that combines the economic, environmental and social sustainability of the system in a global context [12]. also, the globalization of the market leads to an increasing role of achieved business excellence and its verification by comparing business processes and performance indicators with the best business practices at the global level (benchmarking). 3. development of a quality model for the evaluation of innovations this part explains the methodological and practical application of the idea of possible synergistic effect through the interaction of quality assurance (qa) and information technology (it) systems in small and medium-sized enterprises that do not have significant, first of all, human resources such as large organizations. the backbone is the potential role of qms documentation as a catalyst for the interaction of qa and it systems in the process of modeling and applying new information paradigms. the ultimate goal is to increase the innovative capacity of the business system as a determinant of business excellence. the methodology is accompanied by the analysis of a case study based on practical application in the food industry, in the concrete process of collecting, analyzing and receiving raw milk in the dairy. 3.1 service oriented architecture (soa) event driven (ed), which already has a great influence in the business environment, but the problem of continuous recognition and analysis of important data, and that in real time, prevents sufficient agility and ability of companies to make timely and correct business decisions. therefore, it is vital that business process management (bpm)/enterprise resource planning (erp)/customer relationship management (crm) solutions based on soa architecture continuously and in real time monitor the flow of events in the process [13], perform their processing (transformation , filtering and, according to pre-defined patterns of events, noticing the occurrence of scenarios of importance. based on this, it provides: a) automatic reaction and/or notification of actors in the system, b) initiates adjustment of business activities/processes, and c) initiates timely preventive/corrective actions. in order to make this possible, it is necessary to implement bam/cep within the organization's it system, which is based on the event driven architecture (eda) paradigm. service oriented architecture (soa) represents an effective technology for the integration of distributed information systems in complex business environments. soa is based on web service technology where, by adapting the request/response mechanism, the user's request is forwarded to one of the services provided by the distributed service provider, which after processing the request returns the response to the user. however, in business systems with a high level of distribution of functions, such pulling services based on request/response mechanisms do not provide a sufficiently efficient and flexible solution, because the business system (enterprise) changes at a high speed in order to adapt to the diverse requirements of the environment. such a dynamic imposes an event-driven (ed) approach as an additional complement to the soa paradigm, as it enables a more natural distributed application of services through the publish/subscribe mechanism. slađana živanović, nikola abramović, miodrag živanović, sanja smolović 193 the main advantage of the ed paradigm is that it formalizes a cloud of business events with different levels of semantic capacity, which represent a very important resource in the process of managing knowledge flows and developing the innovative character of the entire organization. qdms as a prototype platform and catalyst for the ed paradigm. application services, available from providers, map business services in a process-modeled business environment, which is described in detail by the qms documentation [14]. in order for the mapping to be effective, it is necessary for the documentation to faithfully reflect the business system and all its changes, as well as for it to have a mechanism for prototypical testing of changes through the records of the documentation system. this raises the quality of the documentation system to the level of a mechanism for iterative innovation of the system's business performance. all this implies strong requirements for the implementation of a qdms based on a process approach. qdms traditionally has to provide qms documentation management. the dominant paradigm of the culture of education and work is based on rewarding success and punishing mistakes (obedience is valued more than curiosity). this encourages the monitoring of routine algorithms during the execution of activities, which is the essence of standardization culture [15]. however, innovation requires imagination, curiosity, invention, learning through trial, error, failure and retry. there must be a space where new ideas can be tested through prototype application and people must be motivated to use that space and feel comfortable in it. hazard analysis and critical control points (haccp) and ed/bam/cep principles. in a concrete practical example, the methodology focuses on a case study from the food industry (specifically the industry of production and processing of milk and dairy products) where the mandatory complement of the qa system is iso 22000/haccp (in addition to the generic iso 9001 complement of the qa system which is basic and universal), but the methodology is fully applicable to organizations from any other field of business. in that case, as a natural solution to the it paradigm that would successfully map the qa paradigm in the food industry (eg iso 9000 + haccp) the application of event-driven architectures (bpm/soa/ed/bam/cep). the basic principles of haccp and ed systems are given and mapped in the following table 1. the case study that will be presented in the next part deals with the situation when haccp is the dominant component of the qa system, but the mapping of ed principles is also applicable with the qa system (iso 9001:2008). table 1. mapping of haccp and ed principles haccp principles source: mortimore, s., & wallace, c. (2013). haccp: a practical approach. springer ed/bam/cep principles source: luckham, d. (2008). a brief overview of the concepts of cep1. hazard analysis (flow diagram for each step, recognize the hazard, make an inventory and determine control measures) event identification (an event is an object that represents or records an activity that occurs, or abstracted as an event) identifying critical control points – cpp (decision tree) observing event scenarios (an event scenario can be a time schedule or a causal relationship between patterns of events) determining critical limits (ensuring event scenario constraints (scenarios that are not innovation management on the way to business excellence 194 control of each critical control point) realistically expected in the organization's operations) establishing a monitoring system monitoring activating measures by the occurrence of event scenarios (using event scenarios to initiate reactive measures, then when these scenarios occur) establishing corrective measures that should be taken when monitoring indicates that an individual ccp is not under control establishing verification procedures to confirm that the haccp system is effective (critical audit and tests) event cloud formation (monitoring of historical event data and establishment of a hierarchical map of abstractions) event scenario abstraction (an event is an event scenario abstraction if it summarizes, represents, or denotes an observed set of events) hierarchy of events (the hierarchy of events defines a set of activity levels and a set of rules for calculating events at each level of abstraction of the event scenario from its subordinate levels) establishing documentation related to all procedures and records in accordance with these principles and their application (documentation management). event cloud formation (monitoring of historical event data and establishment of a hierarchical map of abstractions) a good example of the application of bam/cep implementation for the needs of haccp is the software solution for managing the dairy cow farm afifarm of the israeli company afimilk [4]. although it is not structured as a soa architecture, the program creates all events in real time, compares them with historical data and, based on predefined scenarios, predicts complex events (such as the occurrence of mastitis in the throat) and automatically initiates corrective action to treat the throat and informs the farm manager. the problems pointed to by previous research, implementation of bam/cep in environments with a haccp system, refer to the technical side such as: the capacity of events that the cep system can process, the number of lost events, the system's agility to changes in real time, the system's ability to quickly react to a problem and return to stable state (resilient), capacities for event processing and analysis, and optimization of the event processing process. this approach would activate the potential of the synergistic effect of the complementary application of qa and it systems to the business system (enterprise), and with the help of qdms as a catalyst for the interaction of these two systems. approach methodology. during the completion of the organization's business processes, it is necessary that there is a continuous cycle of adaptation and innovation of the business system, which is formally defined through policy and quality goals. the implementation of bam/cep/ed architecture should be seen as infrastructural innovation and not as the ultimate replacement of the existing it system. the proposed methodological cycle of process adaptation and innovation is structurally divided into five phases that take place in parallel with the previously explained cycle of managing knowledge flows, as well as the cycle of managing documentation as the physical carrier of that knowledge. in order to apply the developed methodology for business process innovation, it is necessary for the organization to apply or during process innovation implement it components (extended domain qdms, ed/bam/cep components and business applications that support the process being innovated). defining the focus of process innovation. before starting to implement process innovation into the existing it system, it is necessary to define a procedure and provide tools slađana živanović, nikola abramović, miodrag živanović, sanja smolović 195 for scanning and analyzing existing event data as a valuable corporate resource from which, colloquially speaking, we read the history of the business system. this phase can be divided into three steps: 1. selection of key process parameters and sub-processes (separating the significant minority from the insignificant majority overcoming it blindness [16], and connecting them with the events that emit them and the events that consume them ( events in processes and their interactions in the system); 2. iterative abstraction of low-semantic events into high-semantic events (data filtering, discovery of patterns of event scenarios patterns of events, as well as data derivation represents iterative drill-down cycles in which the capacity of abstraction increases and thereby raises the semantic value of complex events that are detected after each cycle); 3. defining priorities for implementation and measurable parameters for determining the success of the process in accordance with the set business goals. the abstraction process is iterative. its mathematical description is given in table 2. table 2. display of event processing function from lower to higher semantic level where are: n level of abstraction (levels of abstraction are not unambiguously determined but depend on the availability and level of accuracy of data on events at a given time and in a given environment, i.e. on the context in which the events are located) dn event data of the n-th level of abstraction (does not have semantics at that level) in information about events of the n-th level of abstraction (have semantics at that level) aggregate event data processing function function of filtering data about to events at the n-th level of abstraction, the function of detecting the scheme (pattern) of event data at the n-th level of abstraction the function of deriving a new event based on the event data at the n-th level of abstraction modeling of process innovation prototypes. as the qa system (in our example iso9000+haccp) implies complete documentation of the system, the modeling of acquisition, monitoring and event processing can be carried out through the processes of: 1) documentation management and 2) record management of this system, adhering to all the intended activities of these two processes. table 3. shows the documentation layers of the management system and the ed-based system that indicate a certain degree of parallelism and give a recommendation for mapping the documentation and the ed-based application in a conceptual sense. additional problems in this stage of process innovation modeling are different languages of communication, i.e. vocabularies, syntax and semantics of it and qa systems, as well as the absence of standard definitions and building blocks for event driven based system (edbs). therefore, in the entire methodological process, it is recommended to adopt and apply the standard iso 9000 dictionary as universal for all systems. innovation management on the way to business excellence 196 table 3. parallel view of edb application layers and qms documentation l a y e r business solution as an application based on event management (edb systems aplication) documentation system supported by qdms 1 language layer standard operating procedures layer 2 execution layer specific work instructions layer 3 communication layer forms layer (forms) with a defined time and functional schedule 4 data download and creation layer records layer (filled forms, drawings, databases, etc.) source: voisard, a., & ziekow, h. (2011). architect: a layered framework for classifying technologies of event-based systems. information systems, 36(6), 937-957. implementation and application of process innovation. as it is not realistic to expect a sudden transition of the company's it system to bam/cep/soa solutions, after prototype testing, successfully validated scenarios would be implemented in existing it solutions (applications, modules), coming as close as possible (as much as the adaptation of existing modules allows in terms of expediency) to the bam/cep paradigm, including the information push approach (solving the question: where and when is information needed? ; how to get information at the place and time when it is needed?; how to prioritize information in accordance with its importance?); users get the possibility of subscribing to available and desired data about events (the source of the event can be automatic, for example, laboratory software, business module, hardware sensor, but also a person) that happen according to interesting scenarios for them, and the system would send them data when the given scenario happens (here the scenario is actually a prediction of a complex event). the implementation of the bam/cep paradigm should be seen as a way to expand the scope of existing applications in a flexible and non-invasive way. instead of comprehensive interventions on existing applications, we should strive to add functionality that enables the broadcasting and consumption of events. in this way, the intermediate ed layer for event processing can be separated and thereby enable the rapid adaptation of existing solutions to the new business requirements of the system (the aspiration is that the application users themselves perform iterative adaptation during use). monitoring, analysis and optimization of process innovation. during the exploitation of the ed module, it is necessary to enable continuous monitoring and analysis of the set process parameters and thereby monitor the success and expediency of the implementation in practice. in accordance with the ed paradigm, process parameters are event data to which different business functions subscribe and, based on the analysis of that data, change, cancel or define new business scenarios. this phase includes the intensive use of software tools for monitoring, statistical processing (pareto diagrams, histograms, control charts, correlation diagrams) as well as predefined and ad-hoc (custom) data analysis of events in the system. on the basis of these analyses, the semantic capacity is raised to the level required to start a new cycle of adaptation of business processes with the aim of their continuous improvement and innovation. slađana živanović, nikola abramović, miodrag živanović, sanja smolović 197 3.2 an example of the application of process innovation in practice a case study the authors applied process innovation using the previously described methodology in a company engaged in the production of dairy products, and its structure belongs to small and medium enterprises. the practical application of the methodology is focused on the example of the innovation of the business process of collecting, analyzing and receiving raw milk as one of the key processes/sub-processes of processing and production of milk and dairy products. dairy production belongs to the food industry sector where there is a trend of implementing integrated management systems (eg iso 9000 + haccp), which makes it a good candidate for ed remodeling of it systems. the dairy that is the subject of the case study had already implemented: 1. integrated quality management system qms. 2. it system in the segment of composite applications with a low level of interoperability and a high level of data redundancy, which included:  ssqdms for quality management system documentation management – qdoc, which was implemented in parallel with the qa system, but was subsequently partially extended to the domain of design management. during the project, an additional module was developed in qdoc for managing qms records, which included: a) pseudo-application layer and b) ed layer.  data mining module for the analysis of existing data in the it system – the qpromng application module adapted to the specific needs of a large number of dairies for which it was originally designed and developed,  an application for managing the collection business process, analysis and reception of raw milk qlabmlek as a business application which, in the process of innovating the process, is functionally expanded by applying the ed/bam/cep paradigm (the ed layer of the application is implemented). the software programs listed above are intended for general support to employees and consultants during qms implementation, but are modified during process innovation based on the analysis of user requirements. in the first phase of defining the focus of process innovation and key parameters, the qms documentation for the selected process collection, analysis and reception of raw milk was used as a starting resource: 1) procedure, 2) quality plan, 3) haccp process plan, 4) process list and 5) accompanying forms. as haccp requirements are naturally mapped into the ed paradigm, from the documentation, we came to the initial model of the event processing network which shows. during the project, the model was corrected and optimized through an iterative drill-down process of historical data from the existing it system. after defining the framework in which the modeling of the bam/cep paradigm moves, the above-mentioned two author's application solutions (qdoc and qpromng) provided a system that enabled employees in the organization to implement process innovations and their dynamic evaluation according to the previously defined methodology. 1) the first step. in order to define the focus of process innovation, a tool for monitoring, scanning and analyzing data from the event cloud (drill down/data mining) was used, which iteratively abstracts low-semantic event data into high-semantic information. in this way, users get the opportunity to: a) choose databases, b) combine a number of heterogeneous databases through queries, and c) analyze focused data. thus, they detect patterns of events of interest for innovation management on the way to business excellence 198 the performance of business processes and define the focus of innovation. 2) second step. in the innovation modeling phase, it is possible to create and propose draft forms that employees recognize as occasionally recurring scenarios of events important for making business decisions. users define these scenarios as suitable candidates for process innovation. the implemented qdms supports employee collaboration in focusing innovation in order to further optimize proposed design patterns through teamwork. this provides a channel that promotes the flow of exchange and codification of employees' knowledge and reviews the innovation. by applying the basic functionalities of the implemented qdms, the draft form becomes a system document and is approved for use by the authorized function. collaboration on the application of the form in practice finalizes the process innovation modeling phase. 3) the third step. the phase of the zero implementation of the innovation requires the definition of the chronology hodogram and the functions that participate in the application of the form with different roles in the scenario in which the application of the form takes place (launch, filling, approval, distribution, use, initiation of action, etc.). this defines the application rules of process innovation in the pseudo-application layer of qdms. defining the functions but also specific persons who have certain roles in the application of records is (according to the author's experience) of key importance for zero implementation of process innovation. for this reason, it is possible to define the priorities of employees with the same functions. priorities are determined by analyzing the files of employees in terms of their formal and informal competencies as well as the position of the evaluation of individual persons (according to the set criteria defined by the human resources management process) in relation to the average of the organization. the application of forms, records and accompanying documentation through the pseudoapplication and ed layer enables the acquisition, monitoring and processing of generated events, which results in the initiation of previously defined triggers for initiating business decisions. in this way, records management through qdms forms a prototype platform for zero realization, verification and validation of process innovation. 4) the fourth step. the implementation phase of the process innovation is done after its validation in qdms. the implementation of the process innovation in the specific case study was carried out as an infrastructural superstructure (ed layer of the qlabmlek business application) which includes:  event registration services (event service notifications) with parameters for publishing event data,  a mechanism for subscribing business functions to selected event data according to the given scenario (pattern) for the problems of receiving raw milk in the dairy,  defining the event trigger as a reaction to the occurrence of the given scenarios (pattern). from a technological point of view, the solution was realized with vba/jetdb/smtp technologies and protocols, in the pilot phase of the implementation of process innovation, in the existing it infrastructure. it is a non-scalable technology, but it proved to be very applicable in the specific case with 20 or less, competitive users (which is the case with most smes). also, the solution is fully applicable to organizations with a very limited it infrastructure. the implementation of process innovation is possible without a dedicated server or on a server with an open source operating system, which is a common characteristic of smes. g slađana živanović, nikola abramović, miodrag živanović, sanja smolović 199 5) fifth step. the phase of monitoring, analysis and optimization of the process innovation was realized with author's software tools for: a) statistical processing and data analysis (qstat) and b) predefined data analysis. in the specific case study, tools for predefined data analysis are specially specialized for the innovative process of analysis, collection and reception of raw milk. these tools are implemented as a module within the business application qpromng, with sufficient flexibility to enable access and analysis of all existing databases, which are available as a resource to the specific dairy. therefore, the mentioned tools for analysis in cooperation with the applied ed paradigm, enable management and employees to, based on the data on the events to which they are subscribed:  monitor the innovated process,  react in a timely manner to potential problems in the process and  undertake activities aimed at further optimization, improvement and process innovation. 3.3 analysis of the impact of the implementation of qdms in this part of the paper, an overview of the results achieved by applying the author's developed methodology in concretely realized case studies of process innovation is given. bearing in mind that the target group of the research is manufacturing smes, in the analysis of the impact of qdms implementation on process innovation and improving the level of business excellence, experience gained during the implementation of originally developed software solutions was used both in the area of document management and in the area of business process innovation. more specifically, the analysis used data from 4 projects (4 case studies) of the introduction of specially developed software solutions to support process innovation in four production organizations that belong to small and medium-sized enterprises (smes). the aforementioned innovation projects engaged approximately the same resources during implementation. the observed companies have introduced the iso 9001 system, and accordingly some form of documentation management. the companies were chosen so that the impact of the implementation and exploitation of the developed qdms on the management of the innovation process can be seen. the results of the conducted research are presented through originally developed programs for statistical data processing as well as for the assessment of achieved business excellence. in this way, the practical application of the developed methodology was shown, as well as its impact on the change in innovation potential and business excellence of smes. multi-criteria analysis using the saw method. saw (simple additive weighting) is a relatively simple and the most used method of multi-criteria analysis [17]. the method is based on a weighted average. the advantage of this method is that it performs a proportional linear transformation of the raw data, which means that the relative order of magnitude of the total normalized result is equal and directly comparable even after the transformation. using the saw method, the analysis results are determined by adding weight values for each selected criterion. the method consists of three steps: a) rating normalization in order to achieve mutual comparability; b) application of criteria weight values to normalized ratings; and c) summing up the values of indicators for alternatives. the following formula gives the general form of the multi-criteria analysis model in a matrix display: innovation management on the way to business excellence 200 where:  r – the achieved result of an individual alternative,  an – alternative, i.e. the observed aspects,  cm – criteria, indicators of the value of the dimensions of individual aspects,  wm – weighting coefficients for each selected criterion,  xij – values of the corresponding criterion, for each aspect of observation. figure 1. graphic representation of the multi-criteria analysis of the impact of qdms on process innovation the obtained results (figure 1) show that the implementation of some form of softwaresupported qdms in the observed companies has positive effects on the implementation of process innovation. the most pronounced positive effects are experienced by companies that implement the most extensive extensions of the qdms domain (in this case it is company p4, that is, in this analysis, alternative a4). 3.4 analysis of self-assessment of excellence according to the efqm 2013 methodology self-assessment is a systematic and regular review of the company's activities and the results achieved according to the model of excellence. self-assessment is a positive way of recording the current situation and allocating constructive efforts for priority solutions with the aim of continuous improvement as well as innovation, their way of measurement to determine positive changes with long-term results. the fact is that the self-assessment method requires a multidisciplinary approach with constant and systematic reviews of process activities, constant improvements and innovations:  determining the state of what we have done?  determining the current state that leads us to new changes with innovative activities  determining the relationship between what we do and what we want to do. in order to carry out self-assessment according to the efqm 2013 methodology, an analysis of current questionnaires (efqm model in action, n.d.) was performed according to all nine criteria, and based on that, the author's database model and application solution for self assessment were modified and developed. the application solution enables the installation of slađana živanović, nikola abramović, miodrag živanović, sanja smolović 201 the program on the company's computers and thus the continuous process of self-assessment according to this methodology. in this way, the conditions for assessing the current position of the company and identifying its key strengths and areas of improvement are created. the following formula gives the mathematical form of the model for self-assessment: where are:  k main criteria of the method (from k1 to k9),  sk sub-criteria of each of the main criteria (from s1 to minimum s7 and maximum s9)  wk weighting coefficients for each of the main criteria (from w1 to w9 with values of 0.1 or 0.15),  g score of the subcriteria (from 0 to 4 where 0 brings 0%; 1 brings 25%; 2 brings 50%; 3 brings 75%; and 4 brings 100% of the points carried by the sub-criterion in accordance with the weight coefficient and the number of associated sub-criteria within the criteria).  the database of the application solution was initially filled according to the requirements of efqm 2013, but the users are left with the possibility of adapting and expanding the defined criteria, sub-criteria as well as the way of evaluation. in addition to the numerical evaluation, each criterion also has descriptive comments related to a) existing advantages and b) areas of improvement of the company for the business segment to which the observed criterion refers. the program also supports the entry of these descriptive comments, but they were not taken into consideration during the analysis. according to the defined efqm 2013 model, evaluation is done according to each subcriterion within each of the nine criteria. the review of results was realized with reports showing comparative results for two selected self-assessments. in this way, the progress of achieved business excellence is shown descriptively and numerically. for the purposes of analyzing the impact of qdms on the process innovation process, the observed companies conducted a self assessment before and after the implementation of innovative software solutions. the results are presented in graphic form a) individually by company and b) in summary. in the case of individual radar diagrams, a comparative result before and after process innovation is given in percentage for each efqm criterion. in the interpretation of the summary result, the value of points obtained according to the business excellence model efqm 2013 is shown a) before the introduction of the process innovation, b) after the introduction of the process innovation and c) the achieved difference. figure 2. summary results of self-evaluation according to efqm innovation management on the way to business excellence 202 from the graphical interpretation of the obtained results, it is shown that the greatest relative progress of business excellence after the implementation of process innovation is shown by company p4, where qdms was applied with the most extensive domain extension. the most even progress of business excellence was achieved at the company p2, which applies qdms in its basic domain (qms documentation management). 4. conclusions innovations represent an important prerequisite for improving the competitiveness of small and medium-sized enterprises. it is difficult to imagine the growth and development of all, including smes in that context, without developed innovation activities, based on a firmly defined innovation process. by presenting and considering the concept of tqm and business excellence, innovation was detected as the "fuel" of sme business excellence. in order for innovations to be realized, it is necessary that innovation, as a key attribute of smes, be woven into their business culture, vision, mission and strategies. this part of the work also initiated the creation of an original author's solution for the self-assessment of business excellence of smes according to the original efqm 2013 methodology (the solution also allows the modification of metrics according to the specific needs of the organization that uses it). in the continuation of the work, a) knowledge as a necessary resource for creating innovations, b) management of knowledge flows and c) the innovation process itself were discussed. the general conclusion is that smes must strive for an innovative approach to organizing, which assumes that the organization's innovative effort must encompass the entire process structure. therefore, the organization's innovative culture and policy, as well as the ways in which they are implemented, represent the responsibility and obligation of all employees and assume their commitment to it. in order to realize this, it infrastructure is needed as a carrier of codification, dispersion and concretization of knowledge and its focus on an efficient and effective innovation management process. qdms (but now additionally extended to the domain of qms draft management and functionally enriched with the paradigm of event-based management) is emerging as a sustainable and expedient solution for smes. the proposed and developed model, methodology and specific proprietary software application solutions are presented in more detail in the paper through development steps, functional review and case studies of manufacturing companies. the model was verified through analyzes conducted in four companies as four case studies of process innovation development. all the analyzed production organizations have introduced qms according to the requirements of the iso 9001 standard, which guarantees business according to the process approach and the existence of systematically organized business processes. one of the observed companies did not apply software-supported documentation management of qms, while the other three companies used qdms in basic or one of its extended forms. at the beginning of the research of the problem, the basic hypotheses were defined and proved during the research. based on the defined methodology and metrics of efqm 2013, a model for self assessment of business excellence was developed. based on the model, the application solution qsa (quality self assessment) was developed. the solution enables the measurement of the achieved level of business excellence of the organization using the self-assessment method, slađana živanović, nikola abramović, miodrag živanović, sanja smolović 203 while also having flexibility; the originally applied efqm 2013 metric can be adapted to the specific needs of an individual organization in order to apply it more effectively. the obtained results of the analysis showed: the greatest relative progress of business excellence after the implementation of process innovation was achieved by the company where the proposed new qdms solution was implemented with the most extensive domain extension. the company that implemented the proposed qdms solution in its core domain (qms documentation management) achieved the most consistent progress in business excellence after the implementation of process innovation. the presented methodology, implementation and configuration of the proposed and developed new application solutions for managing the innovation process are flexible; practice shows that they can be successfully applied within the existing qms and it systems of manufacturing small and medium enterprises. in any case, the developed methodology, model and application solution, due to their topicality, provide a great opportunity for further improvements in a large number of different directions. references 1. guertler, mr, & sick, n. (2021). exploring the enabling effects of project management for smes in adopting open innovation–a framework for partner search and selection in open innovation projects. international journal of project management, 39(2), 102-114. 2. turner, r., & ledwith, a. (2018). project management in small to medium‐sized enterprises: fitting the practices to the needs of the firm to deliver benefits. journal of small business management, 56(3), 475-493. 3. jacobs, a. m. (2020). project management maturity: a framework for success in subsaharan centres of excellence? the international school of management (ism). 4. berger, r., & hovav, a. (2013). using a dairy management information system to facilitate precision agriculture: the case of the afimilk® system.information systems management, 30. 5. fonseca, l. (2015). relationship between iso 9001 certification and efqm business excellence model results. quality innovation prosperity, 19, 85-102 6. fajsi, a., morača, s., milosavljević, m., & medić, n. (2022). project management maturity and business excellence in the context of industry 4.0. processes, 10(6), 1155. 7. crosby, p. b. (1979). quality is free: the art of making quality certain (vol. 94). new york: mcgraw-hill. 8. ehlers, u. d. (2013). the foundations for quality of open-learning cultures. in open learning cultures ( 123-146). springer berlin heidelberg. 9. hussain, t., edgeman, r., & eskildsen, j. (2020). knowledge-based intellectual structure of research in business excellence (1995–2015). total quality management and business excellence. 10. love, c. e., guo, r., & irwin, k. h. (1995). acceptable quality level versus zerodefects: some empirical evidence. computers & operations research,22(4), 403-417. 11. ali, k., & johl, s. k. (2021). soft and hard tqm practices: future research agenda for industry 4.0. total quality management & business excellence, 1-31. 12. peng, m. y., & lin, k. h. (2021). international networking in dynamic internationalization capability: the moderating role of absorptive capacity. total quality management & business excellence, 32(9-10), 1065-1084. innovation management on the way to business excellence 204 13. etzion, o., & niblett, p. (2010). event processing in action. manning publications co. 14. stefanovic, m. matijević, m. erić, m. & simic, v. (2009). method of design and specification of web services based on quality system documentation.information systems frontiers, 11(1), 75. 15. robinson, k. (2010). changing education paradigms. rsa animate, the royal society of arts, london, http://www. youtube. com/watch. 16. luckham, d. (2004). the beginnings of it insight: business activity monitoring.2004 06-21). http://www. ebizq. net/topics/cep/features/4689. html. 17. afshari, a., mojahed, m., & yusuff, r. m. (2010). simple additive weighting approach to personnel selection problem. international journal of innovation, management and technology. agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 18, no. 2 (2024), pp. 387-399 the evolution of digital currencies: from private innovation to central bank implementation a comprehensive analysis of cbdc development a. yusifov ali yusifov azerbaijan state university of economics (unec), azerbaijan https://orcid.org/0009-0002-9251-4801, e-mail: ali.yusifov.1945@gmail.com abstract: this paper traces the development of digital currencies and central bank digital currencies (cbdcs), and how their conceptual models and implementation have evolved over the past decade. first conceptualized as private digital assets operating independently from central banking systems, digital currencies have evolved in that monetary authorities started to develop their own versions. drawing from an explanation of cbdc projects under construction all over the world and their defining features, the study reveals that modern cbdcs are widely perceived as digital manifestations of national fiat currencies that perform largely similar functions to cash. while dlt in cbdc implementation is fairly typical, it certainly isn't a requirement. analysis of data from 138 active cbdc projects underscores that most are in the research or development stages; only four are fully operational. most target retail, but wholesale cbdcs have higher rates of dlt adoption, mainly for cross-border payments. the key drivers toward cbdc development include efficiency in the payment system, increasing financial inclusion, and maintaining monetary sovereignty. this paper, however, argues that consensus on the nature and functionality of cbdcs will only emerge once more pilot programs have been completed and real-world implementation data become available. this research adds to the understanding of the evolving nature of digital currencies and their potential impact on monetary systems. keywords: central bank digital currency, digital currency, blockchain, distributed ledgers, cbdc, dlt introduction the active development of cryptocurrencies over the last decade has attracted the attention of both academic researchers and monetary authorities. the phenomenon of cryptocurrencies is interesting both because of the consequences of its development for the monetary and financial system and some aspects of its technical implementation. the principle of non-national issuance of means of payment, in which there is no fundamental need for a state intermediary, is interesting in itself, but it would not be realized without the technology that allows, in the absence of a state intermediary-regulator, to act as a guarantor of each specific transaction in particular and the history of transactions in general. in the most famous cryptocurrency bitcoin, the distributed ledger technology (dlt), called blockchain, has been successfully used as such a guarantor. https://orcid.org/0009-0002-9251-4801 mailto:ali.yusifov.1945@gmail.com the evolution of digital currencies: from private innovation to central bank implementation a comprehensive analysis of cbdc development however, since the emergence of the concept of bitcoin as a digital non-state currency, the functioning of which is based on cryptographic methods, to the present day, when the central banks of the largest countries are busy developing digital currencies and implementing distributed ledger technologies, many variations of cryptocurrencies and products on the blockchain and other distributed ledgers, as well as approaches to defining and classifying the phenomenon of digital currencies have been developed; cryptocurrencies have demonstrated their actual suitability for performing the functions of a measure of value, a means of payment and accumulation, as well as de facto, but not de jure, world money (bank of england, 2022), but not all states and monetary authorities are ready to recognize them as money. in this variety of interpretations, there is a difficulty in identifying the essence of digital currencies and central bank digital currencies, what are their inseparable and inherent qualities only to them. therefore, tracking how the concept of digital currencies has evolved and how the definition of central bank digital currencies (cbdcs) emerged is of interest – especially in a situation where several central banks are preparing to launch their own digital currencies. the article presents a study of the evolution of the concepts of digital currencies and central bank digital currencies, the practice of introducing digital currencies by central banks and the problems they solve in this way, in order to understand what constitutes the nature of digital currencies at the moment. digital currencies: evolution of the concept it is useful to trace the evolution of the concept of digital money in recent years, since the interest in this phenomenon has emerged, since in some cases digital money has been defined in terms of the opposite of what we now call central bank digital currency. ideas for creating digital currencies based on cryptographic methods have been put forward since at least 1998, when anonymous remailer user wei dai published the concept of electronic assets based on decentralized b-money systems. in addition, the concept of a digital currency called bit gold was proposed by user nick szabo. researchers c. bronk, s. monk and j. villasenor, whose work was also used by researchers at the european central bank, also classified e-gold as a digital currency. it was launched in 1996, ceased to process transactions in 2008 due to criminal prosecution of its creators for illegal financial transactions, and ceased to exist in 2015. however, this project differs significantly from b-money and bit gold: firstly, it was implemented, while b-money and bit gold were only concepts; secondly, e-gold was backed by a real asset real gold in the e-gold ltd gold fund, while b-money and bit gold were digital currency projects that were not backed by a real asset such as precious metals; thirdly, e-gold was a centralized and privately managed payment method from the us, while bit gold and b-money were conceived as decentralized digital assets that did not have a single issuer and regulator. for this reason, the projects of users under the names or pseudonyms of wei day and nick szabo are much more similar to those digital currency projects that would later be called cryptocurrencies, and the document describing the principle of the most famous of them, bitcoin, contains direct references to the b-money project. (bank of canada, 2020). in 2008, bitcoin: a peer-to-peer electronic cash system was published by satoshi nakamoto, an author or team of authors (nakamoto, 2008). it outlined the concept of the first ali yusifov of the digital assets that later became known as ‘cryptocurrency’ bitcoin. based on advances in cryptography, such as hashing and electronic signature, as well as on the principles of the distributed blockchain registry and the proof-of-work consensus algorithm (pow), it was based on the principles of the blockchain. ‘the concept was to create in a network a register of transactions with a unit of account bitcoin accessible to all network participants, the updating of which, as well as the issuance of this unit of account, would be decentralized, uncontrolled and at the same time secure, confirmed by cryptographic methods. among other things, this meant the concept of a private, monetarily independent currency that could be circulated and issued without the involvement and supervision of intermediaries such as banks or the state. the number of digital currencies that exist today has not yet emerged, and researchers have had to rely on the only digital currency project that has been implemented, bitcoin, and it has not been possible to isolate common qualities from a large sample. however, another paper used by the european bank, “bitcoin: an innovative alternative digital currency” by r. greenberg, provides a very precise characterization of bitcoin as a digital, decentralized, partially anonymous currency that is not backed by any government or other legal entity, and relies on a peer-to-peer network and cryptography to maintain integrity (world economic forum, 2021). the definition also states that bitcoin is “not redeemable for gold or any other commodity.” in this context, this could mean that it is not necessarily redeemable for gold or any other commodity, just like the us dollar (for which the same wording is used). the definition of bitcoin given in this paper includes a wide range of characteristics that would be common to many other digital currencies. after some time, bitcoin gained great popularity, the outlines of its functionality became approximately clear and, importantly, analogues began to appear on a mass scale. researchers and government agencies came to the understanding that bitcoin is not the only asset of its kind, but gave rise to a class of assets, the most common designation of which is digital currencies. whether the term "cryptocurrency" is a complete synonym for "digital currency" is debatable, or at least was previously, when the concept of digital currency was closely associated with decentralization and the dlt system. even now, it is difficult to talk about one, generally accepted approach to how digital currencies and cryptocurrencies are related. in some cases, cryptocurrency is defined as a type of digital currency, the peculiarity of which is its private nature and the ability to carry out transactions with each other directly (international monetary fund, 2021), or (not only for cryptocurrencies, but for crypto-assets within digital assets) the defining feature is the combination of a non-state issuer and cryptographic methods that ensure the security of the value or rights embodied in electronic form. as of the mid-2010s. the boundaries between digital and cryptocurrency have become even more blurred, cryptocurrencies have been the most active and have attracted the most attention among all digital assets, so digital currencies and cryptocurrencies have often been used (and sometimes continue to be used) as synonyms. (edward l. 2012) one important course of action with regard to cryptocurrencies, or more generally digital currencies, is regulation and legislative recognition. although even with the serious impact of cryptocurrencies on the financial system, states have not always had time and still do not always have time to regulate the digital currency market, which by 2015 reached the evolution of digital currencies: from private innovation to central bank implementation a comprehensive analysis of cbdc development billions, and later hundreds of billions and trillions of us dollars (according to www.tradingview.com, accessed on 05.05.2024). the first definitions of digital currencies were characterized by the fact that researchers placed a great, if not the main emphasis in their attempts to identify the nature of digital currencies in definitions on the private nature of digital currencies. examples of this early stage of defining the nature of digital currency are two definitions from the european central bank and the bank for international settlements from 2015. the european central bank, in its 2015 document “virtual currency schemes – a further analysis”, which is a continuation of the research work initiated by the abovementioned publication “virtual currency schemes”, does not distinguish between the concepts of virtual and digital currency, using primarily the former term. for example, the authors of the report call bitcoin a virtual currency and cite other researchers on digital currencies in the context of discussing virtual currency. the report defines virtual currency as a digital representation of value, not issued by a central bank, credit institution or institution specializing in electronic money, which in certain circumstances can be used as an alternative to money, although the authors of the report specifically emphasize that they do not consider digital currency to be full-fledged money. the bank for international settlements (bis) paper digital currencies does not provide a separate, full definition of digital currencies; it merely states in a footnote that they are assets in digital form. however, beyond the definition, the paper does discuss the qualities of digital currencies in some detail, identifying three sets of characteristics, or three aspects, of digital currencies. first, it notes that they have some of the characteristics of currencies (e.g., being used as a means of payment), but are not typically issued in or linked to a sovereign currency, are not obligations of any entity, and are not backed by any authority, have zero intrinsic value, and therefore derive value only from the confidence of users that they can be exchanged for other goods or services or for a specified amount of sovereign currency at a later point in time. second, the authors highlight the way these digital currencies are transferred or distributed, typically through an embedded distributed ledger, as “a truly innovative aspect.” third, the authors note the variety of third-party institutions, almost exclusively non-banks, that are actively developing and operating digital currency and distributed ledger mechanisms. it should be noted that distributed ledger technology is not limited to the transfer of currency from one user to another; a transaction is an entry in the ledger, which in turn is copied among all network participants, or “distributed,” hence the name distributed ledger technology. both definitions highlight the fact that digital (or virtual) currencies are not issued by central banks. there is some difference in the way the reports emphasize distributed ledger technology. the european bank stated that a virtual currency may or may not use dlt, the bis stated that dlt is typically used as the “transfer technology” of digital currencies. dlt was thus a popular but optional feature of digital currencies. it is worth noting that by 2014, at least two of the most authoritative monetary institutions saw one of the main features of digital currencies as independence from central banks, the private nature of these assets. ali yusifov classification of money. since 2014, monetary authorities in different countries have begun to announce the start of studying the prospects of central bank digital currencies. in 2014, information appeared about the start of preliminary research in the field of cbdc by the bank of uruguay. in 2016, the stella project was launched a series of studies on the use of dlt in financial architecture as part of cooperation between the european central bank and the central bank of japan (bank of japan, 2020). in 2017, their report on the first phase of the project was published. one of the most significant and well-known events in this area was the launch of the development and subsequent testing of the digital yuan (official name dcep, also referred to as digital renminbi in english sources). as central banks have become increasingly interested in digital currencies and cryptocurrencies, and many have begun researching central bank digital currencies, the contradiction between the supposed independence of central banks from central regulators and the fact that monetary authorities are planning to issue digital currencies has become increasingly apparent. a major influence on the popular understanding of digital currencies has been the taxonomy of money by m. bech and r. garratt in 2017, the so-called money flower in the work “central bank cryptocurrencies”. this method of classifying money is based on the identification of four characteristics of a monetary unit: issuer (central bank or other); form (electronic or physical); availability (universal or limited); transmission mechanism or peer-topeer nature of the transaction network (centralized or decentralized, i.e. peer-to-peer). in the latter case, a centralized transmission mechanism implies the presence of a hierarchy of at least two participants in the transaction: the parties to the transaction at the lower level and the regulator, who is also the guarantor of the transaction at the upper level. cryptocurrencies that run on a distributed ledger can be considered a peer-to-peer network because dlt eliminates intermediaries; cash can also be considered a peer-to-peer network because a cash transaction does not require a guarantor like a bank. (federal reserve bank of new york, 2018) current cbdc projects at present, a relatively large number of central banks have already announced plans to create cbdcs. it is worth paying attention to how they define the nature of their own digital currencies. the people's bank of china in its working group on e-cny research and development of the people's bank of china, 2021, defines the digital yuan as a digital version of paper currency issued by the pboc and managed by authorized operators. it is classified as a "retail" cbdc, and its prospects for use at the interbank and cross-border levels will be assessed after its domestic implementation. it should be noted that despite its status as a central bank digital currency, dcep cannot be called an unambiguously decentralized peer-to-peer currency, and even the use of dlt remains questionable. the reserve bank of india is developing both a retail and wholesale version of the cbdc. according to the concept of the digital rupee published by the fintech department of reserve bank of india, 2022, it will not differ significantly from banknotes, but, being a digital form of national money, it will probably be simpler, faster and cheaper. it also has all the transactional advantages of other forms of digital money. the central bank of brazil is still in the evolution of digital currencies: from private innovation to central bank implementation a comprehensive analysis of cbdc development the development stage of the cbdc, but according to information on its official website (banco central do brazil, 2024), it is planned to build an ecosystem based on dlt, in which regulated financial intermediaries convert the balances of demand deposits and e-money into drex a digital real, so that their clients have access to various smart financial services. the digital currency itself will also have the status of a digital form of the national currency. the european central bank in its glossary describes the digital euro as the retail digital currency of the european central bank, and generally defines a retail digital currency as a central bank liability in digital form offered to the general public (e.g. individual users, business users and governments or other public bodies) for retail payments. it can be noted that a constant attribute of all definitions of cbdc is some form of reference to the central bank digital currency being a digital form of the national currency; it is often directly referred to as a central bank liability. often, in addition, an analogy with cash is encountered, indicating their similarity. this is fully consistent with the typology of money by bech and garratt. stages of cbdc development: quantitative data for the purposes of the study, data were collected and aggregated from the cbdc tracker portal, a resource that semi-automatically collects and presents information on the stages of development and implementation of digital currencies by central banks, which is referenced, in particular, by the imf (nathaniel popper, 2015). with seven cancelled projects, 138 cbdc projects have been launched and not cancelled, 94 are at the research or development stage, 24 are at the concept testing stage, and 16 projects are at the pilot launch stage. the resource calls four projects fully launched as of 08.05.2024: nigerian e-naira, bahamian sand dollar, jamaican jem-dex and zimbabwean zig. we will consider further statistical data only for currencies that have not been cancelled. (reserve bank of zimbabwe, 2023). it should be noted that the data on the portal may be updated. thus, earlier, in october 2023, the dcash currency, issued by the eastern caribbean central bank, was listed as a fully launched central bank digital currency on the resource. at the time of the request on may 8, 2024, dcash was already listed on the portal as a pilot, which is confirmed by the statement on the official website (https://www.dcashec.com/). in october 2023, the haiti cbdc currency was mentioned among the cancelled digital currencies, which was absent from the database at the time of the request on may 8, 2024, although in both periods the gourde digital currency was present at the research stage, developed by the same country (which makes it possible to assume the elimination of a duplicate under a different name, albeit with a different status). thus, when working with cbdc data, including aggregated data from news and press releases such as those presented on the cbdc tracker resource, it is worth considering the fragmentation of information, unclear wording in official press releases, the possibility of currencies rolling back from a later stage to an earlier one (for example, in the case of unsatisfactory results of the pilot return to the study) and the emergence and elimination of duplicates. ali yusifov taking this into account, it should be noted that in addition to the above-mentioned zimbabwean digital currency zig, the resource data also indicates an unnamed currency, the retail zimbabwe cbdc, which is under development. with some probability, it may also be understood as zig, but since we do not have reliable information that this is the same initiative, in the analysis we will proceed from the data provided by the resource. figure 1. development status, number of projects source: prepared by the author based on cbdc tracker most central banks developing digital currencies have not yet decided whether they will use dlt, but the vast majority of those that have, say yes. of the 138 projects that have not been cancelled, dlt is used in 49 projects, 7 are not (the digital yuan falls into this category), and the majority, 82 projects, have no information on this yet. thus, dlt is used in the majority of projects for which there is data. however, a significant number of projects are still in the early stages of development only 24 and 16 have moved to the pilot or proof-of-concept stage, respectively, against 94 in the development stage (another 4 cbdcs can be considered fully launched). figure 2. data on the use of dlt in active cbdc projects, number of projects source: prepared by the author based on cbdc tracker data the evolution of digital currencies: from private innovation to central bank implementation a comprehensive analysis of cbdc development it can be noted that the use of dlt is a noticeable trend, although it is too early to talk about it as a mandatory or inherent property of digital currencies in the overwhelming majority of cases: the first excludes the existence of digital currencies projects such as the digital yuan, and for the second statement there are too many projects with an unspecified transaction accounting technology. it is also interesting to see the data on what currencies are mostly being developed by central banks: retail or wholesale. most of the cbdcs being developed are of the retail variety. there is no information yet on the purpose or technology of the ethiopian central bank digital currency announced in 2024. the currencies classified in the “other” group by functionality include two projects that are not digital currencies as such, but rather experiments with technologies. these are the stella project between the european and japanese central banks, dedicated to studying the prospects of dlt in the field of transnational payments, and the hamilton project, an experiment by the us federal reserve. this group also includes the stablecoin project of palau, which does not have its own central bank, and the above-mentioned zimbabwean currency zig. the resource does not indicate the exact reason for classifying these currencies as "other", but the small amount of information on their account does not allow us to clearly classify these currencies as one group or another. the press release on the official website of the reserve bank of zimbabwe does not answer this question and only indicates that the new currency will be backed by gold. figure 3. data on active cbdc projects models (retail or wholesale models), number of projects source: prepared by the authors based on cbdc tracker data. all projects, with the exception of one (agila), that claim not to use dlt, belong to the retail model of the cbdc system. those developments that use distributed ledger technologies are equally divided in the access model between retail and wholesale models, with a slight advantage for wholesale.(eswar s., 2021). ali yusifov figure 4. data on active cbdc projects models using dlt (retail or wholesale models), number of projects source: prepared by the authors based on cbdc tracker data of the 30 wholesale digital currency projects, 22 have already decided whether they will use dlt, and all but agila have answered this question positively. it can be assumed that a significant portion of these wholesale currencies are being developed with the prospect of being used for cross-border settlements: since credit institutions are much more active participants in cross-border settlements than individuals, they are interested in the currency intended specifically for them performing cross-border payment tasks more efficiently. dlt has great potential in cross-border payments. therefore, the prevalence of dlt among wholesale currencies can be attributed to the fact that distributed ledger technologies have demonstrated good results in cross-border settlements. as noted by i. o. nesterov, the speed of international payments is low due to the above-mentioned strict security checks kyc (know your customer) and aml/cft (anti-money laundering / combating the financing of terrorism) procedures, due to which the average international payment period took several days. added to this are the high commission and poor predictability of commission and time costs for cross-border transfers due to the high and poorly defined number of intermediaries. together, this increases transaction costs with all the ensuing negative consequences. (world bank group, 2021) research and testing in the area of merging the systems of the centralized digital currency exchanges of different countries, conducted by the monetary authorities of thailand and hong kong, and later by china, the uae and the hong kong hub of the bank for international settlements, have demonstrated an increase in the speed of international transfers from several days to several seconds, while maintaining control over all transactions by each of the monetary authorities. since a significant part of international payments occurs in the interbank sector, such technologies can be developed as a specialized instrument for interbank exchange, i.e. a wholesale version of the centralized digital currency exchange. (the committee on payments and market infrastructures (cpmi), 2017). the evolution of digital currencies: from private innovation to central bank implementation a comprehensive analysis of cbdc development purpose and reasons for developing the cbdc as we found out from the analysis of definitions and data on the cbdc projects under development, there is a tendency to develop a retail version of central bank digital currencies, with a significant part of the projects being considered as a digital analogue of cash. from this, we can make a preliminary conclusion that some of the functions that the digital currency is planned to implement are comparable to those of cash. if we talk about cbdc projects for cross-border payments, the functions of such digital currencies are also partly known facilitating faster and less expensive international payments. the report “central bank digital currencies: foundational principles and core features”, produced by the bank for international settlements in collaboration with a number of central banks and monetary authorities , takes a closer look at the motivations of institutions exploring or developing cbdcs (bank of canada, 2023). most of the reasons are related to payments. these include: constant access to central bank money in regions and jurisdictions where access to cash is declining, which can be attributed to the above-mentioned functionality of digital currencies as a banknote substitute; increasing the operational resilience of the financial system in the event of technical problems with telecommunications or energy, which is also one of the functions of cash in the modern economy, as well as theoretically greater resistance to cyberattacks (however, the authors attribute this only to general-purpose cbdc systems); increasing the diversity of payment systems, which prevents their monopolization and fragmentation; encouraging financial inclusion and removing barriers of mistrust and low financial and technological literacy (although for cbdcs to have an effect in this regard, they need to be included in a whole array of reforms aimed at removing these barriers; they are unlikely to cope with this task alone). theoretical partial increase in the so-called public privacy and anonymity in electronic payments; the above-mentioned improvement in cross-border payments; facilitation of financial transfers, such as those carried out during the covid-19 pandemic, i.e. direct transfer of money to citizens and businesses (however, either the advantage over the usual transfer to accounts will not be so great, or, on the contrary, so great that the line between fiscal and monetary policies and the independence of the latter will be erased to some extent). the document also mentions the theoretical possibility of creating a cbdc with an interest rate, which would allow changes in interest rates to be transmitted directly to holders of the digital currency, but this would greatly change the transmission mechanism and increase the risks of destabilization of the financial system, so the authors of the report note that this possibility is not the main motivation of central banks and the main option for implementing a cbdc. there is some uncertainty about the motives of the people's bank of china. the report “progress of research & development of e-cny in china” prepared by the working group on e-cny research and development of the people's bank of china, progress of research & development of e-cny in china. people's bank of china, 2021, explicitly states that the internationalization of a particular currency is a consequence of market competition, depth and openness of the financial markets of the issuing country. therefore, as stated in the report, despite the technical readiness to use the digital yuan, including for cross-border payments, it ali yusifov is currently focused only on servicing payments within the country. at the same time, researchers d.k. lee, l. yang and w. wong point out that one of the reasons for the introduction of the digital yuan may still be to “counteract the hegemony of the dollar,” which is difficult to imagine without the processes of internationalization of the national currency, at least at the regional level. another motive that periodically appears in publications is what researchers, both the authors of the bis report in collaboration with central banks (international monetary fund, 2016). and lee, yang and wong, call “asserting monetary sovereignty” (although the latter mention it in the context that this issue is of greater concern to the authorities of the g7 countries than to the chinese regulator). this is understood as competition from private digital currencies. (g7 working group, 2021). when assessing the prospects for the success of cbdcs in competition with private digital currencies, one should be cautious. it is highly likely that the reasons why different people and organizations prefer cryptocurrencies to fiat money lie outside the functionality — or, at least, the implemented functionality — of central bank digital currencies. one of the reasons for turning to them is high, albeit not absolute, anonymity and non-accountability to government institutions. despite the motive for partially increasing the anonymity of payments indicated above in the bis report, the same report notes that central banks will most likely be forced to take into account both anti-money laundering and combating the financing of terrorism (aml/cft) requirements and specific supervisory requirements of their country's legislation when developing the architecture of a digital currency. people and organizations that turn to cryptocurrencies are not necessarily engaged in money laundering or terrorist financing, but may be motivated by a lack of trust in their own state or monetary authorities, or in states and regulators as an institution. for such economic agents, a cbdc will not have sufficient competitive advantages over cryptocurrencies. another common reason for turning to cryptocurrencies is speculative or investment interest. in this capacity, an interest-free digital currency can be considered a profitable investment to the extent that the national currency as a whole is considered to be such (although much will depend on the specific scheme of implementation and circulation of the digital currency: dependence on the infrastructure of commercial banks, the presence or absence of mechanisms for competition with the interest income of non-cash funds, etc.). theoretically, the introduction and use of a digital form of the national currency, especially in the international payment system, can contribute to the growth of demand for the national currency, but in this case the national currency, including its digital form, will compete not only and not so much with cryptocurrencies as with other currencies and assets attractive to investors. conclusions the concepts of digital currencies and central bank digital currencies have undergone rapid changes in the last decade. in the early stages, there was little understanding of what constituted the nature of digital currencies. over time, some consensus developed that digital currencies were digital assets that could partially function as money, but were issued by private entities, not by national monetary authorities, and were likely to use dlt. this view came into conflict with reality: central banks began to develop their own digital currencies, and therefore the evolution of digital currencies: from private innovation to central bank implementation a comprehensive analysis of cbdc development the premise of digital currencies being independent of monetary authorities, by which they were previously defined, no longer held true. current central bank definitions of their digital currencies suggest that they all view digital currencies as a new form of money, similar in many ways and functions to cash, but in digital form. the use of dlt remains an open question: although most central banks have not yet published data on whether they use distributed ledgers or not, those that have confirmed that they do. however, most of the definitions reviewed do not postulate the use of dlt. for now, it is an optional, albeit common, attribute of central bank digital currencies. the intended functions of the cbdcs under development are largely determined by the motives that prompted central banks to develop them. some of them, such as competition with cryptocurrencies and private currencies, are skeptical, while others are driven by current demands from society and financial system participants, but will only be effective in conjunction with large-scale reforms in other areas (for example, if we talk about the task of financial inclusion). it can be said with relative certainty that consensus on what a central bank digital currency is and what its functionality will be will not be achieved until a significant number of cbdc pilots are launched. it will be clear whether a cbdc is a digital analogue of cash, whether most counterparties perceive it as a central bank obligation equivalent to banknotes, whether dlt will be a ubiquitous feature of cbdcs with some exceptions or will remain only an option, and which central bank currencies will be more widespread for retail or wholesale payments. the highly important research analyzing how wholesale and retail payments will affect the benefits of different economic actors, governments, households, businesses will be fully possible after researchers have data on the implementation of cbdcs in other countries or at least a detailed description of how these currencies function. the concepts will again be tested by reality and adapted to it. references 1. banco central do brazil. (2024, august). drex — digital brazilian real. banco central do brazil. https://www.bcb.gov.br/en 2. bank of canada. (2020). the economics of central bank digital currencies. 3. bank of canada. (2023). the promise and peril of digital currencies. 4. bank of england. (2022). digital money and the future of monetary systems. 5. bank of japan. (2020). project stella: the ecb and the bank of japan release joint report on distributed ledger technology (phase 4). 6. edward l. (2012). the dark side of financial innovation: the rise of financial derivatives. 7. eswar s. (2021). the future of money: how the digital revolution is transforming currencies and finance. 8. federal reserve bank of new york. (2018). cryptocurrencies and blockchain: their impact on the financial system. 9. g7 working group. (2021). central bank digital currencies for cross-border payments. https://www.bcb.gov.br/en ali yusifov 10. international monetary fund. (2016). virtual currencies and beyond: initial considerations. 11. international monetary fund. (2021). central bank digital currencies: design and implications. 12. nathaniel popper. (2015). digital gold: bitcoin and the inside story of the misfits and millionaires trying to reinvent money. 13. reserve bank of zimbabwe. (2023). introduction of the zimbabwe gold-backed digital token (zig) as a means of payment. 14. satoshi nakamoto. (2008). bitcoin: a peer-to-peer electronic cash system. 15. the committee on payments and market infrastructures (cpmi). (2017). distributed ledger technology in payment, clearing, and settlement. 16. tradingview.com. (2024, may). crypto market, market cap, trading view. https://www.tradingview.com/markets/cryptocurrencies/global-charts/ 17. world bank group. (2021). blockchain and distributed ledger technologies for financial institutions. 18. world economic forum. (2021). designing a central bank digital currency: lessons learned. https://www.tradingview.com/markets/cryptocurrencies/global-charts/ agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 18, no. 2 (2024), pp. 148-154 148 “the economic magazine” from sibiu, an imperative of that time between 1898-1918 r. ivan rica ivan faculty of electrical engineering and information technology, university of oradea, romania e-mail: rika_ivan2005@yahoo.com abstract: “the economic magazine“, particularly meant on the service of the romanian financial institutions, to which was given a common publicity organ ,of which they would use of, in all their practical needs and which to contribute for the spreading over of futuristic experiments of the ruling circles in the economic life of the transylvanian romanians, it put its service for the national economic interests by publishing wide lists of economic themes useful to all national economic fields .it had a much wider horizon than the one strictly connected to the financial-banking relations and interests. in this case, also, the romanians national interests came first comparing to the strictly economic ones. keywords: banking system, banking strategy, financial banking interests, reforms banking, expert reviewers, pension found 1.introduction understanding the major role and the complexity of economic progress, the transylvanian romanians promoted in the second half of the 19th century next to vast political program also a rich economic program, well contoured multilateral and deepen in. in their exertion of economic prosperity and national freedom, the romanians from transylvania needed functional institutions and organizations through which to be absorbed all the energies that the romanians disposed of potential targeted and directed then towards the achievement of centennial ideals and aspirations of national unity. on this purpose it was improved and enlarged the activities horizon of the economic institutions of which the romanians from transylvania disposed of, new institutions were created, meant for the economic and financial prosperity of keeping the dignity and increasing the national prestige. after many attempts and ineffective tries in the economic media field the romanian transylvanians finally succeeded at the end of 1899 to establish a publication in this field, which to be suitable with that time’s exigency. it is about “the economic magazine” breakthrough. the issue of “the economic magazine” as an organ dedicated particularly to the financial and commercial companies was possible due to high level of development that the transylvanian romanian banking network had reached. through the complex activity that it displayed and through the collective grouped around it, “the economic magazine” played the role of a true economic school in transylvania. mailto:rika_ivan2005@yahoo.com rica ivan 149 just as the romanian banks, “the economic magazine”, the outface in the period between1899-1918 the hostile attitude of the hungarian officiates and of a large part of the hungarian officiates and of a large part of the nationalist hungarian press. a major role in those 20 years from the appearance of “the economic magazine” was the one of its managers, great personalities of the romanian culture and science in the first three decades of the twentieth century. because of the decisive initiative and help of cornel diaconovici, in his quality as a manager, appeared in sibiu, beginning with the year 1899, the first publication in this field of the romanian transylvanians. militant leader in the cultural purview, cornel diaconovici brought himself a major contribution for editing “the economic magazine “, but also for publishing a large number of studies referring to the romanian banks reform in transylvania (diaconovici,1899) the second great personality in the financial, banking, economic and political domain, which had a manager’s and collaborator position of “the economic magazine “, was ioan i lapedatu. at the scientific and publicist level, the transylvanian economist published books, studies, articles, consignments and informations with varied themes. in the most prolific years of his activity, he practiced all the possible publicist genders. there is also to be remarked his particular contribution as a politician, in solving the problems romania was facing at that time, and for elaborating a proper legislation. beginning with 1st january 1908 “editor in charge” of “the economic magazine” was nominated constantin popp, constant and truthful contributor of it. his activity as a highly bank officer matched in a perfect way with his publicist activity, together with the leading of “the economic magazine” (popp, 1923). 2.the program and the themes of “the economic magazine” the diversity of the programmers and themes of “the economic magazine” is presented in the next chapter of the doctorate thesis. the new stage of the economic development imposed new requirements in the romanian economic thinking and practice, imposed by the new management manners. “the economic magazine” was from the very beginning an authorized councilor of the financial and commercial circles, through its pages being spread the specialized experiences and knowledge of those who dedicated their entire activity exclusively to the economic studies. initially, without leaving out agriculture’s problems, the program of spreading economic knowledge was primary targeted to financial and accountant matters. tracing the themes’ evolution and the initial program’s appliance of “the economic magazine”, we may notice that it was initially created with the purpose of serving the interests of the romanian bank from transylvania and exclusively sustained by these. but it didn’t confine only to dealing bank business, strictly meaning, but also appreciating the interaction status between the financial institutions and the romanians’ economic condition and their importance and influence on banks. “the economic magazine” widened its field of actions and the themes, handling topics referring to all aspects of the romanians’ lives and activities (lapedatu, 1903: 430). “the economic magazine” from sibiu, an imperative of that time between 1898-1918 150 besides being a publicist means of spreading the progressive ideas and experiences, it was also an organ of publicity, which to be directly used by the romanian banks. appreciating the interaction status between the financial institutions and the romanians ‘economic condition, “the economic magazine” widened its field of action and the themes, handling topics referring to all aspect of the romanians’ lives and activities (industry, exchange, agriculture). “the economic magazine” for achieving the romanian banks ‘reunion into a common junction, publishing send offs, pointing out books and manuals’ advent conferred a particular place. “the economic magazine” militated for the institutionalism’s development in the economic, cultural and socio-historic fields. the idea of a cultural found of the romanian banks bestowed by “the economic magazine” became an integrated part of the programs. the romanian banks’ conference. preoccupied with the perfecting of the romanian cultural and economic organisations from transylvania, “the economic magazine” publishing house considered that this process would facilitate the assuming of an as perfect common language as possible for all the romanians and a homogeneous terminology (diaconovici,1899) as an institution, “the economic magazine’s” publishing house was forced to develop a varied theoretical, practical and utilitarian theme. studying and knowing the economic laws and phenomena, called “the economic magazine’s” publishing house did not contribute a pure theoretical purpose of its own. it was made in the purpose of substantiating ways and trends in which was supposed to be headed a certain economy. from the romanian economists’ point of view, opinion also shared by the editors from “the economic magazine”, the most important link in the economic organisations of the transylvanian romanians was the banks. of their financial strength and ability would depend the development’s acceleration of both, romanian agriculture and industry (diaconovici, 1903). the pages of "the economic magazine" hosted, next to problems referring, to economic processes, also their theoretical interpretation and studies concerning the society’s future: socialism or capitalism. the crises, its effects and solutions were analyzed by the collaborators of “the economic magazine", in close relationship with the economic realities in which they displaying the romanian banks' activity, meaning during the periods of economic crises, general or partial (diaconovici,1904: 305). the reflections concerning the crises arisen in "the economic magazine" are of a preventing nature, not postfactum. the representatives of "the economic magazine" made quite some reflections concerning the competition and its effects on the romanian banks with the purpose of tracing the ways and means of strengthening their resistance in both, the struggle against the competition from inside the romanian banking system, and in the struggle for survival against foreign financial organisations. “the economic magazine" pondered not only the general concerns respecting the ways of development and of the economic progress of the romanians (lapedatu, 1906), it was also rica ivan 151 preoccupied in elaborating some plans for improving and making efficient activity sectors of the transylvanian romanians. such an activity plan in a long time framed was the on referring to the romanian banking sector strengthening. 3.“the economic magazine” promoter of the strengthening and developing reforms of the transylvanian romanian banking network. the support given for creating, developing and perfectioning the promotor institutions of the romanian banking system reform although the romanian banks had reached quite high level, still their simple extension no longer constituted a rational process. it was imposed the consolidation of the existing ones, concomitant with a process of founds’ increase of which it disposed, and of centralization, in the possible cases of several banks. this imperative demand of the moment was picked up deeply realized by the transylvanian economists. as a result of the analyses and searches a new institution was created through which to be achieved radical reform of the functioning mechanism of the romanian banks. the institution was given the name of the romanian banks' conferences. the five conferences of the romanian banks and the meetings of the romanian banks' delegation had as a purpose the fundamental reorganization of the romanian banks guiding themselves according to "solidarity and association", principle according to which the reform of the romanian banks were displayed. initiator of the transylvanian romanian banks' reforms of consolidation and development, "the economic magazine" replied to these needs of the romanian banks, which in that period had to face many forms of competition. from the many lacks the romanian banks were suffering of, "the economic magazine" publishing house draws the attention on two major categories: a) lack of external control; b) lack of movable assets. the romanian banks had liabilities (deposits, reaccounts), mostly on short-term, which in shortage, were about to be paid off in a relatively short time, while the assets, even those less strict, most of them, couldn't be achieved but on long-term. the two categories of defects that the romanian banks were suffering of, could be removed according to "the economic magazine's" publishing house or through: a) the interested circles’ self-action; b) or through the state's power. this second way was rejected mainly by the reform’s promoter the great virtue of cornel diaconovici consists in the fact that while the state's pressure on the romanian banks was exerted, he succeeded to hold forth such reform measures in order to avoid the governmental intercession on these. from the hungarian state, he draws everyone's attention; the romanian banks couldn't wait for any help (diaconovici, 1899). cornel diaconovici showed the romanians that they needed such financial-banking organisation in order to prevent the action of the state legislation through a self-contained social action, to consolidate themselves through self-initiative, through their own forces, to use that human asset they disposed of, changing over its knowledge and experience into a real factor, of national heritage. “the economic magazine” from sibiu, an imperative of that time between 1898-1918 152 the romanian banks had reached-according to cornel diaconovici to such a level of development, that for surviving for their own interest, they needed to do everything that was in their power for their own self-sufficiency .this goal could be achieved only if they themselves were willing to elude the inconveniences and the subsidence that were in their lives and couldn’t be denied .the stricter and the more rigorous self-imposed the romanian banks’ measurements for the reform would be ,the more they would impose the respect of their selfsufficiency from the hungarian authorities.(diaconovici, 1901: 101) there were indicated measures of unconditioned and uninterrupted insurance of the romanian banks’ solvency of avoiding deposits; jeopardize through exaggerated extending of the reaccounts, of confirming the public's trust in the banks administration, of of attracting available romanian funds, of ensuring a deeper control from the stockholders and their deponents. the whole reform was meant as a social, selfeaction of the interested institutions, meaning a spontaneous work, began and achieved at free will. just as his forerunner, loan i. lapedatu draw his attention on consolidating the reforms' themes, he underlined t the necessity of the reasonable use of the reaccount credit, on improving the deposits’ structure. marking out, once again, the shortcomings of the romanian banking system, ioan i. lapedatu outlined in the pages of "the economic magazine" a new program of the banking political strategies, through which it had to stand out to the competitive environment imposed by the banks belonging other ethnic groups, meantime consolidating their positions within the transylvanian economy. (lapedatu, 1906: 261) the idea of passing to a new organisation in an institution with its own functioning status, provided with executive organs and with their own control organs, was taken over and supported. it is about "the solidarity", an association of the financial institutes, of which, "the economic magazine" from sibiu published a large number of pages.] 4.control perfecting, major component of the banking system reform: the experts inspectors institution launched and sustained, the idea of controlling in the romanian banking system, it would arouse many discussions for and against predicting, mental changes, the recurrence on certain points of view, initially supported. discussions regarding the authorities that should be registered with surveillance attributions. but "the economic magazine" was the press mechanism that widely and truthfully reflected the whole problems of control displayed for two decades. it supported within its pages any initiative of establishing romanian institutions that had the vocation to fill the romanian economic institutionalized landscape, and also to contribute to the efficiency of the existent ones by taking over or by decongestion them of some duties (lapedatu, 1906: 237). an institution like this was the institution of the expert revisers, strongly supported by the magazine's editors, to who belongs the greatest part of the initiative and the practical support of establishing, developing and consolidating it. giving a high appreciation for the activity of the reviser experts, the editor's office of "the economic magazine" was writing about this institution: " it has had throughout its activity rica ivan 153 of nearly two decades many difficulties to defeat, but it also had wrathful and beautiful years of activity that will never be forgotten, whatever the future will be. the inspectors-experts' conferences represent a new stage in the development of the inspectors-experts' institutions. 5.social problems and the insuring problem of a retirement fund for the romanian banking clerk the problems of the clerk’s retirement were, next to the one of controlling, one of the most important ones. disciples of the social solidarity, the editors of "the economic magazine " often debated the problems connected to the bank officers' level of qualification, but also the of insuring a decent living and insuring the future in case of retirement, or of other unhappy circumstances that might happen to them. they considered that the banks were interested in creating elite officers, whose interests were identified with the bank's interest. the forming of a fund for allowance for the clerks is not an act charity, but an economic need imposed by the well-understood interests of the bank managers. "the economic magazine" took care of the retirement issue for their private officers, illustrating with many examples and digits many times, a whole series of ways through which the pensions of the bank officers could be created and assured. 6. the banking institutional profile’s enlargement through establishing insurance units as a component of the interests of the transylvanian romanian banking financial circles, the “the economic magazine” published an important number of materials, through which it fundamental the opportunity and the importance of an insurance bank, exclusive property of the romanian nation. (lapedatu, 1912: 185) after establishing the bank of insurance, the "the economic magazine" continued publishing materials in order to support the development and the consolidation of the insurance spirit among the romanians. in the editors' office vision, the insurance bank, in transylvania's condition at the beginning of the xx" century, also received an important educational role. it needed to promote not only the idea of saving, but also the one of predicting. the insurance bank constituted a new link that completed the romanian financial institutional system, having the vocation of contributing to the enhancement of the economic and financial capacity of the romanians. 7. the national unity idea reflected in “the economic magazine”. pages between 18991918 the establishing of "the economic magazine" marked a superior stage in marking out the intense economic connections between the two sister countries, but also revealing the unity in principle and action concerning the economic area of the romanians from both sides of the carpathians. it developed a vast program of informing the transylvanian public regarding the dynamics of the romanian economy between 1898-1918. the attention of the transylvanian romanian banking circles, the versatile economic relationships the businesspersons from both sides of the carpathians were sustaining reflected in the particular care given to the romanian banking movement. “the economic magazine” from sibiu, an imperative of that time between 1898-1918 154 the editors of "the economic magazine" were the exponents of the most interesting part of the population in completing and unifying the terms in general, but of the financial banking, in special. 8.conclusions established as a means of communication in the service of the transylvanian romanian banking system, "the economic magazine" was forced by unfavorable historical circumstances to suspend and reject numerous attacks pointed against the romanian banks and against banks of other non-hungarian cohabiting nationalities (the romanian banks were blamed of baffling the colonizing plan with the hungarian population from transylvania). “the economic magazine" published not only materials that testified the discriminatory attitude of the hungarian banks towards the romanian population, but also materials in which were admitted, in an honest way, the activity of the romanian banks. by reading the pages of "the economic magazine", we realize that its editors were forced to take great efforts, especially in editing a modern magazine in the hostile romanian business environment, a graphically appropriate one, but also at the highest level, that the economic science had already reached from the first half of the twentieth century. conclusion, we may declare that "the economic magazine" from sibiu may be considered a cultural institution, with multiple services in the economic, cultural, historical and cultural areas. it was an organizational institution meant in the service of the institutional development of the romanian people. references 1. diaconovici cornel (1899), o chestiune de cultură [a matter of culture], the economic magazine, vi, nr. 3. 2. diaconovici cornel (1903), o expoziție a băncilor române [an exhibition of romanian banks], the economic magazine, vi, nr. 10. 3. diaconovici cornel (1901), problemele reformei bancilor [the problems of banks reform], the economic magazine, iii, nr.8. 4. diaconovici cornel (1904), problema băncilor în fața crizei [banks problem in front of the crisis], the economic magazine, vi, nr.36. 5. lapedatu i. ioan (1906), chestiunea economică română [the romanian economic matter], the economic magazine, viii, nr. 35. 6. lapedatu i. ioan (1906), reformele de consolidare [consolidation reforms], the economic magazine, viii, nr.28. 7. lapedatu i ioan (1906), chestiunea controlului [the control matter], the economic magazine, viii, nr.25. 8. lapedatu i. ioan (1912), banca generală de asigurare [the general insurance bank], the economic magazine, xiv, nr. 12. 9. lapedatu i. ioan (1903), la aniversare [at anniversary], the economic magazine, nr.52. 10. popp constantin (1923), trecutul și activitatea „revistei economice" în primii 25 de ani de existență [the past and the activity of the economic magazine in the first 25 years of existence], the economic magazine, xxv, nr. 52. agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 18, no. 1 (2024), pp. 200-209 200 progress of the microfinance sector in albania, current challenges and the perspective of this sector f. pjetri, r. kastrati, f. prifti fabian pjetri¹, rajs kastrati², fjorda prifti³ ¹ ² ³ faculty of economics, finance bank department, metropolitan university of tirana, albania ¹ e-mail: fpjetri@umt.edu.al ² e-mail: rajs.kastrati22@umt.edu.al ³ e-mail: fjorda.prifti21@umt.edu.al abstract: the paper presented by the authors aims to research the role of microfinance in albania over the years, especially in improving living conditions for the less privileged groups. the authors have tried to give a summarized panorama regarding the progress and evolution of microfinance in the state of albania. portraying the latter as a good alternative solution to the shortcomings of the traditional banking system, to address the needs of certain segments of the population. the analysis used by the authors focuses on the major and current challenges that the microfinance sector in albania is facing, it also examines the perspectives and potential future opportunities of this developing sector in our country. since most of the economic entities that operate in our country are small and medium-sized businesses, where family businesses account for a significant number of the total number of economic entities, the authors have considered it important to research this segment of the economy. keywords: microfinance, financial system, financial supervision authority, digitization of financial services in relation to market demands. introduction in this paper, the authors have tried to present a comprehensive overview of the financial system in albania, but with the primary focus on the financial sector of microfinance. the authors of this paper, based on official data, present the evolution of the microfinance sector from the 1990s to the present day. the researchers in this work are based on official secondary data provided by prestigious national and international institutions. microfinance has made an important contribution over the years to the albanian economy. over the years, microfinance has facilitated lending to individuals and businesses that had difficulty accessing the banking sector. at the end of this paper, the authors present the findings and give their opinions and suggestions regarding this sector. mailto:fpjetri@umt.edu.al mailto:rajs.kastrati22@umt.edu.al mailto:fjorda.prifti21@umt.edu.al fabian pjetri, rajs kastrati, fjorda prifti 201 the history and progress of financial institutions in the spectrum of microfinance in albania. microfinance in albania during the 1990s was seen as an essential instrument for the population and small businesses that did not have access to the traditional banking system. microfinance institutions during this period mainly offered small loans, with the aim of alleviating poverty and encouraging entrepreneurship. this sector became an important financial source for farmers and small businesses. during this period, microfinance, through its programs, has pointed out that it is possible to give loans to low-income families by reducing the high interest rates, even in many cases requiring guarantees in relation to the collateral (johnson, 1997). improving the living conditions of the low-income classes and their exit from poverty through financial and social inclusion is the primary objective and the main reason for the existence of microfinance (milana, 2020). programs during this period were aimed at alleviating poverty and extending services to millions of poor and diverse families around the world. a group in the formation of economic theory shows how new contractual forms of a key to the success of microfinance issues of lending contracts in the group with a common purpose (morduch, 1999). during the period from 2000 to 2010, microfinance institutions in albania were transformed and expanded, offering a wider spectrum of financial services, with improved quality. this period brought a positive impact on the development of local communities, enabling wider access to financing, especially for marginalized groups and rural areas. the competitiveness between the microfinance institutions in albania during this period began to increase between the different operators operating in our country. also, this was a characteristic that emerged as evidence in many different countries of the world that were developing during that period of time. the competition between microfinance institutions operating in developing countries has grown significantly, especially during the first five years of the 2000s (mcintosh, 2005). during the period from 2010 to 2020, the microfinance sector in albania faced new and complicated challenges, such as managing the impact of the global financial crisis. the microfinance sector has become a major factor in the country's economic development, especially in rural areas. the microfinance revolution' is the term often used for the successful expansion of small-scale financial services to the poor with high repayment records in developing countries (kono, 2010). microfinance institutions further improved risk management and diversified services to expand financial access and increase the number of clients (assefa, 2013). this period brought an increase in the impact of microfinance in the economy and society, helping communities and individuals in need of these services (cocoli, 2022). during this period, the microfinance sector had a positive impact on the local economy, especially for groups with lower access to the financial system. also, this sector has increased the focus on investments that help individuals and underprivileged communities (loca, 2014) the latest perspectives and developments of microfinance in albania from 2020 onwards are presented below. the poor strata of the population and small businesses were particularly challenged by covid-19, forcing microfinance institutions to take support measures, such as extending loan terms or restructuring them (zheng, 2021). progress of the microfinance sector in albania, current challenges and the perspective of this sector 202 this situation was similar in other countries that are part of the balkan peninsula, as for example in the case of the state of romania, in which the application of restrictive measures to combat and prevent the spread of the sars-cov-2 virus, profoundly influenced the crediting of various subjects during that period (antik, 2022). during the year 2023, the institutions operating in the field of microfinance in albania have begun to prioritize technological developments and digitization: this process requires investments and training, for the coordination of new technology with current operations (scan tv, 2023). methodology the quantitative data used by the authors regarding microfinance in albania have been provided, using the statistical data located in the data base of the central bank of albania. these data were processed by the authors during the month of march 2024 (financial_stability/financial_stability_indicators, 2024). some of the secondary data are provided by precedence research, which is a canada/india based company that specializes in strategic market studies and from the european-microfinance network (network, 2024). the processing of these data, graphical representation, was carried out by the authors using the microsoft excel computer program. the interpretation of the data related to the financial system in albania with the main focus on microfinance was carried out by the authors. the microfinance institutions operating in global ranking in the global ranking for the year 2022, based on the statistics published by research, precedence, it results that: global microfinance markets had a size of 226.37 billion american dollars (usd). it is claimed that by 2032 this market will reach the value of 646.25 billion american dollars (usd) (precedenceresearch, 2023). figure 1: global microfinance market share, by provider type during the year 2022 source: precedence research (2023). based on the data published by precedence research during the year 2023, it results that: financial institutions such as universal banks, made up 43% of the total financing at the micro level at the global level. financial institutions of the micro finance institution (mfi) type made up 36% of the total of microfinances globally. financial institutions of the nbfc type non-banking institutions made up 14% of the total of microfinances globally. 43% 36% 14% 7% 0% 10% 20% 30% 40% 50% banks micro finance institute(mfi) nbfc(non banking institutions) others microfinance market share, by provider type, 2022 (%). fabian pjetri, rajs kastrati, fjorda prifti 203 other financial institutions own 7% of the total financing at the micro level at the global level. in the north american region, the institutions of the microfinance sector offer a variety of microloans, with a focus mainly on small businesses and individuals with low incomes. the united states of america and the state of canada are the main countries that during 2023 have given a special role to the demand for microfinance in the north american region.based on global regional statistics of 2023, the economic sector in which microfinance is included dominates in the asia region and the pacific region. based on the opinions of different experts in this sector, it is concluded that: this growth of this financial sector can be attributed to the increase of initiatives undertaken by the governments of these countries. the governments in these regions aim to reduce poverty in the population and improve living conditions for individuals. in asia region and in the pacific region, a good part of the population lives in rural areas and a good part of them have limited access to the services offered by second level banks. in the region of europe, during the year 2022, it was found that: the state of germany, the united kingdom and france are the three main countries with the most developed system in relation to microfinance (mfc, 2022). in 2019, the banking sector in europe has financed micro lending worth 857 million euros. during the year 2020, the banking sector has financed micro lending in the value of 1002 million euros, or in other words 145 million euros more than last year 2019. during the year 2021, the banking sector has financed micro lending in the value of 1042 million euros, or to put it another way, 40 million euros more than last year 2020. in 2019, the coop financial sector in europe has financed micro lending in the amount of 90 million euros. during the year 2020, the coop financial sector has financed micro lending in the value of 78 million euros, or in other words 12 million euros less than last year 2019. during the year 2021, the coop financial sector has financed micro lending in the value of 95 million euros, or in other words 17 million euros more than last year 2020. figure 2: microloan disbursements (in euro million) in 2019, 2020,2021, by institutional type source: microfinance in europe, survey report (december 2022). in 2019, the nbfi financial sector in europe has financed micro lending in the amount of 496 million euros. during the year 2020, the nbfi financial sector has financed micro lending in the value of 440 million euros, or in other words 56 million euros less than last year 857 90 496 223 1002 78 440 240 1042 95 578 229 banks coop nbfi ngo microloan dispursements (in euro million) by institutional type. 2019 2020 2021 progress of the microfinance sector in albania, current challenges and the perspective of this sector 204 2019. during the year 2021, the nbfi financial sector has financed micro lending in the value of 578 million euros, or in other words 138 million euros more than last year 2020. in 2019, the ngo financial sector in europe financed micro-lending in the amount of 223 million euros. during the year 2020, the ngo financial sector has financed micro lending in the value of 240 million euros, or in other words 17 million euros more than last year 2019. during the year 2021, the ngo financial sector has financed micro lending in the value of 229 million euros, or in other words 11 million euros less than last year 2020. based on the publication of the financial supervision authority in albania (ama), albanian microfinance during 2022 had in its composition the most consolidated non-banking financial institutions, with microfinance as their main activity, which together owned a loan portfolio with a surplus of 382.3 million euros in total. also, these economic entities during 2022 owned more than 170,000 customers. (association, https://ama.com.al, 2024) results, progress and performance of microfinancial institutions in albania from 2016 to 2022 below, the authors have presented in a summarized way the financial system in albania, with the opposite of the financial institutions that make it up for the time period from 2016 to 2022. figure 3: financial system weight of assets to gdp (%) in albania during the year 2016 source: bank of albania (2024). below is the composition of the financial system in albania for the year 2016. the financial sector in which they participate, the banking sector, comprises 95.5% of the entire financial system in albania, while the remaining 4.5% is made up of financial institutions present in the system. the non-bank financial institutions sector comprised 2.8% of the entire financial system in 2016. financial institutions such as: slas and union during 2016 comprised 0.6% of the entire financial system in albania. pension funds during 2016 comprised 0.1% of the entire financial system in albania. pension funds occupied the last place in terms of the financial system of that year. the financial sector in which they participate, investment funds in albania, made up 4.5% of the entire system for 2016 and took the second place in the total financial system. 95,5 2,8 0,6 2 0,1 4,5 banks nbfis nonbanking financial institution slas and union insurance companies pension funds investment funds financial system in albania 2016. fabian pjetri, rajs kastrati, fjorda prifti 205 figure 4: financial system weight of assets to gdp (%) in albania during the year 2017 source: bank of albania (2024). the banking sector in albania during 2017 comprised 93.2% of the entire financial system. compared to the previous year, 2016, the specific weight of this sector has decreased by 2.3%. the non-bank financial institutions sector comprised 2.9% of the entire system in 2017. compared to 2016, this sector has increased by 0.1%. slas and union comprised 0.5% of the entire financial system during 2017, compared to the previous year, this indicator decreased by 0.1%. pension funds comprised 0.1% of the financial system during 2017. during 2017, investment funds comprised 4.7% of the entire system. these institutions occupied the second place in terms of importance during this year. compared to the previous year, the weight of this voice increased by 2% compared to 2016. the financial sector in which they participate, insurance companies during 2017 comprised 2% of this market. figure 5: financial system weight of assets to gdp (%) in albania during the year 2018 source: bank of albania (2024). the banking sector in albania comprised 88.8% of the entire financial system. compared to a year ago, the weight of this sector has decreased by 4.4%. the sector in which non-bank financial institutions are included during 2018 comprised 3.2% of the entire financial system. compared to 2017, the sector that includes non-bank financial institutions has increased by 0.3%. financial institutions slas and union comprised 0.6% of the entire system during 2018. pension funds during 2018 comprised 0.1% of the entire financial system. investment 93,2 2,9 0,5 2 0,1 4,7 0 20 40 60 80 100 banks nbfis nonbanking financial institution slas and union insurance companies pension funds investment funds financial system in albania 2017. 88,8 3,2 0,6 1,9 0,1 4,2 0 20 40 60 80 100 banks nbfis nonbanking financial institution slas and union insurance companies pension funds investment funds financial system in albania 2018. progress of the microfinance sector in albania, current challenges and the perspective of this sector 206 funds made up 4.2% of the entire system for 2018. these institutions were the second most important in 2018. compared to the previous year, the weight of this item decreased by 0.5%. insurance companies made up 1.9% of this market during 2018. compared to a year ago, this sector, where insurance companies are a part, decreased by 0.1%. figure 6: financial system weight of assets to gdp (%) in albania during the year 2019 source: bank of albania (2024). the banking sector as a component of the financial system during 2019, comprised 87.2% of the entire system. compared to the previous year, 2018, the share of this sector, which includes second level banks, has decreased by 1.6%. the sector in which they participate, non-bank financial institutions during 2019 comprised 3.9% of the entire financial system. compared to a year ago, this sector had a slight increase of 0.7%. the financial sector, which includes slas and union during 2019, comprised 0.6% of the entire system. the financial sector in which pension funds are included during 2019 comprised 0.2% of the entire system. the financial sector, which includes investment funds, made up 4% of the entire system for 2019. these institutions took the second place in terms of importance during 2019. compared to 2018, the weight of this voice decreased by 0.2%. insurance companies made up 2% of this market during 2019. compared to the previous year 2018, the sector in which insurance companies are a part expanded with a modest increase of 0.1%. figure 7: financial system weight of assets to gdp (%) in albania during the year 2020 source: bank of albania (2024). 87,2 3,9 0,6 2 0,2 4 0 20 40 60 80 100 banks nbfis nonbanking financial institution slas and union insurance companies pension funds investment funds financial system in albania 2019. 97,8 4,2 0,7 2,4 0,2 4,2 0 20 40 60 80 100 120 banks nbfis nonbanking financial institution slas and union insurance companies pension funds investment funds financial system in albania 2020. fabian pjetri, rajs kastrati, fjorda prifti 207 the financial sector in which they participate, the banking sector during 2020 comprised 97.8% of the entire financial system in albania. compared to the previous year 2019, the specific weight of this sector has weighed a considerable increase of 10.6%. nonbank financial institutions, during 2020, comprised 4.2% of the entire financial system. compared to the previous year, 2019, this sector has grown by 0.3%. the financial sector in which slas and union participate during 2020 comprised 0.7% of the entire system. compared to 2019, this sector had a modest growth of 0.1%. the financial sector, which includes investment funds, during 2020, comprised 4.2% of the entire system. these institutions occupied the second most important place during 2020. compared to 2019, the weight of this financial sector increased by 0.2%. the financial sector in which they participate, insurance companies during 2020 comprised 2.4% of this system. compared to a year ago, this financial sector expanded by a modest figure of 0.4%. figure 8: financial system weight of assets to gdp (%) in albania during the year 2021 source: bank of albania (2024). during 2021, the banking sector comprised 97.8% of the entire financial system in albania. compared to 2020, the share of this sector has decreased by 3.9%. the non-bank financial institutions sector comprised 4% of the entire system during 2021. compared to 2020, this sector has decreased by 0.2%. slas and union and pension funds comprised 0.9% of the entire system. investment funds comprised 4.1% of the entire system for the year 2021. these institutions occupied the second place in terms of importance during this year. compared to the previous year, 2020, the weight of this voice decreased by 0.1%. insurance companies comprised 2.2% of this market during 2021. compared to the previous year 2020, this sector suffered a decrease of 0.2%. figure 9: financial system weight of assets to gdp (%) in albania during the year 2022 source: bank of albania (2024). 93,9 4 0,7 2,2 0,2 4,1 0 20 40 60 80 100 banks nbfis nonbanking financial institution slas and union insurance companies pension funds investment funds financial system in albania 2021. 87,9 3,7 0,7 2 0,3 2,5 0 20 40 60 80 100 banks nbfis nonbanking financial institution slas and union insurance companies pension funds investment funds financial system in albania 2022. progress of the microfinance sector in albania, current challenges and the perspective of this sector 208 the banking sector in albania during 2022 comprised 87.9% of the entire system. compared to the previous year 2021, the weight of this sector, which includes second level banks, has decreased by 9.9%. the financial sector, in which non-bank financial institutions participate, during 2022 comprised 3.7% of the entire financial system. compared to the previous year 2021, this sector has decreased by 0.3%. these institutions occupied the second place in terms of importance during this year. the financial sector in which they participate, slas and union, comprised 0.7% of the entire financial system this year. the financial sector in which they participate, investment funds, during 2022 comprised 2.5% of the entire financial system. compared to 2021, the weight of this voice was reduced by 1.6%. insurance companies made up 2% of this market during 2022. compared to the previous year 2021, this sector suffered a decrease of 0.2%. based on the report published by the financial supervision authority in albania, it results that: the total number of loans granted by microfinance institutions in albania during 2022 was 297,813 loans. compared to the previous year 2021, this indicator has increased by 14.6%. (association, raporti i mikrofinancave shqiptare 2022) based on these data, it can be seen that the main specific weight of lending by microfinance institutions is occupied by loans for individuals with a value of 274,999 loans, or in other words, this indicator is 15.8% higher than the previous year. the new lending made available to the business sector was narrowed during 2022. the value expressed in the figure of 15,717 loans, is 267 units or 1.6% less than in 2021. loans for the sector involving farmers and agribusinesses increased by 1000 units or 18.5%, while the number of other loans decreased by 337 units or 32.4% compared to 2021. discussions/conclussions the financial sector of microfinance in our country has played an important role in the economic development of albania. by offering financial resources to layers of the population, which usually have a hard time or are excluded from traditional banking systems. the microfinance sector in albania has faced challenges in liquidity management, especially in an uncertain economic environment. this has required careful management of financial resources. microfinance institutions should focus on strong financial strategies to better manage liquidity and maintain their sustainability in uncertain economic times. microfinance institutions have encountered challenges in complying with international regulations and standards, which are critical for integration into global markets (ledgerwood, 2013). sustainable strategies for compliance with these regulations must be developed, including staff training, as well as updating policies and procedures. digitization has offered opportunities for improving services, but it has also brought challenges, such as the need for investments in technology and staff training. microfinance should invest in technology and focus on the digitization of their services, to improve their efficiency and effectiveness, as well as to expand the geographical reach of this sector, managing to better serve communities. credit risk management strategies should be strengthened, including regular portfolio analysis and the implementation of corrective measures, when necessary. microfinance has had a positive impact on socioeconomic development and the improvement of living conditions in local communities. microfinance institutions should continue to invest in projects that have a positive socioeconomic and fabian pjetri, rajs kastrati, fjorda prifti 209 environmental impact, helping to develop communities. inclusion of marginalized groups and their empowerment through financial education should be a priority, building a culture of financial awareness throughout society. references 1. european microfinance confederation emc. (december 2022). microfinance in europe: survey report (2022 edition). retrieved from european-microfinance. 2. antik, c. i. (30. december 2022). credit institutions – financing entities during the covid-19 pandemic. agora international journal of economical sciences, 16. doi:10.15837/aijes.v16i.5165 3. assefa, e. (2013). competition and the performance of microfinance institutions. applied financial economics, 767-782. 4. association of microfinance. (2020). raporti i mikrofinancave shqiptare 2022 [report of albanian microfinance 2022]. tirane: ama-raporti-vjetor-2022. 5. association of microfinance. (24. april 2024). retrieved from association, albanian microfinance: https://ama.com.al/rreth-nesh/ 6. johnson, s., & rogaly, b. (1997). microfinance and poverty reduction. oxfam, 1997. 7. milana, c., & ambrosini, a. (04 may 2020). microfinance and financial inclusion: challenges and opportunities. onlinelibrary, 253-410. retrieved from https://onlinelibrary.wiley.com/doi/abs/10.1002/jsc. 8. zheng, c., & zhang, j. (january 2021). the impact of covid-19 on the efficiency of microfinance institutions. international review of economics & finance, 407-423. 9. cocoli, f. (05. august 2022). shqiptarja.com. retrieved from https://shqiptarja.com: https://shqiptarja.com/lajm/mikrofinanca-dhe-qytetari 10. mcintosh, c., & wydick, b. (december, 2005). competition and microfinance. journal of development economics, 271-298. 11. bank of albania, financial stability indicators. (march 2024). retrieved from https://www.bankofalbania.org/financial_stability/financial_stability_indicators/banking_sector_s tructure/ 12. kono, h., & takahashi, k. (11 march 2010). microfinance revolution: its effects, innovations, and challenges. onlinelibrary.wiley.com. 13. ledgerwood, j., & earne, j. (2013). the new microfinance handbook: a financial market system perspective. world bank publications. retrieved from https://books.google.al/books?id=xyvbdfqm8tec&dq=microfinance+institutions+have+encounter ed+challenges+in+complying+with+international+regulations+and+standards,+which+are+critical+ for+integration+into+global+markets.+&lr=&source=gbs_navlinks_s 14. loca, s. (november, 2014). microfinance market diagnoses and beneficiaries impact case of albania. academic journal of interdisciplinary studies. 15. morduch, j. (december, 1999). the microfinance promise. journal of economic literature, 1569-1614. 16. european microfinance network. (22 april 2024). microfinance in europe: survey report (2023 edition). microfinance overview surveys. 17. precedence research. (june 2023). retrieved from https://www.precedenceresearch.com/microfinance-market 18. scan tv. (27. october 2023). retrieved from https://scantv.al: https://scantv.al/digjitalizimi-imikrofinances-nxites-i-perfshirjes-dhe-qendrueshmerise-financiare-ne-shqiperi/ agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 17, no. 2 (2023), pp. 17-26 17 managing internationalization at higher education institutions: assigned drivers and perceived importance k. aškerc zadravec katarina aškerc zadravec ljubljana school of business, slovenia, https://orcid.org/0000-0003-4710-2066 e-mail: katarina.askerc@vspv.si abstract: the internationalization of higher education has become a central focus in contemporary higher education policies, where various demands, motives, and meanings are attributed to higher education institutions and management in the global and international environment. the complex relationship between globalization and internationalization is briefly explored in the article, as well as motives and drivers for the internationalization of higher education at both national and institutional levels, with university management considering it a strategic priority. through semi-structured interviews with representatives of slovene higher education stakeholders, it was found that university management emphasizes the significance of internationalization as a strategic priority and as part of the university’s daily activities, highlighting its integration into research, education, various networks, projects, etc. the article underscores that internationalization serves as a means and driver for changes, raising quality, improvements, employability, and innovations in higher education, fostering a knowledge-based society, and addressing the challenges of the globalized world, which were highlighted by the respondents. in the final part of the article, suggestions for improvements and further research activities are presented. keywords: management of higher education, internationalization of higher education, globalization, motives for internationalization, perceived importance of internationalization introduction the expectations, needs, interests, and demands of higher education institutions, management, students, and higher education staff are changing due to globalization and significant technological advancements. higher education is undergoing radical change and growth (treleaven et al., 2009). the forces of globalization still cause ongoing increased flows of people, money, services, goods, and ideas around the world (despite the world health organization (2020) declaring an epidemic a few years ago). like nothing else in the modern era, the epidemic’s development had a significant negative impact on the social, political, economic, and educational domains (rumbley, 2020) – however, nowadays, all the latter is only a memory. students and higher education staff consider the opportunity to study and work abroad as a right and a means of furthering their personal and professional development; higher education institutions and their management see internationalization as a means for improving quality and the institutions’ reputation, etc. the global and international dimensions of higher education are receiving more attention than ever before in international, national, and institutional strategic documents, policies, and mission statements. the dynamics of the twenty-first century have increased the significance of the global context (altbach, reisberg & rumbley, 2009), wherein immediate communication is now easily possible, and scientific, project and pedagogical communication is made easier by the advancement https://orcid.org/0000-0003-4710-2066 mailto:katarina.askerc@vspv.si managing internationalization at higher education institutions: assigned drivers and perceived importance 18 of information and communication technology and artificial intelligence. in this context, the importance of comprehensive international cooperation of higher education (institutions) and their stakeholders must be strategically and purposefully addressed. the aim of this article is to present and justify the demands and expectations that the contemporary global and international world places on higher education, clarifying a few concepts related to the internationalization and globalization of higher education and its managing role. additionally, the article aims to define the motives, dimensions, and importance embedded in international and intercultural currents of higher education management. in some parts, the article represents an upgraded discussion of previously published findings in the field of the internationalization of higher education, but with a different focus and with an emphasis on the management role (e.g., aškerc zadravec, 2021). internationalization in higher education and related concepts the international dimension of higher education is increasingly becoming a central topic on the agendas of international policies, national governments, transnational organizations, higher education institutions, and their representative bodies. over the last two to three decades, the internationalization of higher education has moved from the periphery of institutional interest to the very core of the concept (de wit, 2011a). in this light, the first definition of the internationalization of higher education was described as “the process of integrating an international or intercultural dimension into the teaching, research, and service functions of the institution” (knight, 1994, p. 7). this was followed by a series of definitions of the concept of internationalization of higher education, as well as their negative and positive criticisms from different authors. in 2015, de wit and his colleagues, in a study for the european parliament, updated knight’s definition of internationalization of higher education, defining it as the intentional process of integrating an international, intercultural, or global dimension into the purpose, functions, and delivery of post-secondary education, with the aim to enhance the quality of education and research for all students and staff and to make a meaningful contribution to society (de wit et al., 2015). many authors discuss the complex relationship between the trend of globalization and internationalization in higher education, which emerged at the end of the last century (e.g., teichler 2004, 2010; knight, 2008; maringe & foskett, 2010; zgaga, teichler & brennan, 2013; aškerc zadravec, 2021). however, the normatively simplistic distinction between globalization and internationalization causes a blurring of the differences between the two concepts and the way in which they ‘feed’ each other (marginson & van der wende, 2007). it appears that the two terms are related, and it is impossible to draw a clear line between them (de wit, 2011b). the concept of globalization, along with internationalization, originated in general social science studies in the second half of the 1960s (zgaga, 2009). it was then applied to higher education policies in the second half of the 1990s and became increasingly prominent in the field of higher education, particularly after 2000 (marginson & van der wende, 2007). according to marginson and van der wende (2007), the term “globalization” is not always understood in a neutral sense. for this reason, beck (2003) draws attention to the term's ambiguity, which makes it difficult to define clearly, leading to its frequent misuse. the term “globalization” is all too frequently substituted with an analytical term or katarina aškerc zadravec 19 a process that speaks of reciprocal national and cultural interdependence, along with an ideological definition of “globalism” that limits the term's application to just one aspect – the economic one. globalization, according to knight (2008), is the process of increasing cross-border movement or mobility of people, ideas, knowledge, values, cultures, technology, and economics that strengthens global interdependence. globalization can have positive and/or negative consequences, affecting each country and nation differently, depending, among other things, on the historical and cultural context. an increasingly interconnected global economy, the creation of new informationcommunication technology, the influence of artificial intelligence, the rise of international knowledge networks, the growing significance of the english language, and other factors outside the purview of academic institutions are some of the factors driving globalization. internationalization, according to altbach, reisberg, and rumbley (2009), is the range of strategies and initiatives that academic institutions and governing bodies carry out in reaction to globalization. therefore, education is among those impacted by globalization (knight, 2008). since the globalization of education is not the same as the internationalization of education, zgaga (2009) emphasizes how crucial it is to distinguish between the two ideas in the context of (higher) education. furthermore, the rise of the nation-state in the 19th century influenced internationalization, which was crucial for the creation of contemporary educational theories and the national systems based on them. according to brandenburg and de wit (2011), globalization is too often characterized as “bad,” while internationalization is frequently defined as “good” and as a means of fostering understanding between people or raising the standard of higher education or research. the latter ignores the fact that activities more directly associated with the idea of globalization (such as higher education as commercial goods) are increasingly being conducted under the aegis of internationalization, and the topic of real internationalization’s impacts and goals is becoming less common. additionally, knight (1999) wrote that the internationalization of higher education is one of the possible ways in which a country and its education respond to globalization, reinforcing the fact that internationalization is a means to an end and not an end in itself. according to the theoretical foundation in the literature, internationalization is the way higher education reacts to and functions within globalization, which is a social, economic, and political process in which it plays a significant role as an actor (adams & de wit, 2011). thus, internationalization is transforming higher education, and globalization is transforming the internationalization landscape (knight, 2008). in addition to the terms internationalization and globalization of higher education, other related terms, such as international education, international studies, transnational education, crossborder, and borderless education, etc., can be recognized. there are also more concrete subcategories, such as academic mobility, international cooperation, study abroad, international exchange, as well as multicultural and intercultural education, global education, transnational studies, global studies, joint programs, etc. (de wit, 2002; hénard, diamond & roseveare, 2012). the majority of the concepts and definitions are united in their relationship between (higher) education management approaches in their broader meaning and the inclusion of global, international, and/or intercultural approaches in different aspects of (higher) education institutions. for the purpose of this article, the focus is mainly on knight’s and de wit’s et al. definitions of internationalization in higher education, which are considered to be broad enough to cover all aspects and activities of modern higher education institutions and their management roles. managing internationalization at higher education institutions: assigned drivers and perceived importance 20 internationalization in higher education – drivers and motives depending on their goals for internationalization, universities take different routes to it. as the purposes of internationalization vary from institution to institution, the choice of internationalization strategies is contingent upon the objectives that each institution seeks to achieve (hudzik, 2011). according to de wit (1998), who defines four categories of motives for internationalization in higher education, the latter can be understood as a final goal or as a means to achieve other or “higher” goals. however, its deeper and broader aim is to achieve new purposes and goals (hudzik, 2011; hénard, diamond & roseveare, 2012; middlehurst & woodfield, 2007) – thus, internationalization is a means and a driver for changes, improvements, and innovations. it creates jobs, develops the skills needed for the twenty-first century, and shapes a knowledge-based society. as a result of the growing significance of internationalization for higher education institutions, new conceptions of internationalization are being created as a component of a strategy to accomplish core institutional objectives (green, 2012). there is widespread consensus that, despite notable variations across nations and educational establishments, internationalization, when incorporated into a more comprehensive approach, can lead to substantial advantages for students, staff, and the institution (hénard, diamond & roseveare, 2012). these benefits include the promotion of innovative and strategic thinking that leads to innovation, the facilitation of staff and student collaboration, the encouragement of novel approaches to learning assessment, and increased awareness of global issues and the functioning of educational systems across diverse nations, cultures, and languages. according to green (2012), several factors drive internationalization: educating students for “global citizenship” and preparing them for the (global) workforce; raising the standard of research and teaching; strengthening institutional capacity; bringing in more profits; promoting local/regional economic development; resolving global issues, fostering global understanding and peace, etc. additionally, marmolejo (2010) outlines the following justifications for the institution’s internationalization: enhancing student qualifications; expanding the institution's international profile; internationalizing curriculum; enhancing research and knowledge acquisition, diversifying the higher education staff and institution, etc. knight (2008) makes a distinction between national and institutional justifications for internationalization, mentioning factors such as the development of human resources, strategic alliances, earning capacity through commercial trade, nation-building, social-cultural advancement, mutual understanding, international brand and profile, quality improvement through international standards, staff and student development, knowledge acquisition, etc. globalization and internationalization positively contribute to students’ growth and development (kadlec & jukić, 2023), wherein successful international cooperation is often associated with online forms of cooperation (aškerc zadravec, 2023). the motives vary by time, nation, or geographic distinction; they do not conflict with one another and result in various strategies and policies. knight and de wit (1999; de wit, 2002) distinguish four categories of motives for the internationalization of higher education: political, economic, socio-cultural, and academic motives, which may vary in importance across countries and regions, and their dominance may also change over time. in 2002, de wit expanded the existing categories with subcategories (de wit, 2002), and his classification is probably the most comprehensive, despite the fact that his methodology did not distinguish between justifications and motives at the national, institutional, or sectoral levels. katarina aškerc zadravec 21 the scope of the study according to the previously presented theoretical background with a focus on the conceptual background and motives or reasons for internationalization, in the later parts of the article, some basic results will be presented with a focus on the following objective: to investigate and understand the factors influencing internationalization at slovene universities, with a specific focus on identifying the main drivers and assessing the significance that university management attributes to the internationalization of higher education. methodology data collection method a semi-structured interview format with open-ended questions on predetermined topics was conducted, allowing for the change of the sequence of questions or the addition of new questions depending on the structure of each interview. similar but not completely identical questions were used, as questions were slightly adapted to specific institutional contexts. the collected data were processed through content analysis (cohen, manion & morrison, 2007). in the article, both facts obtained through interviews, as well as the opinions and views of the interviewees, are included. the interviews took place at the beginning of 2020. subsequently, in june and july 2020, some of the interviews were supplemented to gain insight into the specifics that occurred at higher education institutions due to the declaration of the epidemic. the interviews were conducted in person, as well as online, using skype, due to the time constraints of the people involved and later due to restrictive measures in connection with the epidemic. sample the interviewees were purposefully selected based on their involvement in internationalization activities at the universities or national institutions where they work and according to their roles at the institutions. for this article, the findings of six interviews are presented, involving representatives of the three largest slovene universities: the university of ljubljana, the university of maribor, and the university of primorska, as well as representatives of the slovene national institution in the field of higher education. all the interviewees agreed that conversations were recorded, enabling later verbatim recording of all conducted interviews. the long-term storage of the transcripts in a secure location has been ensured. the questions were structured to allow for the greatest possible anonymity and confidentiality of the interviewees, which is an important aspect of research ethics (cohen, manion & morrison, 2007). following this methodological approach, the anonymity of the persons involved in the research is maintained. the list of interviewees included in the research, in an anonymous form and with numbers assigned to individual interviews, is in the final part of the article. results: university management perspectives on the drivers and significance of internationalization in higher education in this chapter, key observations are presented regarding the perceptions of the interviewees. in the initial part, the results are provided concerning the main drivers and motives for internationalization at slovenian universities. in the second part, key findings are presented regarding managing internationalization at higher education institutions: assigned drivers and perceived importance 22 the importance that university management attributes to the internationalization of higher education in the context of other areas of the university’s activity. the results are presented by summarizing key observations and outcomes from the interviews in the form of text excerpts. the acquired findings are not analyzed in more detail through the coding of qualitative data but are presented as specific excerpts of the text. this approach provides a deeper insight into the opinions of the interviewees and offers an understanding of concrete practices at universities. in the context of motives or drivers for internationalization in higher education, at the national level, interviewee 1 highlights that “internationalization is an important building block of our higher education system”. it ensures “a high-quality higher education system in slovenia […], it is about promoting intercultural competences, […] [and] raising the quality of the international recognition of our higher education, research, and scientific field,” (interview 1). at the university level, the interviewees highlight the motives for internationalization in the context of increasing quality in connection with the pedagogical process (including intercultural learning), the improved reputation of the institution, and the general academic level, e.g. “actually, the biggest motive is academic excellence” (interview 2); the motive is “certainly strengthening the quality of teaching and broader social and cultural development” (interview 3). “these are purely academic motives – the quality of the study process” (interview 4). internationalization makes a significant contribution to employability, e.g.: “certainly, the quality aspect is of primary importance here because we are actually training quality personnel, who are then widely employable, not only in a certain local environment” (interview 5). additionally, “it is a kind of signal for the employer […], if nothing else, already polished english is in a way a ‘brand’ that [students] can write down in their cv” (interview 2). on the other hand, the interviewees see economic or financial advantages in internationalization only in an indirect sense, e.g. “to say that this makes financially added value directly – no. but indirectly, of course” (interview 5), “because from a financial point of view – it would be difficult to say, yes [there is financial advantage. but] later [there is financial advantage] indirectly, because you become more successful and better” (interview 4). namely, “prestige is most important to individuals in the academic profession, money is not important to them […]. if something contributes to prestige, then it is very, very desirable” (interview 2). in the context of the assigned significance of internationalization in higher education at the national level, an interviewee representing a national organization points out that “[…] different managements have different affinities for internationalization” (interview 6). from the point of view of university management, all interviewees emphasize that internationalization is extremely important in the strategic operation of universities. “i would say that [internationalization carries important meaning at] the highest possible [level] because our university realizes that only when a university is integrated into the international environment, it literally is a university” (interview 3). interviewee 2 highlights that “internationalization [is] one of the university’s three key priorities, purely strategic [priority]. […] in the last four-year period, it is, in fact, in close connection with other areas, but it is the highest priority.” likewise, a representative of one of the universities states: “internationalization is very important in our strategy and also in our daily activities. […] we certainly put [internationalization] alongside research and education. […] katarina aškerc zadravec 23 like most universities, we are also very involved internationally […] at various levels. of course, the management strives to include the university in various networks, various connections, and various exchanges […] at the system level” (interview 5). university representatives emphasize the importance of internationalization of higher education from the point of view of various levels of higher education management, e.g.: “unfortunately [...] everything depends on how much experience the management has had with the international environment. if the management is involved in international experience, [...] then there is no fear at the level of [international] cooperation, and [...] they know how to judge what form of cooperation makes sense. [we have international] initiatives, which i am sure will have a long-term impact on the development of universities […]. not even that much money was allocated, compared to the impacts [achieved]” (interview 4). university management primarily highlights the added value and the upgrading of existing activities with an international focus: “[internationalization has] an added value […] and it makes sense to take advantage of [it], so that what [university] fundamentally does, becomes, or at least remains, at a much higher level. that is why we increasingly […] carefully choose international partners, […] we control in some way or follow guidelines, i.e. excellence, quality. […] we choose strategic partners from whom we can get the most and with whom we can significantly upgrade and improve our core processes” (interview 2). in this context, interviewee 4 adds that it is important to plan international activities more broadly and holistically because “[…] if you have very little [international] experience, they are like some little interesting thing. if they are permanent, they become part of the process and change the operation of the university as a whole. intensity turns the exotic into a principle. [...] it is very inappropriate if [university's international activities are not holistically] coordinated.” discussion the internationalization of higher education has gained increasing significance over the past three decades, transitioning from a peripheral concern to the core of the concept. as emphasized by altbach, reisberg, and rumbley (2009), the global and international context has become progressively vital in the twenty-first century, further fueled by the development of artificial intelligence and advanced utilization of information and communication technology. in this context, various drivers, motives, and meanings are ascribed to internationalization in higher education and its associated concepts. a comprehensive understanding of the concept of internationalization in higher education, as well as related concepts and the motives behind it, is essential for effective planning, implementation, and achievement of its objectives. within the theoretical introduction, this article clarifies the conceptual issues related to the internationalization of higher education and presents the underlying motives and drivers. these should be perceived as instrumental in achieving higher objectives, such as enhancing the quality of higher education systems and various services (van der wende, 1997). these foundations set the basis for presenting key findings from interviews involving representatives of the management of three slovenian universities and national institutions at the higher education level in slovenia. the interviewees underscored the significance and driving forces behind internationalization (and globalization) in higher education, primarily in terms of improving the quality of research and pedagogical processes or the overall performance of higher education organizations. notable managing internationalization at higher education institutions: assigned drivers and perceived importance 24 advantages of internationalization in the educational process include the modernization of pedagogy, the development of intercultural and various soft competencies (e.g., communication skills, collaborative work, and strategic thinking), and increased awareness of global issues among students and staff. additionally, participants at the university level expressed the considerable importance of internationalization, closely intertwined with all other university activities. however, as emphasized by interviewee 3, the meaning attributed to internationalization at the university level depends on the management’s experience with internationalization and, consequently, how much importance the university management places on it. it is important to note that the findings of the article cannot be generalized, given the limited number of representatives from the university management included in the interviews, conducted solely among the management of universities in one country – slovenia. nonetheless, the article presents some general insights into the management perceptions about the motives and importance of internationalization in higher education, serving as a foundation for further, more detailed analyses. given the challenges and trends in modern higher education influenced by rapidly changing realities and technologies, a thorough understanding and identification of the drivers, motives, and reasons for internationalization, and the importance universities attach to it, are crucial. this understanding significantly influences the strategic planning of universities and the implementation of international activities in university practices. references 1. adams, t., & de wit, h. (2011). global competition in higher education a comparative study of policies, rationales and practices in australia and europe. in h. de wit (ed.), trends, issues and challenges in internationalisation of higher education (pp. 29–38). amsterdam: centre for applied research on economics & management. 2. altbach, g. p., reisberg, l., & rumbley, l. e. (2009). trends in global higher education, tracking an academic revolution. boston: center for international higher education, boston college. 3. aškerc zadravec, k. (2021). mednarodna razsežnost kurikuluma v visokošolskih študijskih programih. phd thesis. ljubljana: faculty of education. 4. aškerc zadravec, k. (2023). online international learning at slovene higher education institutions. agora international journal of juridical sciences, 1(2023), 78–90. https://doi.org/10.15837/aijjs.v17i1.5749 5. beck, u. (2003). kaj je globalizacija? zmote globalizma – odgovori na globalizacijo. ljubljana: krtina. 6. brandenburg, u., & de wit, h. (2011). the end of internationalization. in h. de wit (ed.), trends, issues and challenges in internationalisation of higher education (pp. 27–29). amsterdam: centre for applied research on economics & management. 7. cohen, l., manion, l., & morrison, k. (2007). research methods in education. london: routledge. 8. de wit, h. (1998). rationales for internationalisation of higher education: polytechnic institute of viseu. retrieved from http://www.ipv.pt/millenium/wit11.html https://doi.org/10.15837/aijjs.v17i1.5749 katarina aškerc zadravec 25 9. de wit, h. (2002). internationalisation of higher education in the united states of america and europe: a historical, comparative, and conceptual analysis. westport, ct and london: greenwood press. 10. de wit, h. (2011a). globalisation and internationalisation of higher education [introduction to online monograph]. revista de universidad y sociedad del conocimiento (rusc), 8(2), 241–248. retrieved from http://rusc.uoc.edu/rusc/ca/index.php/rusc/article/download/v8n2globalizacion-e-internacionalizacion-de-la-educacion-superior/1247-2213-1-pb.pdf 11. de wit, h. (2011b). global citizenship and study abroad – a european comparative perspective. in h. de wit (ed.), trends, issues and challenges in internationalisation of higher education (pp. 77–92). amsterdam, the netherlands: carem. 12. de wit, f., hunter, l., howard, l., & egron-polak, e. (eds.). (2015). internationalisation of higher education. brussels: european parliament, directorate-general for internal policies. 13. freeman, m., treleaven, l., ramburuth, p., leask, b., caulfield, n., simpson, l., ridings, s., & sykes, c. (2009). embedding the development of intercultural competence in business education. canberra: australian government office for learning and teaching. 14. green, m. f. (2012). measuring and assessing internationalization. washington: nafsa – association of international educators. 15. hénard, f., diamond, l., & roseveare, d. (2012). approaches to internationalisation and their implications for strategic management and institutional practice, a guide for higher education institutions. paris: oecd. 16. hudzik, j. k. (2011). comprehensive internationalization: from concept to action. washington, dc: nafsa association of international educators. 17. kadlec, ž. & jukić, m. (2023). globalization as a support for the growth and development of students. agora international journal of juridical sciences, 1(2023), 130–142. https://doi.org/10.15837/aijjs.v17i1.5753 18. knight, j. (1994). internationalization: elements and checkpoints. ottawa: canadian bureau for international education. 19. knight, j. (1999). internationalization of higher education. in j. knight & h. de wit (eds.), quality and internationalisation in higher education (pp. 13–60). paris: oecd. 20. knight, j. (2004). internationalization remodeled: definition, approaches, and rationales. journal of studies in international education, 8(1), 5–31. https://doi.org/10.1177/1028315303260832 21. knight, j. (2008). higher education in turmoil: the changing world of internationalisation. rotterdam: sense publishers. 22. knight, j., & de wit, h. (eds.). (1999). quality and internationalisation in higher education. paris: organization for economic cooperation & development. 23. marginson, s., & van der wende, m. (2007). globalisation and higher education – education working paper no. 8. paris: oecd publishing. 24. maringe, f., & foskett, n. (2010). globalization and internationalization in higher education: theoretical, strategic and management perspectives. london: continuum international publishing group. 25. marmolejo, f. (2010, september). internationalization of higher education: the good, the bad, and the unexpected. retrieved from https://doi.org/10.15837/aijjs.v17i1.5753 managing internationalization at higher education institutions: assigned drivers and perceived importance 26 http://www.chronicle.com/blogs/worldwise/internationalization–of–highereducation–the– good–the–bad–and–the–unexpected/27512 26. middlehurst, r., & woodfield, s. (2007). research project report 05/06: responding to the internationalization agenda – implications for institutional strategy. higher education academy research report. retrieved from https://s3.eu–west– 2.amazonaws.com/assets.creode.advancehe–document– manager/documents/hea/private/web0582_responding_to_the_internationalisation_agenda_ 1568036875.pdf 27. rumbley, l. e. (2020). coping with covid–19: international higher education in europe. amsterdam: the european association for international education (eaie). 28. teichler, u. (2004). the changing debate on internationalisation of higher education. higher education, 8(1), 5–26. https://doi.org/10.1023/b:high.0000033771.69078.41 29. teichler, u. (2010). internationalising higher education: debates and changes in europe. in d. mattheou (ed.), changing educational landscapes. dordrecht: springer. 30. van der wende, m. (1997). internationalising the curriculum in dutch higher education: an international comparative perspective. journal of studies in international education, 1(2), 53–72. https://doi.org/10.1177/102831539700100204 31. world health organization. (2020, april). who director–general’s opening remarks at the media briefing on covid–19 – 11 march 2020. retrieved from https://www.who.int/dg/speeches/detail/who–director–general–s–opening–remarks–at–the– media–briefing–on–covid–19–––11–march–2020 32. zgaga, p. (2009, january). edukacija za ‘boljši svet’: od kozmopolitizma preko internacionalizma do globalizma. ljubljana: pedagoški inštitut. retrieved from http://www.pei.si/userfilesupload/file/zalozba/znanstvenaporocila/20_09_edukacijezabolj sisvet.pdf 33. zgaga, p., teichler, u., & brennan, j. (2013). challenges for european higher education: ‘global’ and ‘national’, ‘europe’ and ‘sub–europes’. in p. zgaga, u. teichler, & j. brennan (eds.), the globalisation challenge for european higher education: convergence and diversity, centres and peripheries. frankfurt am main: peter lang. interviews 1. interview 1: representative of the slovene national institution in the field of higher education (march 5, 2020). 2. interview 2: representative of the university 1 (march 12, 2020). 3. interview 3: representative of the slovene national institution in the field of higher education (march 5, 2020, and july 28, 2020). 4. interview 4: representative of the university 2 (march 6, 2020, and july 19, 2020). 5. interview 5: representative of the university 3 (february 6, 2020). 6. interview 6: representative of the slovene national institution in the field of higher education (december 17, 2019, and july 24, 2020). agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 18, no. 1 (2024), pp. 18-31 18 cultural and socio-economic factors affecting the formation of leadership in achieving sustainable management: in the context of ukraine l. batsenko, r. halenin liudmyla batsenko¹, roman halenin² ¹royal agricultural university, united kingdom, sumy national agrarian university, ukraine https://orcid.org/0000-0003-2859-4448, e-mail: liudmyla.batsenko@rau.ac.uk ²international european university, ukraine https://orcid.org/0000-0002-0609-0102, e-mail: rgalenin@gmail.com abstract: new challenges for leaders in the field of sustainable management are awareness of cultural and socio-economic factors in the practice of organizational development and organizational change. the purpose of the article is to contribute to the existing body of knowledge through a systematic study of the influence of culture and socioeconomic factors on the formation of leadership in the context of sustainable management. the research methodology includes a literature review, analysis of cultural and socio-economic aspects that influence the formation of leadership for sustainable management. the study is based on the analysis of empirical data obtained through questionnaires. the research results highlighted the impact of culture on leadership in ukraine, some age differences in the perception of culture as an important element of the triad "sustainable management leadership cultural and socio-economic factors", the importance of socio-economic factors and the crucial role of education in the development of leadership for sustainable management. leaders must adapt their approaches to management, considering cultural aspects, economic conditions and societal demands. keywords: leadership, sustainable management, culture, social-economic factors, education, ukraine. introduction the triad "sustainable management leadership cultural and socio-economic factors" is an important complex of interrelated elements and is relevant in the modern world, as dynamic changes in the economy, social and cultural sphere require new approaches to management and development. taking this triad into account will allow us to develop effective strategies for achieving sustainable development. sustainable management is a key aspect of modern business. it is a strategic approach to management that considers environmental, social and economic aspects. zvarych and rivilis (2023) highlighted that “crises have encouraged companies to increasingly include social and environmental aspects in their business activities”. ensuring sustainable development is one of the most urgent problems in the world and is focused on human development, maintaining stability, and reducing social problems which in turn will enhance leadership development. https://orcid.org/0000-0003-2859-4448 mailto:liudmyla.batsenko@rau.ac.uk https://orcid.org/0000-0002-0609-0102 mailto:rgalenin@gmail.com liudmyla batsenko, roman halenin 19 sustainable management should focus on the practices and strategies used to achieve sustainability in a specific context. this involves responsible and efficient use of resources, minimizing the negative impact on the environment and considering social and economic factors in the decision-making process. turchyna et al. (2023) proved that businesses that have implemented the principles of environmental, social and management sustainability are easier to adapt to changes. leadership plays an important role in implementing the principles of sustainable. effective leaders can mobilize people by channelling their energy and efforts towards the achievement of sustainable development goals. tarí et al. (2023) stated, leadership is an influence on groups of people that motivates them to achieve a common goal. leadership researchers have noted that leadership has positive effects across cultures (bass & avolio, 1994), while many scholars have noted the importance of culture, that the effects of leaders vary by geography (budur & demir, 2019a, 2019b). social and economic factors influence the ability of organizations and leaders to implement sustainable development strategies. in the framework of the implementation of this concept, world commission on environment and development in their report (un, 1987) mentioned there must be provision for equal dissatisfaction of people's needs and the development of life, including the quality of the environment, the level of culture and education. understanding the factors helps leaders make balanced and effective management decisions. we note that culture and socio-economic factors are significant moderators of the relationship between leadership and sustainability, and also share the same values (see the conceptual framework in fig. 1). figure 1: conceptual framework political situation economic grows resources education value cultural and socio-economic factors affecting the formation of leadership in achieving sustainable management: in the context of ukraine 20 this study aims to contribute to the existing body of knowledge through a systematic study of the influence of culture and socio-economic factors on the formation of leadership in the context of sustainable management. by studying how specific cultural aspects, as well as socio-economic factors such as access to education, economic growth, stability of the political situation, shape the formulation of leadership, this study seeks to provide practical information for leaders and practitioners in the development of sustainable management practices. moreover, understanding the subtleties of this relationship can help in the development of leadership tools aimed at achieving the principles of sustainable development. literature review sustainable development is focused on meeting current needs without compromising the ability of future generations to meet their own needs (buryak, 2023). the individual is the key source and engine of social progress in the context of sustainable development, and its successful provision depends on the creation of favourable conditions for the disclosure of intellectual and creative potential through the manifestation of leadership qualities and initiative of the individual. in reichmann’s (n.d) research, the key competencies that are necessary for a sustainable development specialist are proposed for consideration: the competence of early, anticipatory thinking; competence of interdisciplinary work; the competence of cosmopolitan perception and change of perspective; competence to deal with incomplete and complex information; competence of participation; competence in interaction, cooperation; competence to deal with the conflict of goals; competence in self-motivation and motivating others; the competence of remote reflection in relation to individual and cultural models; competence to act independently and independently; competence to act ethically; capacity for empathy and solidarity daft (2008) claims, that leadership is an interaction between a leader and group members that promotes change and results that meet common goals. leaders must have a deep understanding of the cultural characteristics of stakeholders, which helps build trust and effective communication. pastva (2005), researching leadership in the field of management, reveals it as follows: "despite the fact that the concept of leadership can be understood differently in different cultures, it is basically defined as a process consisting of a series of constant interactions between the leader and by othersю leadership is also about influence, because leaders motivate other people to do certain things, and this takes place in a group context, involving many individuals and a common goal.” psychologist sheinov (2008) defines leadership as “the process of psychological influence of one person on others during their joint life activities, which is carried out on the basis of perception, imitation, understanding of each other. this is a psychological characteristic of the behaviour of group members, based on the principles of free communication and voluntary submission.” but this definition does not consider all aspects of leadership, such as societal structures, cultural influences, and political factors. goldsmith and clark (2008) state that the purpose of a leader is to create: “relationships based on trust; learning environment; organizational structures, culture and processes that would allow ... to achieve balance in ... life.” liudmyla batsenko, roman halenin 21 according to tomšič et al. (2015) leadership is one of the most important factors of success, which allows achieving the goal of sustainable development (and is defined as "the ability to influence individuals and mobilize organizations to realize a vision of long-term environmental and social sustainability" (wolfgramm et al., 2015). galpin and whittington (2012) point out that a necessary condition for sustainable development is the involvement of employees, and therefore the involvement of their cultural values for building and cultivating the culture of a sustainable organization. for all the importance of psychological sources of leadership, sociocultural factors exert the greatest influence on this phenomenon. usually, scientists consider it as a mechanism of power, the emphasis is on studying its functionality or optimality, but at the time leadership is a culturally and historically determined phenomenon. this is due to the fact that culture is a phenomenon that characterizes the basic, truly human structures of the individual, including his motivational fields. culture is how a person defines himself and his life and includes his thoughts, ideas and values. culture is based on ordered systems of values and norms. sociocultural factors have the ability to capture, perceive, adsorb, process determining impulses through their own system of value orientations, turning them, ultimately, into direct motives of leaders' activity. cultural beliefs and practices influence the acceptance and support of sustainable development initiatives. hofstede (1980) defines culture as "the collective programming of the mind that distinguishes members of one human group from another." according to him, culture represents various characteristics such as religion, language, traditions, norms or systems and generally it differs from one place to another. understanding cultural differences helps leaders communicate effectively and implement sustainable management strategies. cultural factors also influence the formation of leadership in a significant way, because cultural values, beliefs and norms determine what qualities are considered important for a leader and how he is perceived by others. hofstede (hofstede, 1996, 2003, 2009, 2011; hofstede & bond, 1984) also noted cultural differences in people management as the perception of the value of employees, the behavior of managers, the behavior of consumers and marketing related activities of organizations and customer feedback according to their culture. the role of culture as a moderator of human resources and firm performance has been investigated (den hartog & robert, 2004) and some types of culture, such as ethical culture, have been found to prevail over sustainability values (closs et al., 2011). one type of organizational culture that seems compatible with people values (talent, leaders) and organizational outcomes (sustainability) is an ethical culture. ethics have a strong influence on employee behavior, and an ethical culture ensures fairness and equality in the workplace (pereira et al., 2017). ethical values can also relate to the values of sustainable development: protecting the environment and supporting the regional economy (closs et al., 2011). this literature review clearly shows the interaction between culture, socio-economic factors and leadership in achieving sustainable development. organizational culture and socioeconomic factors serve as the foundation on which leadership is formed. leaders must be aware of and attuned to the specifics of the culture, leveraging its strengths, and be able to anticipate and understand the impact of socio-economic factors while addressing potential challenges to create a sustainable environment. in the following sections of this study, an empirical study cultural and socio-economic factors affecting the formation of leadership in achieving sustainable management: in the context of ukraine 22 will be considered to reveal the influence of culture and socio-economic factors on the formation of leadership for achieving sustainable development. methodology research design to gain insight into the influence of cultural and socio-economic factors that influence the formation of leadership in achieving sustainable management, the authors developed a mixed methods study: in particular, a literature review was conducted from the following stages planning, implementation, evaluation, and covered about 35 publications in english and in ukrainian, related to the topic (reports in magazines and conferences, scientific works, official websites). the review process began with the development of research questions and a search strategy. after analyzing and summarizing the information, the authors compared them with the results obtained during their own survey. this was later confirmed by the collection of empirical data. the quantitative empirical research was conducted using a survey questionnaire designed according to individual steps within constructive alignment theory (biggs & tang, 2011). survey questions the data were collected using the web survey mode, and the questionnaire was programmed in the google form online data collection tool. the form was distributed through social networks. the questions encompassed narratives: 1.what role does culture play in shaping the concept of leadership in ukraine? 2.do national characteristics affect the attitude to leadership in ukraine? 3.what socio-economic factors contribute to the development of leadership in ukraine? 4.does education play an important role in the development of leadership qualities in ukraine? sample and population the collected information was analyzed using deductive and inductive approaches. the survey sample included 111 respondents from ukraine. the survey targeted higher education teachers/academics, graduate students and masters students. all respondents are related to the high education sector of ukraine. sampling proved beneficial for this research due. however, with only 1111 represents this may not have represented the entire population, but that results show some trends. the main demographic characteristics of the sample are presented in tables 1 and 2. the largest share of respondents was with a phd (46/8%) and a master’s degree (44/1%), and the sample was unbalanced by gender (51.0% men, 49.0% women). in the sample there were more people over 41 years old (69.1%), and the majority of respondents were pedagogically active in ukraine (91.0%). liudmyla batsenko, roman halenin 23 table 1: representatives by sex/age from 20 to 30 years 12 women 9 men 3 from 31 to 40 years 22 women 18 men 4 from 41 to 50 years 43 women 41 men 2 older than 50 34 women 30 men 4 grand total 111 table 2: representatives by degree bachelor 7 phd 52 master 49 secondary school 3 grand total 111 culture acts as a prism through which people perceive events, make decisions and respond to challenges (kilag, et al., 2023). in the context of sustainable development, culture provides a meaning-making mechanism that guides leaders to achieve goals and determine appropriate responses (du plessis et al., 2022). russia's aggression against ukraine has created obstacles to achieving sustainable development, such as collecting quality and timely data. but authors were able to collect data and analyse it. in the next section, the authors will present research results on the influence of cultural and socio-economic factors that contribute to sustainable development on the formation of leadership in ukraine. results and discussion the analysis based on the literature provided insight into the complex interaction between culture and leadership formation in the context of sustainable development. as a result of the generalization of empirical data, the following important questionsthemes arose proposed by the authors for discussion. question 1: what role does culture play in shaping the concept of leadership in ukraine? (fig.2) a synthesis of the results of the literature analysis revealed the influence of culture on the formation of leadership (uy et al., 2023). previous research emphasizes that leadership has a strong connection with culture, which in turn affects competitive advantage in the long run. cultural and socio-economic factors affecting the formation of leadership in achieving sustainable management: in the context of ukraine 24 figure 2: the role of culture in the formation of the concept of leadership in ukraine leaders who work within the framework of cultural characteristics demonstrate the ability to innovate strategies in ensuring sustainable development, emphasizing the importance of matching cultural norms with dynamic requirements. the literature emphasizes the role of adaptability as a key attribute in culture that affects the orientation of leaders (uy et al., 2023). the mode in this case would be “a very important role" since it appears most frequently in the data. this shows that a significant proportion of respondents believe that culture plays a very important role in the formation of leadership concepts in ukraine. the difference in awareness of the role of culture in leadership formation between people aged 40+ and young people may be related to their experience and life situations. people 40+ have more opportunities to observe and experience, which allows them to better understand the influence of culture on leadership. while youth may be less aware due to lack of such life experience and limited opportunities to observe other cultural contexts. in addition, young people may be more prone to innovation and change, leading to less focus on traditional aspects of culture. leaders who consider the postulates of culture demonstrate understanding, confidence and a proactive position in ensuring sustainable development. this approach is characterized by openness to change, clear identification and will allow to form a leadership that is ready to give challenges in ensuring sustainable development. question theme 1 emphasizes the key role of culture in the formation of leadership in the conditions of sustainable development, particularly in the context of ukraine. this widespread recognition suggests a strong belief in the influential role of culture in shaping leadership paradigms, thereby emphasizing its relevance for sustainable management practices (incorporating diverse perspectives and cultural values into decision-making processes promotes inclusivity, implementation of effective cross-cultural communication mechanism, management to align with local cultural norms and practices what demonstrates respect for indigenous knowledge and traditions etc.). 0 5 10 15 20 25 30 some role a very important role i don’t know there is no role 20-30 31-40 41-50 50 and older liudmyla batsenko, roman halenin 25 the positive correlation emphasizes the importance of the fact that the knowledge of cultural attributes will create a basis for the formation of leadership aimed at sustainable development. this aspect contributes to understanding and practical perception, emphasizing the need to explore cultural specificities as an asset for navigating sustainable development. question 2: do national characteristics affect the attitude to leadership in ukraine? (fig.3). leaders who use cultural attributes to create a climate of trust, fostering an enabling environment for making more informed and optimal decisions (meng & berger, 2019). figure 3: the influence of national characteristics on the attitude to leadership in ukraine the majority of respondents believe that national characteristics do not have a very significant influence on attitudes to leadership, which somewhat contradicts generally known facts. the reason for this may be ukrainian society's tendency towards collectivism, where many people jointly make decisions, which can reduce the importance of an individual leader. in addition, in the historical context of ukraine, there were many changes in the power and political system, which could lead to a more sceptical attitude towards leadership as such and considering the peculiarities of culture in management. despite this, it is a positive fact that 35% of respondents believe that national characteristics significantly influence the attitude to leadership in ukraine, because culture has its own unique values, beliefs and requirements for leaders. cultural norms can determine what qualities are considered important in a leader, for example, whether an authoritarian leadership style is valued or whether teamwork is more sought after. this question-topic has implications for leaders who seek to expand knowledge about the influence of national characteristics for the development of cultural strategies of management and communication in the international arena. the practical application of such knowledge can contribute to the improvement of cooperation and understanding of international partners and contribute to the successful sustainable management of business in the conditions of globalization. question 3: what socio-economic factors contribute to the development of leadership in ukraine? (fig.4) 0 5 10 15 20 25 i dont know no, they do not affect yes, but not very much yes, they have a significant impact 20-30 31-40 41-50 50+ cultural and socio-economic factors affecting the formation of leadership in achieving sustainable management: in the context of ukraine 26 socio-economic factors are vital for understanding the complexity of society, promoting economic development, making business decisions, and developing human capital. recognizing the importance of these factors is essential to building a resilient, sustainable and thriving company. figure 4: socio-economic factors what contribute to the development of leadership in ukraine literature highlights socio-economic factors that can create challenges and opportunities for organizations (masuo et al., 2001). some researchers (thapa, 2007; indarti & langenwerg, 2008) stated that education has a positive effect on business success. raman (2004) noted that economic conditions lead to success. rogoff et al. (2004) found that economic conditions, competitive environment, and governmental regulations significantly influence the success of businesses. muhammad (2012) discovered that higher general education enables business people to understand the world. leaders must understand the social and economic context in which they operate. this includes understanding the level of income, education, employment and other socio-economic indicators that affect the lives of their subordinates and stakeholders (indarti & langenverg, 2008). respondents noted that organizations that understood their socio-cultural factors were particularly associated with leaders who adopted optimal approaches to decision-making. some respondents noted that self-development, self-sufficiency, ability to learn are a group of factors that influence the development and formation of leadership. leaders who work on self-development and have the ability to learn constantly increase their skills and understanding in their field. they are open to new ideas and approaches, as well as to feedback from their colleagues and employees. the results of the theme 3 analysis confirmed statements, demonstrating that socialeconomic factors such as access to education, economic growth, and the stability of the political situation contribute to the development of leadership in ukraine. question 4: does education play an important role in the development of leadership qualities in ukraine? (fig. 5) 0 2 4 6 8 10 12 14 16 18 all is listed access to education economic grows none of the above there is no effect on today self-development, self-sufficiency, ability to learn stability of the political situation 50+ 41-50 31-40 20-30 liudmyla batsenko, roman halenin 27 some researchers found that the education has positive effect on business success (lussiers & pfeifer, 2001; masuo et al., 2001; thapa, 2007; indarti & langenverg, 2008). astin and astin (2000) stated leadership is based on personal status and professional recognition. at the same time professional recognition related to the development of professional knowledge, which is turn is obtained through the appropriate level of education. black s. (2015) noted that leaders need a combination of leadership and management competencies. in order to get people knowledge, skills and opportunities for improvement, it is necessary to study and get a degree. and as a result, learn various aspects of leadership, such as communication, decision-making. leadership contributes to the implementation of innovations, the development of new ideas and strategies, which balances social, economic and environmental development. figure 5: importance of education in the development of leadership qualities in ukraine the results of the analysis highlighted the importance of education in developing leadership skills. 75% said education plays an important role in developing leadership skills. it is worth noting that people over 40 have more self-confidence and are aware of this statement. based on their experience and professional knowledge and skills, they know that managers with a solid education are able to better understand the complex problems of the modern world, work to solve them and implement sustainable development strategies in various areas of society, economic, social and ecological aspects. educated leaders are better equipped to devise and implement sustainable management practicies across diverse sectors, encompassing societal, economic, and environmental aspects. this topic provides valuable information for organizational leaders and highlights the need for a strategic and differentiated approach to human capital development. together, these four themes contribute to a more comprehensive understanding of how cultural and socioeconomic factors influence leadership development in achieving sustainable governance. the results highlight the need for managers to recognize the influence of cultural and socioeconomic factors on leadership development in order to achieve sustainable management. the identified themes provide a basis for further research and the clarification of theoretical foundations that guide the knowledge and integration of cultural and socioeconomic factors in the training of managers to achieve sustainable management. 0 5 10 15 20 25 30 35 no, it does not play an important role yes, but not very much yes, a very important role 20-30 31-40 41-50 50+ cultural and socio-economic factors affecting the formation of leadership in achieving sustainable management: in the context of ukraine 28 conclusions this meta-analytic study is based on the analogy of the triad "sustainable management leadership cultural and socio-economic factors". the four identified questions topics contribute to the generalization of information that emphasizes the relationship between culture, education, socio-economic factors and the development of leadership in ukraine in conditions of sustainable development. understanding and mastering these interrelated elements is essential to developing and shaping effective leadership practices that are responsive to cultural dynamics and promote sustainable management. the first theme highlighted the positive relationship between cultural norms and values on leadership practice, emphasizing the need for leaders to align strategies with cultural dynamics. it has been found that leaders who cultivate a culture demonstrate increased resilience and a willingness to implement innovative strategies. it was also found that there is a marked difference in the perception of the role of culture in leadership between people aged 40+ and younger people. older people, having more life experience, are more likely to recognize the influence of culture on leadership. the second theme revealed some differences with the generally accepted notions, but despite the fact that the majority of respondents did not agree with the statement about the significant influence of national characteristics on attitudes towards leadership, a significant proportion of them still recognized their importance. this disagreement may follow from collectivist tendencies in ukraine. the third question-topic emphasized the importance of socio-economic factors such as access to education, economic growth and political stability in promoting leadership development in ukraine, but respondents noted that leaders who constantly invest in selfimprovement and self-sufficiency, as well as take advantage of opportunities for learning and improving their skills positively influence their leadership effectiveness. education became a central theme in the fourth question, emphasizing its role in building leadership skills. well-educated leaders are better equipped to understand today's challenges, develop effective solutions, and implement sustainable development strategies. we support smolović et al (2023) with the conclusions that sustainable management assumes different knowledge and skills acquired by studying social sciences and different areas of natural sciences because it enables a comprehensive understanding of sustainability challenges, facilitates stakeholder engagement, supports evidence-based decision-making, and fosters innovation and problem-solving. leaders who integrate cultural and social-economic insights into their practices will be able to demonstrate proactive engagement and readiness to tackle challenges associated with sustainable development. this proactive stance, characterized by openness to change and clear identification of cultural, social and economic nuances, lays the foundation for cultivating leadership capable of effectively creating sustainable management. limitations of research. more than 111 responses were required for clear trends in statistical tests. one of the limitations of this research was the time. it is generally accepted that people do not dare to spend their time on the survey, and the effectiveness of the survey largely depends on the response rate. another limitation concerns response bias. this bias occurs when respondents liudmyla batsenko, roman halenin 29 tend to give answers that they think are socially acceptable, rather than express their true opinions. additionally, the validity of multiple-choice surveys may be compromised by the limited range of available responses. future research directions. future research directions could include investigating how leaders can innovatively use cultural aspects to achieve sustainable management, such as using cultural flexibility to drive change, or could focus on developing and testing leadership training methods that take cultural and socio-economic factors into account. references 1. astin, a. w., & astin, h. s. (2000). leadership reconsidered: engaging higher education in social change. battle creek, mi: w.k. kellogg foundation. 2. bass, b. m., & avolio, b. j. (1994). transformational leadership and organizational culture. the international journal of public administration, 17(3-4), 541-554. 3. biggs, j., & tang, c. (2011). teaching for quality learning at university (4th ed.). society for research into higher education & open university press 4. black, s. a. (2015). qualities of effective leadership in higher education. open journal of leadership, 4, 54-66. http://dx.doi.org/10.4236/ojl.2015.42006 5. budur, t., & demir, a. (2019a). leadership effects on employee perception about csr in kurdistan region of iraq. international journal of social sciences & educational studies, 6(1). 142-154. 6. budur, t., & demir, a. (2019b). leadership perceptions based on gender, experience, and education. international journal of social sciences and educational studies, 6(1), 142–154. 7. buryak, e. v., redko, k. yu., chornovol, a. o., & orlenko, o. v. (2022). socioeconomic aspects of the sustainable development of ukraine in the conditions of war (european integration aspects). scientific notes of lviv university of business and law, 34, 135-143. 8. daft r. (2008). leadership lessons. m.: eksmo. 9. closs, d. j., speier, c., & meacham, n. (2011). sustainability to support end-to-end value chains: the role of supply chain management. journal of the academy of marketing science, 39(1), 101-116. 10. deanne n. den hartog, robert m. v. (2004). high performance work systems, organisational culture and firm effectiveness. human resource management journal, vol 14 no 1. 55-78 11. du plessis, m., jansen van vuuren, c. d., simons, a., frantz, j., roman, n., & andipatin, m. (2022). south african higher education institutions at the beginning of the covid-19 pandemic: sense-making and lessons learnt. in frontiers in education. vol. 6. frontiers media sa. 12. galpin t. & lee j. (2012). whittington sustainability leadership: from strategy to results journal of business strategy, 33 (4). 40-48 13. indarti, n. & langenberg m. (2008). factors affecting business success among smes: empirical evidences from indonesia. www.utwente.nl/nikos/archief/research/conferences/esu/papers/indartilangenberg.pdf. 14. hofstede, g. (2003). cultural dimensions. https://geerthofstede.com/ https://www.sciencedirect.com/science/article/pii/s1361920920306271#bb0190 cultural and socio-economic factors affecting the formation of leadership in achieving sustainable management: in the context of ukraine 30 15. hofstede, g. (2009). geert hofstede cultural dimensions. https://geerthofstede.com/ 16. hofstede, g. (2011). dimensionalizing cultures: the hofstede model in context. online readings in psychology and culture, 2(1), 15-26. 17. hofstede, g., & bond, m. h. (1984). hofstede's culture dimensions: an independent validation using rokeach's value survey. journal of cross-cultural psychology, 15(4), 417-433. 18. hofstede, g., & fink, g. (2007). culture: organizations, personalities, and nations. gerhard fink interviews geert hofstede. european journal of international management, 1(12), 14-22. 19. kilag, o. k. t., manguilimotan, a. m. g., maraño, j. c., jordan, r. p., columna, p. a. f., & camaso, m. f. a. (2023). a conceptual framework: a systematic literature review on educational leadership and management. science and education, 4(9), 262-273. 20. masuo, d., fong, g., yanagida, j., cabal, c. (2001) factors associated with business and family success: a comparison of single manager and dual manager family business households. journal of family and economic issues 22 (1), 5573. 21. meng, j., & berger, b. k. (2019). the impact of organizational culture and leadership performance on pr professionals’ job satisfaction: testing the joint mediating effects of engagement and trust. public relations review, 45(1), 64-75. 22. muhammad amjad saleem (2012). the impact of socio-economic factors on small business success. malaysia journal of society and space. 8 issue 1. 24 – 29. 23. pastva, j. (2005). democratic development: senior civil servants and politicaladministrative relations. materials of the xviii international congress on the training of senior civil servants. kyiv: k.i.s. 150-160. 24. pereira, r.h., schwanen, t., banister, d. (2017). distributive justice and equity in transportation. transport reviews, 37 (2). 170-191. 25. rieckmann, m. (n.d). developing key competencies for sustainable development. summer school “implementation of sustainability into research and teaching of higher education institutions in eastern europe”. luneburg. 26. raman, r. (2004). motivating factor of educated self-employed in kerala: a case study of mulanthuruthy block ernakulum. discussion paper no. 90. kerala research programme on local development center for development studies. 27. goldsmith, r.e., clark, r. (2008). an analysis of factors affecting fashion leadership and fashion opinion seeking. journal of fashion marketing and management, 12(3), 308-322. 28. rogoff, e.g, lee, m.s, suh, d.c (2004). who did it? attributions by entrepreneurs and experts of the factors that cause and impede small business success. journal of small business management. 42 (4). 364376. 29. tarí, j.j., portela maquieira, s. and molina-azorín, j.f. (2023). the link between transformational leadership and the efqm model elements, business process management journal, vol. 29 no. 2, 447-464. 30. tomšič, n., bojnec, š., simčič, b. (2015). corporate sustainability and economic performance in small and medium sized enterprises. journal cleaner production, 108. 603-612. 31. thapa, a. (2007). micro-enterprises and household income. the journal of nepalese business studies, 4 (1), 110-118. liudmyla batsenko, roman halenin 31 32. turchina, s., turchina, k., dashutina, l., and batsenko, l. (2023). a review of top corporate sustainability initiatives and their resilience during the covid-19 pandemic. corporate economic research, 26(1), 111-126. https://doi.org/10.18778/1508-2008.26.06 33. smolović, s., živanović, s., abramović, n., živanović, m. (2023). management of sustainable development and environmental protection. agora international journal of economical sciences, vol. 17, no. 2. 142-157. http://univagora.ro/jour/index.php/aijes 34. sheinov v. (2008). psychology of leadership, influence, power. m.: harvest. 35. un. secretary-general. world commission on environment and development (1987). report of the world commission on environment and development: note / by the secretary-general.) https://digitallibrary.un.org/record/139811 36. uy, f., kilag, o. k., abendan, c. f., macapobre, k., cañizares, m. c., & yray, f. (2023). application of adaptive crisis management theory: the dynamics of leadership in times of crisis. excellencia: international multi-disciplinary journal of education, 1(5), 159170 37. wolfgramm, r., flynn-coleman, s., conroy, d. (2015). dynamic interactions of agency in leadership (dial): an integrative framework for analysing agency in sustainability leadership. journal of business ethics, 126 (4). 649-662 38. zvarych, r., rivilis, i. (2023). social responsibility of business as sustainable development approach in management, agora international journal of economical sciences, no. 1, 154-161. http://univagora.ro/jour/index.php/aijes http://univagora.ro/jour/index.php/aijes agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 18, no. 1 (2024), pp. 262-269 262 waste management in the concept of green reconstruction of economy r. zvarych, i. rivilis, b. kharkovskyi, o. masna, y. shevchuk roman zvarych¹, igor rivilis², bohdan kharkovskyi³, olha masna⁴, yurii shevchuk⁵ ¹ west ukrainian national university, ukraine https://orcid.org/0000-0003-3741-2642, e-mail: romazvarych@yahoo.com ² m3 technology, llc, usa; phd student, west ukrainian national university, ukraine https://orcid.org/0000-0003-3764-2843, e-mail: igor@rivilis.com ³ ⁴ ⁵ west ukrainian national university, ukraine ³ https://orcid.org/0009-0006-4030-4991, e-mail: kharkovskyibohdan@gmail.com ⁴ https://orcid.org/0000-0003-2592-5619, e-mail: m_a_c_n_a_o_l_i_a@ukr.net ⁵ https://orcid.org/0009-0002-5637-0329, e-mail: ureckua@gmail.com abstract: the article defined the concept of waste management in the environmental management system. the research analysed the problems of waste management in the environmental management system from point of view by a number of domestic and foreign scientists. as a result, authors outlined the basic components of waste management: strategic planning, prevention of environmental pollution, conservation of resources, minimization of the amount and toxicity of waste generation, choosing the best prevention option, assessment of effects and consequences, decision-making. the research described the system of green reconstruction of economy and formed the basic principles of the green post-war reconstruction that would provide sustainable economic development. the article outlined the concept of post-war green reconstruction which should focus on such areas as: sustainable construction and resource saving; implementation of renewable energy sources; sustainable development of infrastructure; implementation of a waste management system, minimization of residues. the authors grounded five main stages of waste management process under postwar reconstruction of ukraine: prevention of waste generation, preparation for reuse, processing, other uses, disposal. sustainable waste management solutions are essential to maintain environmental harmony but, also, they are linked with cost, public response, political constraints, and social norms. consumers' environmental awareness influence the demand for goods and services and thus reduce the amount of waste. research argued that local communities should developed own waste prevention strategies and attract environmentally conscious businesses to their territory. state policy should focus consumers for preferring products in packaging/container that is suitable for recycling or reuse (glass), paper bags, ecobags, used appliances. keywords: circular economy, green economy, green reconstruction, sustainable development, waste management introduction post-war reconstruction and recovery in ukraine are projected to cost $490 billion over the next decade. the government has identified a number of regions and branches where https://orcid.org/0000-0003-3741-2642 mailto:romazvarych@yahoo.com https://orcid.org/0000-0003-3764-2843 mailto:igor@rivilis.com https://orcid.org/0009-0006-4030-4991 mailto:kharkovskyibohdan@gmail.com https://orcid.org/0000-0003-2592-5619 mailto:m_a_c_n_a_o_l_i_a@ukr.net https://orcid.org/0009-0002-5637-0329 mailto:ureckua@gmail.com roman zvarych, igor rivilis, bohdan kharkovskyi, olha masna, yurii shevchuk 263 reconstruction will be comprehensive and based on new principles. the base of this principles is the environmental responsibility. the approach of green reconstruction of economy is the base of sustainable development and will strength the economic convergence of ukraine with eu. same time, when we think of environmental development and green investment we think about waste and its disposal in a landfill. such case actualizes the concept of waste management which combines various actions taken and plans created to manage waste, from composting or recycling existing waste to minimizing the production of waste in the first place. waste management refers to both public service providers and private companies that handle waste from the time it is discarded to the time it is managed. the concept of waste management is the basic approach in the implementation the model of green economy reconstruction. concept of waste management in the environmental management system inefficient waste management, from non-existent waste collection systems to inefficient waste disposal, leads to air, water and soil pollution. open and unsanitary landfills contribute to the contamination of drinking water, cause infections and spread diseases. the problem is quite relevant for developing and low-income countries. the accumulation and dispersion of garbage pollutes ecosystems, and hazardous substances from e-waste or industrial waste harm the health of city dwellers and the environment. this problem actualizes the problem of waste management at the global level and requires the development of integrated solid waste management systems. problems of waste management in the environmental management system were considered by a number of domestic and foreign scientists. in particular, researchers (khan et al., 2022) studied that solid household waste is a reflection of the culture that generates it and has a negative impact on human health and the environment. the authors concluded that the world is rapidly urbanizing and these changes impose on cities the burden of proper waste management at both social and environmental levels. scientists (lopez-maldonado et al., 2022) investigated that solid waste generation has increased rapidly due to population growth in around the world, urbanization and industrialization. scientists have found that solid waste management is a serious challenge for society, which creates local problems with global consequences, in particular, poor management can accelerate harmful environmental and socio-economic problems. researchers (kharola et al., 2022) identified barriers to organic waste management decisions from the subject's point of view and studied their causal relationships to overcome the problem of organic waste management from a systems perspective. the study identified key issues in organic waste management and noted that incentives and increased attention to waste is an effective approach to solving the problem, and that waste collection fees, environmental behaviour and obligations influence consumer and household decisions. effective management of waste, which will be used as a resource in the future and play an important role in achieving environmental sustainability and the transition to a circular economy (tanveer, khan & umar, 2022). the authors identified the following categories: ewaste, transition to a closed-loop economy, plastic waste, bio-based waste disposal, life cycle assessment and environmental impact, as well as construction and demolition waste disposal. scientists have developed conclusions for politicians, specialists and practitioners regarding waste management and technological innovations towards a circular transition. waste waste management in the concept of green reconstruction of economy 264 management theory is a conceptual description of waste management that defines concepts related to waste and proposes a methodology for waste management. the theory of waste management is based on the hypothesis that sustainable waste management largely depends on the definition of the category "waste". the concept of "waste" is related to a person and his life activities. populations, households and economies depend on constant flows of air, water, food, raw materials and fossil fuels. waste is constantly generated or released into the air, dumped on/into the ground. the concept of "technical inefficiency" is closest in meaning to the traditional use of resources and generation of waste. "technical inefficiency" means that managers of an organization fail to minimize costs or maximize output because they are not using the best available technology (zvarych & rivilis, 2023). the european council waste directive defines waste management as: collection, transport and disposal of waste, including supervision of disposal sites and aftercare. that is, from the definition, it follows that waste management is only the process of manipulating unnecessary materials, and waste management is an activity on these materials. as a result, this definition does not cover all waste management activities and is therefore not sufficient. the term "management" refers to the manipulation of activities, and gives the hope that waste management will encompass more than the elimination of waste. the basis of sustainable waste management is the minimization and reduction of waste (pongracz, 2002). as a result, it is worth noting that the waste management process also involves (see fig. 1): strategic planning; prevention of environmental pollution and conservation of resources; minimization of the amount and toxicity of waste generation; choosing the best prevention option, taking into account the legislation; assessment of effects and consequences; decision-making. figure 1 components of waste management source: authors. the “5r” waste management system covers a set of principles aimed at reducing the impact of waste on the environment. (1) refuse unnecessary items such as single-use plastic or excess packaging. (2) reduce the use of resources and increasing conscious consumption. (3) reuse items or using durable goods that have a longer service life. (4) repurpose, i.e. giving items a new purpose or using items with a long service life. (5) recycle of used materials into strategic planning prevention of environmental pollution and conservation of resources minimization of the amount and toxicity of waste generation choosing the best prevention option (legislation) assessment of effects and consequences decisionmaking roman zvarych, igor rivilis, bohdan kharkovskyi, olha masna, yurii shevchuk 265 new products, reducing the need for raw materials and reducing the overall impact on the environment. in general, these principles are aimed at responsible waste management and encouraging individuals and enterprises to be more attentive to their consumption and disposal habits (reznikova et al., 2019). the best alternative to waste disposal is to prevent its generation. this is why waste prevention is the goal of all waste management strategies. a variety of technologies can be used at the production, use, or post-use stages of a product's life cycle to eliminate waste and, in turn, reduce or prevent environmental pollution. some representative strategies include environmentally conscious production methods, including the use of: less hazardous or harmful materials in production; modern systems for monitoring the storage of hazardous materials; innovative methods of chemical neutralization and fresh water saving technologies. system of green reconstruction of economy due to of russian aggression, ukraine faces a many of strategic challenges. among them is the reconstruction of critical infrastructure, providing the country’s energy security, accelerated implementation of the eu legislation, climate change mitigation and adaptation to it. the war still rages on, but the country’s reconstruction is already being planned. the reconstruction will comprise a lot of steps and should include planning process. there are some basic principles of the green post-war reconstruction that would provide sustainable economic development (ecoaction, 2023):  sustainable and systemic solutions;  transparency; community and public participation in decision-making;  using the best available technologies and practices;  sustainable development of cities and regions;  energy sector decarbonization and decentralization;  development of sustainable and decentralized agri-food systems;  ensuring preservation of ukraine’s ecosystems and natural resources. strengthening the position of the “green economy” (mikhno, 2021) around the world determines the high scientific intensity of developments and the high level of technology of “green production”, which ensure an accelerated transition to the new sixth technological order. this is what determines the background of the world economy and the competitiveness of national producers. green reconstruction should take place taking into account a well-thoughtout, differentiated and step-by-step approach to the socio-economic, production-technological and natural-geographical specifics of the business of ukraine. it is worth considering green reconstruction through the main structural and reproductive content of the economy in relation to the interrelated processes of production, exchange, distribution and consumption of products (goods, services), characterized by minimal resource intensity (especially non-renewable resources) and minimal negative impact on nature, in particular the volume of waste and (or) emissions in the process of production and consumption. such a systematic approach allows us to perceive the post-war green reconstruction as a system that will have internal and external (regulatory) influences that will form direct, regular and irreversible changes in the sustainable ecological development of ukraine (reznikova, 2019). waste management in the concept of green reconstruction of economy 266 post-war green reconstruction concept the concept of post-war green reconstruction should focus on such areas as: sustainable construction and resource saving; implementation of renewable energy sources; sustainable development of infrastructure (transport); improvement of water resources management; implementation of a waste management system, minimization of residues; rational management of land resources and control of urbanization; conservation of existing species and control of their populations (müller, 2022). the main prerequisites forming a green economy as a necessary business model are: resources and their pricing; growth in the number of consumers among the middle class; big data; change in legislation and globalization of management; transition from “agreement” to “relationship”. the concept of post-war green reconstruction of ukraine should be focused on prioritizing investment and access to sustainable natural systems, infrastructure, knowledge and education necessary for population prosperity. the concept could offer opportunities for ecologically decent livelihoods, entrepreneurship and jobs (kozak, 2022). the concept of the post-war green reconstruction of ukraine will be based on the principle of justice, that is, the scientific development will be inclusive and non-discriminatory. the concept should outline a long-term economic vision for wealth creation and sustainability and outline measures to address the current multidimensional poverty and injustice. this approach to the development of the concept of recovery of ukraine is innovative in the management of natural systems, because it is based on such properties as circularity, local inclusiveness and natural biodiversity (zvarych et al., 2023). the energy transition process for the eu will not be cancelled by either the energy crisis or russian aggression, they may slow it down somewhat, but there are chances of its dynamic acceleration. that is, the reduction of carbon emissions into the atmosphere and the growth of carbon productivity of the economy through the involvement of the best practices of decarbonization will give a powerful impetus to the development of the energy industry, in particular, the direction of renewable and alternative energy sources. along with this, it is important to solve the problem of waste management in ukraine through the recycling implementation mechanism and methodical recommendations on ways to adapt existing practices of the circular economy at the stage of restoring the stability of the system in crisis conditions (war, pandemic), which will positively affect the development of the energy and agricultural industries (bergmann & romanyshyn, 2022). a climate-neutral and ecologically clean economy will ensure green growth and sustainable development of agriculture through an increase in the water productivity of the economy, a reduction in waste generation, and a reduction in air and water pollution. economic development in this way will mean ecologically clean reconstruction and reconstruction, which is achieved in an ecological way, and ukraine will be part of the global climate-neutral economy. building a base for green investments and green innovations, government assistance to green sectors in priority areas, creation of green jobs will have a positive impact on the economy. green post-war reconstruction requires the use of green tools to achieve the set goals, effective mechanisms for integrating environmental issues into the decision-making process, and clear environmental conditions for the implementation of sectoral projects. the main function of the reconstruction and green reconstruction of ukraine should be the greening of this process, the prevention of long-term negative consequences of ecological sustainable development of ukraine, and the implementation of priority green projects in this area. in such roman zvarych, igor rivilis, bohdan kharkovskyi, olha masna, yurii shevchuk 267 way, ukraine’s green reconstruction should be a sustainable reconstruction realized by the best available technologies and practices. waste management in the concept of green reconstruction implementing green reconstruction requires a combination of programme design and policy. to ensure that decentralised decision-making is guided towards green reconstruction, existing obstacles to green investment such as highly regulated wholesale market prices in the electricity sector need to be eliminated. affordable financing is vital for green reconstruction. the costs of capital were already high in ukraine before the war. without affordable financing, the higher capital costs of green investments cannot be outweighed by lower operational costs. efficient administration of green reconstruction projects is necessary. replacing old, dirty and inefficient assets which are damaged or destroyed by the war with newer and clean technologies will generally require more sophisticated planning and construction processes that can otherwise lead to a lower speed of implementation. private investors will be very cautious in a post-war situation, with security concerns likely not fully resolved. but they could complement and enhance the financing provided by countries and international financial institutions and improve productivity through joint ventures or more competition on previously monopolistic markets (stubbe & saha, 2022). the waste management process under post-war reconstruction of ukraine should include five main stages: (1) prevention of waste generation; (2) preparation for reuse; (3) processing; (4) other uses (eg, renewable energy); (5) disposal. waste prevention is simple and desirable way to manage waste, and it is the first step in the waste management process (lumenlearning, 2020). business should act in accordance with the eu directives on the prevention of waste generation and resort to the following methods of prevention: reducing the amount of waste; reducing the harmful impact of waste on the environment and human health; reduction of the content of harmful substances in materials and products. in ukraine, the national waste management strategy until 2030 has been adopted (melen-zabramna, 2018). this reconstruction should provide for the creation of a network of centers for the implementation of clean production/technologies to minimize the volume of waste generation; adoption of legal acts on the introduction of eco-design of consumer goods, which is more suitable for reuse or disposal, by processing or reducing the use of primary raw materials. ukraine should introduce economic mechanisms to stimulate the reduction of the amount of generated waste, such as: a tax/ban on the production of plastic bags, disposable plastic containers and tableware; preferences for manufacturers of environmentally friendly packaging for consumer goods; financial support of innovative developments in the field of product packaging design. however, citizens and businesses must be environmentally conscious and must take measures themselves to save resources, reuse things, and reduce consumption. thus, local communities should actively work on developing their own waste prevention strategies and attract environmentally conscious businesses to their territory. consumers' environmental awareness can influence the demand for goods and services and thus reduce the amount of waste. so, consumers may prefer products in packaging/container that is suitable for recycling or reuse (glass), paper bags, eco-bags, used appliances. that is why all subjects of economic relations should prevent the generation of waste, first of all, each subject needs to start dealing with its waste at the first stage, which will make the country cleaner and the nation healthier. waste management in the concept of green reconstruction of economy 268 discussions/conclusions integration of environmental and climate policy should take place in all sectors, which requires taking into account the provisions of environmental and climate policy in strategic and programmatic documents in all spheres and levels of public life. the priorities of the european green deal (egd) should become the key tasks of ukraine’s post-war recovery. such key tasks include: decarbonization and modernization of the economy, preservation of biodiversity, clean industrial production and the transition to sustainable agriculture. green reconstruction should contribute to the sustainable development of ukraine. that is why the recovery of the economy requires that the goals of sustainable development be aligned with the investment policy. and the financing vectors should be directed primarily to the development of production chains with high added value, displacing the resource-export economy. ukraine’s green economy should be: low-carbon, energy-efficient, nature-oriented, efficient and clean production, balanced consumption. the green economy should be based on the following principles: shared responsibility, innovation, cooperation, solidarity, flexibility and interdependence. development should empower the national economy and provide better choices through targeted and appropriate fiscal policies. economic development should be sustainable and ecological and oriented towards climate goals, environmental protection policy and social protection policy. the reconstruction programme must be designed to favour longterm efficiency over initial investment costs to encourage investment in green technologies. international donors and ifis will need to play a vital role and their concerns must be taken seriously in designing the institutional framework of reconstruction. to avoid stalling or impeding the green reconstruction, effective and fast project management and implementation processes are needed. the availability of investment insurance, covering relevant risk categories such as military risk, will be a necessary precondition to attract any investment. green reconstruction economy model should focus on approach that, waste should be recycled through effective treatment methods to recover materials and minimize the hazardous impact on environment. sustainable waste management solutions are essential to maintain environmental harmony but, also, they are linked with cost, public response, political constraints, and social norms. sharing knowledge and implementing advanced technological know-how to manage waste and post-consumption processing is mandatory for implementation the model of green reconstruction of economy and investment into future generations. acknowledgment this research is the collaboration between scientists and young scientists of the west ukrainian national university. the topic researched as part of the erasmus+ jean monnet module “european inclusive circular economy: post-war & post-pandemic module for ukraine”. also, the research provided within the framework of a research grant funded by the ukrainian ministry of education and science on the topic: “the concept of recovery and green reconstruction of ukraine”. references 1. bergmann, j., romanyshyn, i. (2022). rebuilding ukraine: how the eu should support ukraine’s reconstruction and recovery. idos policy brief. no. 6/2022. https://www.econstor.eu/bitstream/10419/265452/1/1819333418.pdf https://www.econstor.eu/bitstream/10419/265452/1/1819333418.pdf roman zvarych, igor rivilis, bohdan kharkovskyi, olha masna, yurii shevchuk 269 2. green post-war reconstruction of ukraine. (2023). ecoaction. https://en.ecoaction.org.ua/topics/green-reconstruction 3. khan, sh., anjum, r., raza, s., bazai, n., ihtisham, m. (2022). technologies for municipal solid waste management: current status, challenges, and future perspectives. chemosphere. vol. 288, part 1, 132403. https://doi.org/10.1016/j.chemosphere.2021.132403 4. khan, a., lopez-maldonado, e., khan, n., villarreal-gómez, l., munshi, f., alsabhan, a., perveen, k. (2022). current solid waste management strategies and energy recovery in developing countries. chemosphere. vol. 291, part 3, 133088. https://doi.org/10.1016/j.chemosphere.2021.133088 5. kharola, sh., ram, m., goyal, n., mangla, s., nautiyal, o., rawat, a., kazancoglu, y., pant, d. (2022). barriers to organic waste management in a circular economy. journal of cleaner production. vol. 362, 132282. https://doi.org/10.1016/j.jclepro.2022.132282 6. kozak, z. (2022). the policy brief “green post-war reconstruction of ukraine: vision and models. 08/2022, 4 p. https://dixigroup.org/wp-content/uploads/2022/09/green-post-war-reconstruction-ofukraine_n-1.pdf 7. melen-zabramna, o. (2018). stages of waste management. environment, people, law. https://epl.org.ua/en/environment/5-shodynok-upravlinnya-vidhodamy-1-shodynkapoperedzhennya-utvorennya-vidhodiv/ 8. mikhno, i., koval, v., shvets, g., garmatiuk, o., tamošiūnienė, r. (2021). green economy in sustainable development and improvement of resource efficiency. central european business review. prague: prague university of economics and business. vol. 10, iss. 1, 99-113. https://vb.vgtu.lt/object/elaba:88202698/88202698.pdf 9. müller, w., khrystoforova, o. m., lyashenko, v. (2022). post-war reconstruction of ukraine – parallels of the post-war reconstruction of germany. international journal of academic management science research. vol.6(10), 267-271. https://openarchive.nure.ua/bitstream/document/21072/1/mkhl.pdf 10. pongracz, e. (2002). re-defining the concepts of waste and waste management: evolving the theory of waste management. doctoral dissertation. university of oulu, department of process and environmental engineering, oulu, finland. http://herkules.oulu.fi/isbn9514268210/ 11. reznikova, n., zvarych, r., zvarych, i., shnyrkov, o. (2019). global circular e-chain in overcoming the global waste. procedia environmental science, engineering and management. vol. 6, issue 4. p. 641-647. https://www.procedia-esem.eu/pdf/issues/2019/no4/72_reznikova_19.pdf 12. stubbe, r., saha, d. (2022). how to implement a green reconstruction for ukraine. german economic team, nl 166. https://www.german-economic-team.com/en/newsletter/how-to-implement-a-greenreconstruction-for-ukraine/ 13. tanveer, m., khan, s., umar, m. (2022). waste management and green technology: future trends in circular economy leading towards environmental sustainability. environmental science and pollution research, vol. 29, 80161–80178. https://doi.org/10.1007/s11356-022-23238-8 14. waste management system: a guide. (2023). safety culture. https://safetyculture.com/topics/wastemanagement-system/ 15. waste management strategies. (2020). lumenlearning. https://courses.lumenlearning.com/ sunymonroeenvironmentalbiology/chapter/15-2-waste-management-strategies/ 16. zvarych. r., rivilis. i. (2023). social responsibility of business as sustainable development approach in management. agora international journal of economical sciences. no. 1, pp. 154-161. https://univagora.ro/jour/index.php/aijes/article/view/5773/1969 17. zvarych, r., rivilis, i., domiter, m., skulski, p., oleksiiv m., janiga, m. (2023). information support for postwar economy recovery of ukraine”, 13th international conference on advanced computer information technologies (acit), wrocław, poland, 235-240. https://doi.org/10.1109/acit58437.2023.10275360 https://en.ecoaction.org.ua/topics/green-reconstruction https://doi.org/10.1016/j.chemosphere.2021.132403 https://doi.org/10.1016/j.chemosphere.2021.133088 https://doi.org/10.1016/j.jclepro.2022.132282 https://dixigroup.org/wp-content/uploads/2022/09/green-post-war-reconstruction-of-ukraine_n-1.pdf https://dixigroup.org/wp-content/uploads/2022/09/green-post-war-reconstruction-of-ukraine_n-1.pdf https://epl.org.ua/en/environment/5-shodynok-upravlinnya-vidhodamy-1-shodynka-poperedzhennya-utvorennya-vidhodiv/ https://epl.org.ua/en/environment/5-shodynok-upravlinnya-vidhodamy-1-shodynka-poperedzhennya-utvorennya-vidhodiv/ https://vb.vgtu.lt/object/elaba:88202698/88202698.pdf https://openarchive.nure.ua/bitstream/document/21072/1/mkhl.pdf http://herkules.oulu.fi/isbn9514268210/ https://www.procedia-esem.eu/pdf/issues/2019/no4/72_reznikova_19.pdf https://www.german-economic-team.com/en/newsletter/how-to-implement-a-green-reconstruction-for-ukraine/ https://www.german-economic-team.com/en/newsletter/how-to-implement-a-green-reconstruction-for-ukraine/ https://doi.org/10.1007/s11356-022-23238-8 https://courses.lumenlearning.com/%20suny-monroe-%20environmentalbiology/chapter/15-2-waste-management-strategies/ https://courses.lumenlearning.com/%20suny-monroe-%20environmentalbiology/chapter/15-2-waste-management-strategies/ https://univagora.ro/jour/index.php/aijes/article/view/5773/1969 https://doi.org/10.1109/acit58437.2023.10275360 agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 18, no. 2 (2024), pp. 252-275 252 adapted neuromanagement and integral methodology in decision evaluation. cum intervention s. sandhya, j. satpathy s sandhya, jyotirmaya satpathy ¹ nitte school of management, bengaluru, india https://orcid.org/0009-0008-7986-1589, e-mail: sandhyajyoti24@gmail.com ² poornaprajna institute of management, udipi, india https://orcid.org/0000-0003-2087-6619, e-mail: jyotisatpathy@gmail.com abstract: with the advent of management and technology, the world is witnessing a plethora of problems; mental issues occupying the prime spot. this provides an opportunity for the discipline of adaptive neuromanagement and integrated methodologies to offer a ‘way out’; for those afflicted with mental issues. based on the protocol evaluations obtained through adapted neuromanagement, this paper applies a variety of personalized intervention techniques oriented from the neurointegral methodology. these techniques include; intervention with neurofeedback and biofeedback, personalized training programs to improve neuronal and physiological self-regulation. mindfulness and relaxation techniques, implementation of specific protocols to reduce stress and improve attention, adapted to individual needs virtual reality exposure therapy, development and application of personalized scenarios to treat phobias, anxiety and ptsd, cognitive performance training based on computational interface, implementation of adaptive programs to improve specific executive and cognitive functions, based on the individual neurocognitive profile, qualitative neuropsychological training, implementation of rehabilitation and neuropsychological correction programs aimed at improving the psychological and brain functioning of people, emotional freedom techniques, application of emotional reprocessing protocols to improve self-regulation, adapted to specific emotional needs, guided neuroplasticity interventions, application of cognitive stimulation techniques designed to promote neuroplasticity in specific brain areas, character strengths program, implementation of psychological well-being management programs based on scientific evidence and personalized neuromanagement education. keywords: adapted neuromanagement, neuro-integral methodology, 3600 evaluation, neurofeedback and intervention 1. introduction it is possible that, when translating an extensive document, some minor errors may have been made. however, the first author would like to emphasize that the diagnosis conducted goes far beyond the contours of diagnosis with additional data not yet incorporated (but under consideration for subsequent papers and presentations), which is highly viewed as https://orcid.org/0009-0008-7986-1589 mailto:sandhyajyoti24@gmail.com https://orcid.org/0000-0003-2087-6619 mailto:jyotisatpathy@gmail.com adapted neuromanagement and integral methodology in decision evaluation cum intervention 253 relevant. for example, one valuable insight is the ability to identify people with a higher predisposition to danger, such as those who may be more susceptible to workplace accidents. this information is crucial for risk prevention in the work environment. additionally, diagnosis offers data that do reveal aspects related to leadership, among other important topics. this approach is truly innovative, and could further enhance its applications and reach. what makes this diagnosis significant is its ability to go beyond traditional questionanswer methods used in tests and assessments. it’s literally as if we can interrogate the brain directly, generating real stimuli that allow us to observe how a person makes decisions under pressure, how they get stressed, how they recover from that stress, how they adapt to change, and much more. all of this is analyzed from a solid neurological foundation, which is crucial, as while a person can lie or skew their answers in a traditional assessment, the brain doesn’t lie when subjected to pressure or high cognitive demands. moreover, we use additional sensors that provide us with physiological responses like breathing, heart rate, sweating, or skin resistance, among many others, giving us even more valuable information. adaptive neuromanagement constitute a transdisciplinary approach that integrates advanced knowledge in neuromanagement with personalization and contextualization of specific interventions for individuals and groups in diverse settings. this approach is oriented towards optimizing cognitive performance, emotional regulation and physical activity through evidence-based techniques adapted to the unique characteristics and needs of each context, that is, with a people-centered perspective for flourishing human (2). due to its fundamental theoretical orientation in scientific field of greatest extension and validation, adapted neuromanagement resumes its surname ‘adapted’ in the field of study of life, theory of evolution supported by charles darwin since publication of ‘the origin of neuromanagement’; species through natural selection. thus, we understand adaptation as a process by which living organism develops behavioral characteristics that allow it to live well in the different environments and scenarios in which it coexists with other living beings. conception of adaptation makes two other notions relevant. first, living-well, a term that emphasizes commitment of adapted neuromanagement with general framework of studies of well-being and quality of life (rojas, 2020). second, to environment, context or scenarios in which human being interacts as a being-in-the-world (seamon, 2018). based on these, adapted neuromanagement go beyond an instrumental definition; they are embedded in development of management as a way of adapting its contents and developments to human needs, with a focus on well-being (3). adapted neuromanagement aims to go beyond theoretical framework by focusing on practical application of neuroscientific knowledge to improving quality of life. it seeks to bridge the gap between laboratory findings and everyday life, personalising interventions to the unique needs of various individuals and/or communities. through overlap in psychology, biology, and the environment, adapted neuromanagement aims to optimise human wellbeing, performance, and resilience across myriad of ages and circumstances. it does have applications in education to healthcare to social interaction (4). 1. aim and objectives s sandhya, jyotirmaya satpathy 254 artificial intelligence plays a key role in interpreting brainwave data, allowing for the real-time identification of patterns of attention, meditation, and stress. a thorough analysis was conducted, correlating this data with the personality test results and key elements of the patient’s personal narrative. this multidimensional approach enables an in-depth analysis of how the brain responds to different cognitive and emotional demands, and how these responses affect overall well-being (alexander et al., 2021). this paper provides a comprehensive analysis of subject patient’s brain activity, cognitive performance, and personality profile, using innovative approach that combines cutting-edge neurofeedback (brain-wave reading), artificial intelligence tools, and personalized analysis of personal narrative. this methodology, based on electroencephalography (eeg) with devices like myndband being considered in subsequent attempts), allows real-time measurement of [paulo’s] brain activity while experiencing reallife situation simulations, including cognitive tasks, meditation sessions, and auditory distractions. understanding how brain responds to everyday challenges is key to developing this paper. the paper proposes a personalized development plan, based on test results, outlining clear goals and practical strategies aimed at improving stress management, cognitive flexibility, and decision-making. the ultimate goal is to provide tools that enhance the patient's personal and professional development (aristóteles, 2009; 2016). 2. methodology 2. 1. adaptation in darwin's framework evolution and genetic or environmental components these days are having a clash directly with component of trait as a separate determining factor in personality studies of species. it is still a grey zone, so lots of possibilities can be explored. this highlights part of ‘relationship between adapted neuromanagement and charles darwin's theory’ where it indicates that adapted neuromanagement are based on principles of adaptation and evolution that charles darwin presented in his theory of evolution by natural selection (5). this theory, first detailed in his work ‘on the origin of species’ in 1859, establishes that species evolve over time through a process of natural selection, where individuals with advantageous characteristics for their environment are more likely to survive and reproduce, passing these characteristics on to their offspring. natural selection: natural selection is the key mechanism by which traits that improve an organism's ability to survive and reproduce become more common in a population over generations. adaptability: species that can better adapt to changing environmental conditions are more likely to survive. this adaptation process is continuous and dynamic, allowing species to evolve in response to new challenges and opportunities. survival of fittest: ‘the fittest’ refers to those individuals best equipped to face their specific environment, not necessarily the strongest, but the most adaptable. adapted neuromanagement: adapted neuromanagement take these evolutionary principles and apply them to the study and intervention in human cognitive and emotional functioning. this transdisciplinary approach integrates advanced knowledge in neuromanagement with the personalization and contextualization of specific interventions for individuals and groups in various settings. adapted neuromanagement and integral methodology in decision evaluation cum intervention 255 adapted neuromanagement and darwin's theory: parallels personalization and contextualization: just as in natural selection, where specific adaptations of an organism are closely related to its environment, adapted neuromanagement aim to develop personalized interventions that consider the unique needs and characteristics of each individual and their context. performance optimization: adapted neuromanagement focus on optimizing cognitive performance and emotional regulation through evidence-based techniques that are tailored to individual characteristics, promoting ‘well-being’ in the various contexts in which a person develops. prevention and resilience: similar to how species develop adaptations to survive in their environment, adapted neuromanagement focus on prevention and resilience, helping people develop skills and strategies to effectively face and overcome challenges. 2.2. transdisciplinary approach adapted neuromanagement aim not only to prevent and correct problems but also to optimize human well-being and performance. this holistic approach considers well-being from an integral perspective, encompassing biological, psychological, and social aspects. just as in darwin's theory, where adaptation is a continuous process, adapted neuromanagement promote constant and dynamic individual development, adjusting to changes and environmental demands. the relationship between adapted neuromanagement and charles darwin's theory lies in the application of adaptation and evolution principles to the study of the human brain and mind. by understanding how individuals can better adapt to their environments and optimize their cognitive and emotional functioning, adapted neuromanagement aim to improve well-being and resilience, offering practical and personalized solutions that reflect the evolutionary processes described by darwin. 2.3. epistemic foundation the brain has immense capabilities. we understand that generation and application of knowledge has transdisciplinary methodological future, based on scientific evidence and centered on people. it is considered a ‘person-centered approach’ because it is recognized that each ‘flesh and blood’ person presents unique profile of psychosocial configuration and brain activity, requiring personalized interventions. in addition, sustainable development objectives in the 2030 agenda offer governance horizon towards well-being, resilience and sustainability; these three components are central to our institutional work. 2.4. knowledge management all knowledge generation and application procedures are developed with robust methodologies based on scientific advances in cognitive management (rich, et al., 2021), brain-computer interface (bansal & mahajan, 2019), technological innovation and in the new humanities. among the main analysis methods is work with big data, graph theory and social network analysis, machine learning, bayesian statistical analysis, artificial neural networks and generative artificial intelligence, all with the aim of understanding complex relationships, non-linear and dynamics of human behavior (mitchell, 2009). s sandhya, jyotirmaya satpathy 256 figure1. general knowledge management model with neurointegral methodology note. neurointegral methodology through operationalization of its 360 protocols has adapted assumptions of cognitive management approach made up of six disciplinary fields: philosophy and epistemology of mind, cognitive linguistics, anthropology, neuromanagement, artificial intelligence and cognitive psychology (favela, 2020; rich, et al., 2021). in hexagon, thicker lines highlight transdisciplinary interactions relevant to neurointegral methodology: neuromanagement, artificial intelligence and psychology. psychology has usually focused on understanding of disorders, dysfunctions and psychopathologies of human beings, that is, on typically negative phenomena. for its part, positive psychology that emerged in mid-20th century was focused on positive psychological phenomena, which in a detailed review paved way for study of flourishing and well-being. finally, a third wave of positive psychology (“actually the beginning of a new multi-, interor transdisciplinary domain of study focusing on well-being as multimodal with a focus on humans, but also beyond the individual and human social systems”) studies has expanded epistemological bases of this approach, adopting more holistic, complex dynamic systems perspectives to develop interventions in diverse flourishing contexts (lomas, et al., 2021). “the third wave reformulates and synthesizes previous generations of behavioral and cognitive therapy and carries them forward into questions, issues, and domains previously addressed primarily by other traditions, in hopes of improving both understanding and outcomes.”(hayes, 2004).” it is under this model that the neurointegral evaluation and intervention protocols return to their foundations. in this context, optimal levels of psychological well-being are a crucial element for human flourishing and thriving as people. however, the experience of well-being tends to decrease among people who have experiences of mental health diagnoses, such as depression and anxiety. beyond focusing on positive outcomes, such as optimal levels of psychological well-being, mental health programs prioritize the identification of mental symptoms or disorders (lomas, et al., 2021). thus, priority has been given to developing treatments that reduce mental health problems rather than improving aspects of increasing well-being (rottenberg, et al., 2024). to achieve neurointegral improvement, mental flexibility is considered an important mechanism for the likelihood of psychotherapeutic success in any diagnosis. in general, increased flexibility is associated with changes in people's symptoms, quality of life, and level of general functioning (14). therapeutic programs that assume changes in mental flexibility have presented a significant decrease in symptoms, papering higher levels of quality of life adapted neuromanagement and integral methodology in decision evaluation cum intervention 257 and functioning. therefore, evidence on flexibility attention programs is crucial as a transdiagnostic process in the success of psychotherapy and psychological interventions (rutschmann, et al., 2024). another fundamental element is self-control. self-control is an essential life skill. a philosophical reflection on this indicates that, sometimes, the impulse to act in a certain way is at odds with what is known to be best, so self-control must be used in a better way to achieve more valued goals (15). the topic of self-control has recently gained great interest in disciplines such as psychology, neuromanagement, economics and sociology. broadly speaking, self-control refers to the pursuit of valued long-term goals despite the momentary predominance of lower-value, short-term alternatives that are impulses with momentarily attractive outcomes (duckworth & gross, 2024). both psychological flexibility and self-control are two higher functions associated with the activity of the prefrontal cortex of the human brain, involving cognitive, emotional and social processes (see figure 2); these functions are susceptible to shaping through feedback training processes and various comprehensive exercises, procedures that the neurointegral methodology has collected and systematized for its work of prevention, correction and optimization of the human factor. figure 2. neurointegral methodology in model of positive emotions note. figure adapted and translated from the conceptual model of the psychological correlates of positive emotions and their influence on well-being outcomes. redrawn from figure 1 of alexander, et al. (2021: 222). additionally, the term tunnel vision evokes the narrowing of the visual field, where one center of an image can be clearly focused, but blindness is experienced in peripheral vision. this term has a cognitive equivalent about the experience and information that human beings handle in different contexts (mullainathan & shafir, 2016). tunnel vision is usually a metaphor used to express the way in which human beings tend to overestimate certain information and underestimate other information. this vision allows us to focus on the problems, but leaves aside the context of decision-making under uncertainty (glimcher, 2018). it is commonly associated with solutions focused exclusively on problems, the management of negative emotions, warning signs about threats, generating states of alert and s sandhya, jyotirmaya satpathy 258 sustained stress (16). on the other hand, the big picture view provides a broad context for decision-making, typically called ‘slack,’ and allows people to be more creative in overcoming difficulties. panoramic vision is commonly accentuated when positive emotions are experienced and generate what has typically been called in the scientific literature as an ‘upward spiral of flourishing’ (garland, et al., 2010). figure 3. tunnel vision versus big picture vision in affective response & decision making note. adapted neuromanagement and neurointegral methodology have incorporated advances in neuroeconomics and behavioral economics to provide contextual responses to people we accompany in evaluation and intervention processes, guiding practices to generate a vision of panorama in solving problems. in summary, integration of these approaches and concepts in the evaluation and intervention protocols of the neurointegral methodology provides a solid basis for the prevention, correction and optimization of cognitive performance, emotional regulation and social connectivity, as part of a comprehensive intervention in mental health. in addition to these foundations, advances in the analysis of brain activity, neuroplasticity, mind-body interactions and brain-computer interface have been relevant in the evaluation processes and in the generation of quantitative and qualitative indicators that allow us to understand how the methodologies used have allowed the prevention, correction and optimization of the human factor in general. 3. research, development and innovation the research unit of neurointegral scientific institute, bogota implements plural methodological processes based on paradigms of complexity and cognitive management. due to this transdisciplinary integration, the institute is seen as a scientific space oriented to human flourishing with cutting-edge development and innovation. there are four main fields of application and adaptation:  cognitive psychology and social cognition  cognitive and affectiveneuromanagement  social management (philosophy and economics)  artificial intelligence and machine learning the field of cognitive and social psychology is inspired by research on social perception, attitudes, attributions, priming, and social cognition, where the topics of decision making under uncertainty, rationality, dual systems model and heuristic judgments are raised (kahneman, et al., 2021; pinker, 2021). this field implements a wide variety of adapted neuromanagement and integral methodology in decision evaluation cum intervention 259 methodological approaches, from the development of factorial experiments, psychometric evaluations and big data analysis with national and international repositories for the exploration of macrotrends in human behavior. at the neurointegral scientific institute, the corresponding field is the analysis of subjective experiences and experiences, since it allows the analysis and approach of a large number of phenomena related to the human psyche (giorgi, 2015). for its part, in the field of cognitive neuromanagement, brain activity is analyzed through electroencephalographic recordings and brain mapping with quantitative electroencephalography (qeeg), as well as the application of intervention and training plans with neurofeedback technology. in this disciplinary field, brain imaging studies are carried out that propose functional correlates with cognitive functioning and decision making for the generation of neurofeedback intervention protocols adjusted for each participant or person we accompany. our neuroimaging, brain mapping and brain minimapping equipment are tools to verify the psychological changes related to the neurointegral methodology interventions (see figure 2). figure 4. neuroimaging technologies in adapted neuromanagement and neurointegral methodology note. the figure shows three images that correspond to the domain of generation and application of knowledge about brain activity through technology in adapted neuromanagement. a) brain mapping by qeeg is shown with normalized results of brain activity. these ‘heat’ maps allow a comparative interpretation between a neurotypical group and the activity of the subject under evaluation, making the hyperactivation or hypoactivation of different parts of the brain clearer. the cerebral cortex. b) the basic scheme of how training with neurofeedback works, technologies based on brain-computer interface research is shown. c) illustration that shows what the professional services based on the neurointengral methodology are like for prevention, correction or cognitive optimization. finally, the field of humanities and social management is an area of knowledge that links developments aimed at understanding social phenomena and interpersonal connection. social cognition, behavioral economics, social neuromanagement and neuroeconomics are located within this field of work of the institute (campos, 2017; thaler, 2019). the institute's data collection efforts use a group of diverse research methodologies, experimental and non-experimental quantitative approaches, biomarkers, psychometric evaluations, in-depth interviews, surveys, purposive and probabilistic sampling, so the tools are available to cover the developments proposed at an interdisciplinary level and attention to diverse fields of application. a summary of main work tools is (20):  phenomenological and open interview protocols.  adaptive computerizedpsychometricbatteries. s sandhya, jyotirmaya satpathy 260  go-no go performance tasks and hot/cool cognition.  qualitative and quantitativeelectroencephalography.  brain mapping and brain minimapping.  neurofeedback and biofeedback training. 4. results our baseline evaluation protocol has been established through a multidimensional examination design that allows the observation of multiple spheres of the biopsychosocial life of our clients, using various types of neuromanagement technologies, cognitive psychology and artificial intelligence, state-of-the-art care models have been developed to propose personalized and person-centered protocols. our protocols apply the following diagnostic and evaluative activities. 4.1. self pattern examination interview (epy) to begin, a face-to-face interview is carried out with the examiner to inquire about various experiences and personal experiences associated with habits and health in general. in this stage of in-depth qualitative analysis, 10 elements are examined: 1) bodily processes, 2 ) processes of pre-reflective experience, 3) affective processes, 4) behavioral or action processes, 5) social or intersubjective processes, 6) cognitive or psychological processes, 7) reflective processes, 8) narrative processes, 9) ecological processes and, 10 ) regulatory processes (daly, et al., 2024). this pattern analysis assisted by artificial intelligence allows the identification of configurations of the self associated with overwhelm, stress-distress, high demand and cognitive overload, as well as the direction of behaviors directed at goals and environments oriented to biopsychosocial states of stability/destability. these interview processes are based on the most recent studies on the so-called 4e cognition, understood as embodied, embedded, enactive and extended cognition (newen, et al., 2018). table 1. elements of self-pattern examination interview patterns description body processes it includes the entire basic core of autopoiesis processes (maturana & varela, 2003) related to motor, autonomic, endocrine, immune, and interoceptive functions, which allow the general work of the system to maintain the homeostasis necessary for the survival of the organism. people. processes of pre-reflective experience it includes people's pre-reflective self-awareness, that is, the characteristic structure of first-person consciousness delimited by bodily factors, the sense of ownership or ‘sameness,’ and the sense of agency that may involve various sensory and motor modalities, such as such as proprioception, kinesthesia, touch and vision. these aspects form the core experiences of what is often called the minimal self. affectiveprofessors the fact that someone manifests certain temperamental or emotional dispositions reflects a particular mix of affective factors that range from basic elements to those more covert or tacit such as hunger, fatigue and libido, which are more typical emotional patterns, a set of feelings. existential, or background mood. behavior/actionprocesses behaviors and actions make us who we are. behavioral habits and skills reflect and constitute our character. this is a classic look at aristotle's lessons in his adapted neuromanagement and integral methodology in decision evaluation cum intervention 261 works on ethics (aristotle, trans. 2016; trans. 2009). social/intersubjectiveprocesses humans are born with the ability to synchronize with intersubjective existence; from the point of view of social relationships, the self-conscious development and recognition of oneself as a being distinct from others, a sense of beingby/for-others, and a sense of being part of a group or community. psychological processes these processes have been classically emphasized in theories of personal identity that emphasize psychological and memory continuity, including our conceptual understanding of self, beliefs, cognitive dispositions, and personality traits. reflective processes the ability to reflect on our own experiences and actions, closely related to the notion of personal autonomy and morality, includes the ability to evaluate and form second-level volitions about personal decisions. narrative processes self-interpretations have a narrative structure and recursive (and often reinforcing) reflections of the self pattern. in some theories they are inherent or constitutive narrative entities. ecologicalprocesses people tend to identify ourselves with our ‘things’, physical things we own, clothes, home, and various things we are, the technologies we use, the institutions in which we work, etc. our embodied and situated actions are engaged with (and also incorporate) different artifacts, instruments and structures of our environment in ways that define our identity. regulatoryprocesses our extensive commitment to the context, including the social and cultural practices in which we are immersed. they are delimited by social, cultural and institutional factors that shape our habitual behavior and our self-conception of how we are and how we think we should be. source: translation and own adaptation of the works of daly, et al. (2024) and gallagher (2024) the qualitative information deepened in the interview will be used as criteria for the adaptation and personalization of standardized tests, examination protocols that will be carried out during the evaluation. in addition, calibrated and standardized sets of stimuli are used that facilitate in-depth analysis and intrapersonal and interpersonal comparisons. 4.2. computerized and adaptive psychometrics (pia) advances in psychometric technology are used to apply digitalized questionnaires that adapt based on the answers that people have for each item or question. this innovation in psychometry has been the result of research by the neurointegral scientific institute based on the working databases it has had for years. the pia raises questions such as the following: what is the minimum number of questions that can be asked about people's emotional state to identify the prevalence of depressive or anxiety symptoms? these advances of the institute have been possible thanks to the technological implementation of big data, bayesian statistical analysis and machine learning that make our cutting-edge psychometric scales possible. some of the components of our pia are:  hexaco personalitymapping  performance in primary mental skills  wellnessprofile and characterstrengths  psychosocial risk factors in the workplace in addition, there is a wide range of psychometric batteries for personalized application. below, the characteristics of these evaluations and their importance for the development of personalized prevention, correction and optimization interventions are described in general terms. s sandhya, jyotirmaya satpathy 262 4.3. hexaco personality mapping hexaco model of personality is perhaps one of the most relevant theoretical models currently in the study of personality (ashton & lee, 2020). the hexaco personality inventory 60 (ip-hexaco-60) is a computerized personality profile scale that provides information on six personality factors: honesty-humility, emotionality (neuroticism), extraversion, agreeableness, conscientiousness (responsibility), and openness to experience and in a total of 24 facets corresponding to these factors. this instrument is based on the big five theory, one of the most representative theoretical models in the measurement and analysis of personality (ahston& lee, 2014; zettler, et al., 2020). the translation and adaptation has been carried out by members of the institute as a systematic process and with sociocultural references for latin america and spanish-speaking people, in addition to having the original version in english and more than 20 additional languages (22). what does the hexaco profile offer us? a reliable and valid measure for the identification of the most dominant personality traits in behavior, thought patterns and affective-emotional regulation, personality profile and indicators of adaptability of the behavior of those evaluated (see figure 1). by identifying the strengths, weaknesses, and areas of development based on these personality traits, the hexaco test model also facilitates personal growth and self reflection. it applies to adults 18 years of age and older. figure5. hexaco personalitymapping note. the mapping or visualization of the personality profile through the ip-hexaco-60 is a valid and reliable measure for the identification of the most salient personality traits in clients, it offers a measure of knowledge or self-knowledge of the adaptive behaviors of clients for personalized adjustment of neurointegral 360 intervention protocols. 4.4. performance in primary mental skills (hmp) in general terms, primary mental abilities are understood as the psychic activity in which human cognition can be crystallized, beyond a conception of intellectual quotient, our approach—based on the 4e cognition paradigm, which refers to the embedded, embodied, enactive, and extended conception of mind (newen, et al., 2018)—, defines the cognition evaluated with the hmp as enaction, that is, ‘history of bodily and structural coupling that enacts (makes emerge) a world’ (varela, et al., 2011: 240). thus, our understanding of primary mental abilities is broad; they always involve the personal trajectory of individuals and the way in which they have adapted to their context. 0 20 40 60 80 100 h e x a c o mapeo hexaco de personalidad perfil adapted neuromanagement and integral methodology in decision evaluation cum intervention 263 to understand the way in which people make their world emerge, we used a group of activities organized into five factors from louis thurstone's primary mental abilities scale (thurstone & thurstone, 2012). the factors are the following: factor v. verbal comprehension, an important element for learning through oral or written language, a person with good verbal comprehension has important resources for learning and brain plasticity, establishing relationships of greater empathy, understanding the others, the emotional and social environment that surrounds him (24). factor e. spatial understanding facilitates the spatial interaction of people with their physical environment, optimizing the spatial relationships in which they live: home, work centers and spatial settings in general where their corporeality is located. the r factor. reasoning, raises the skills associated with cognitive inference, induction, deduction and the ability to express logical responses in the identification of patterns and in the prediction of configurations of reality; this factor can be considered as the factor typical of system 2 of thinking, slow, but in which people make an effort to reduce cognitive biases by not taking any mental shortcuts as is typical in system 1 thinking (kahneman, 2012). factor n. number management evaluates people's mental calculation capacity, it is an important component for mathematical understanding, however, this task has some of the most interesting configurations from an integrative and enactive approach, in addition to taking of quick decisions that are made during the n factor test, this can be considered a ‘reality test’ test, that is, it exposes people's ability to identify the relationship between their feelings, emotions and thoughts. with what happens in reality or in an ‘objective’ way, evaluating its own behavior as an adaptive response to the context, for this reason, it is strongly associated with mental flexibility and emotional intelligence (see figure 6). finally, factor f. verbal fluency allows us to understand how people have the ability to express their thoughts and emotions in the social sphere. figure 6. cognitive flexibility model integrateings cognitive and emotional aspects note. research at the neurointegral scientific institute through its adapted neuromanagement and neurointegral methodology approach has discovered important relationships between factors traditionally called ‘iq’ and so-called ‘emotional intelligence.’ in this case, verbal understanding and handling of numbers as ‘cold’ cognitive skills are closely related to some factors of emotional management such as emotional understanding, empathy and reality testing. the results indicate that ‘link’ skills between these two apparently separate fields occur through executive functions of prefrontal cortex, especially dorsolateral region of brain, called mental or cognitive flexibility. s sandhya, jyotirmaya satpathy 264 4.5. wellness profile and character strengths the 20th century was dominated by the idea that a high economic income is enough for people to reach optimal levels of well-being and quality of life. from this idea arises the paradigm of progress as economic growth. at the center of this approach are the gdp (gross domestic product) or gdp (gross domestic product) metrics and other related concepts as indicators of progress in societies. however, in recent years it has been shown that it takes more than a good income to have well-being (27). a paradigm shift has resulted in the premise of well-being as the progress of societies. from this point of view, economic development is not enough to explain well-being; income is only an instrument that must be considered together with other factors that are sources of well-being (28). to overcome these global paradigm changes, the neurointegral scientific institute integrates into its evaluation and intervention protocols the metrics on subjective and psychological well-being, with a view to always having an evaluation of the experiences and experiences of the people we accompany, for this, have assimilated the metrics presented in table 2. table 2. well-being profile and character strengths indicators description satisfactionwithlife evaluative component of subjective well-being, a single item indicator that synthesizes information about the life trajectory, evaluation of achievements, failures, general aspirations. itisthemetricwiththehighestemploymentinternationally. positive affects affective component of subjective well-being, it evaluates the emotions, affections and positive feelings that people experience, such as joy, patience, hope, concentration, vitality, tranquility, among others. negative affects affective component of subjective well-being. it is not considered a continuum of positive affects, so people can experience both in different magnitude and frequency. this group includes emotions, feelings and affects such as sadness, despair, worry, fear, suffering, anger, among others. eudaimonia a metric associated with psychological well-being, in this you can find components such as self-esteem, optimism, freedom of decision, commitment, locus of control, purpose or meaning in life, resilience and burnout. characterstrengths character strengths allow the evaluation of the values and virtues that people require to increase their psychological well-being, evaluating a total of 24 strengths divided into six major components: wisdom and knowledge, courage, humanity, justice, temperance and transcendence. the well-being profile allows the generation of a global image of people's experiences of well-being and discomfort, not as a metric of pathology, but of the mental health experience that people have, thus, this evaluation it is relevant as a general ‘x-ray’ of how people reach the institute's intervention protocols. the well-being profile is made up of the evaluation of life satisfaction, affective balance (positive and negative affects), and eudaimonia. these three dimensions form a baseline of the emotional constitution that people have when undergoing surgery under our neurointegral methodology. on the other hand, character strengths have been shown to be a relevant measure for intervention in positive psychology to increase levels of psychological well-being (niemiec, 2019; seligman, 2021). character strengths aspire to develop human virtues that are oriented towards human flourishing, therefore, the interventions developed in the neurointegral 360 protocols take up these people-centered metrics. adapted neuromanagement and integral methodology in decision evaluation cum intervention 265 4.6. psychosocial risk factors another important aspect in the consideration of the evaluation and intervention protocols of the neurointegral methodology sample is the review of the psychosocial risk factors in the workplaces, these are important components for the development of people and organizations as a whole (uribe, 2016). amongthefactorsanalyzed are: 1) the conditions in the work environment, 2) theworkloads, 3) lack of control over work, 4) theworkdays, 5) interference in the work-family-personal life relationship, 6) positive and negative leadership, 7) interpersonal relationships at work, 8) perceptionofworkplaceviolence, 9) performance recognition, 10) sense of belonging and job stability. in addition, there is a measure of organizational climate (méndez, et al., 2024) that evaluates morale, direction, innovation, motivation, satisfaction, leadership and rewards. these instruments are applied in work centers based on the profile of needs of the clients, people and organizations that we accompany in intervention processes with our methodology. 4.7. evaluations for children and parents the evaluation tasks for children and parents obtain an important differentiator in the neurointegral methodology, this because they analyze dynamic and systemic structures of interaction between the members of a family, their functioning and regulation. neuropsychological work with school-age children (6 to 12 years old) is essential for academic success, high results in living standards, and intergenerational social mobility at a longitudinal level (campos, 2016). for these reasons, analyzes of infants from the perspective of adapted neuromanagement and neurointegral methodology are important. among the main methodological contributions in evaluation are the development of interviews with parents and guardians, an interview with children and free play, the specialized application of pia for the development and evaluation of self-concept in childhood (pai) villa &auzmendi, 1999), assessment of cognitive performance with matrix analysis tasks and the adaptation of neuroimaging protocols to be implemented with schoolage children. table 3 presents the synthesis of the evaluations in this field of care. table 3. elements of child evaluation protocol metrics description interview with parents or guardians it is a second-person interview that analyzes the parents' or guardians' vision of the children's ego patterns. it includes questions about the 10 dimensions in table 1 adapted to school-age children. interview with children and free play approach and empathy interview with children, seeks to ‘break the ice’ in the relationship between facilitator-client and the three basic repertoires of behavior are observed: attention, imitation and following instructions. adaptive behavior evaluation system it evaluates adaptive behavior throughout the life cycle, especially for children ages 6 to 12, analyzing adaptive skills in three main domains: conceptual skills, which include communication, academic skills and self-management; social skills, which encompass social interaction, play, and behavioral skills; and practical skills, which relate to daily living, self-help, safety and community skills. these factors allow us s sandhya, jyotirmaya satpathy 266 to evaluate how children manage everyday demands and develop in different contexts (harrison & oakland, 2008). upbringing and parenting styles it assesses parenting practices across four key dimensions: the authoritative style, which involves warmth, support and reasonable expectations, encouraging autonomy; the authoritarian style, characterized by high demands and control, with little warmth and communication; the permissive style, which shows high warmth and low demand, with little discipline and control; and the neglectful style, defined by low warmth and demand, with little involvement in the child's life. these styles are evaluated to understand how parenting practices affect children's emotional, social, and behavioral development. perception of child self-concept application of a standardized psychometric scale, for the development and evaluation of self-concept in childhood, this scale is carried out with comparative images of individual, family and social contexts that allow the identification of children's coping styles of their different adaptive contexts ( villa&auzmendi, 1999). raven'sprogressive matrices a classic component, but of high relevance in the assessment of cognitive performance in conditions of cool-type tasks, allows the identification of rationality and is linked to high-performance tasks with eeg recording equipment. child wellbeing profile adaptation of the standardized well-being profile scales: satisfaction, affects and eudaimonia (see table 2). character strengths for children the character strengths test in its version for children has been reviewed by the original authors, so an application can be made to identify the 24 children's character strengths (niemiec, 2019). 5 digit test this qualitative application test analyzes performance on attention and interference processes important in the early detection of attention deficits or psychopathological diagnoses in children. however, in the neurointegral methodology it is also used for the analysis of mental flexibility in children. king's complex figure test evaluates visuospatial skills, visual memory, and executive functions in children. it consists of copying and reproducing a complex figure, allowing us to measure the capacity for organization, planning, and short and long-term memory, essential for cognitive and academic development. 4.8. cognitive demand tasks q2 (tdc) these tasks have two modes of application, one qualitative and the other quantitative. the first is applied in a vis-a-vis interview due to the complexity and qualitative examination of the activities, this is because we recognize that qualitative work requires human support that is difficult to replace and that facilitates our evaluations. while the evaluation of quantitative cognitive demand tasks is oriented towards the development of application protocols with computational interfaces, programming packages such as python and psychopy are used for the design of protocols with cognitive tasks of the go/no-go and cool/hot type. that record reaction times, type of response and number of errors. in addition, encephalographic activity (eeg) is also recorded in these activities, so the analysis of event evoked potentials becomes important in the qualitative and quantitative analyzes of the evaluation (see figure 7). what are go/no-go activities? this type of tasks proposes the development of an activity where impulse control is required in decision-making, which makes it possible to identify the prefrontal brain activity associated with inhibitory control, attention and cognitive-affective regulation of people. understanding people's performance in these activities allows them to improve the way they face scenarios of maximum uncertainty for better decision-making in the face of adversity. what are cool/hot activities? similar to go/nogo, but in this case, hot activities present affective content, while cool activities only present cognitive content, in this way they reveal people's performance when emotional and affective aspects are involved or not in making decisions. adapted neuromanagement and integral methodology in decision evaluation cum intervention 267 figure7. quantitative cognitive demand tasks note. our advances in programming have allowed the development of tasks with high cognitive demand and decisionmaking under uncertainty that serve as training activities and evaluation of cognitive and emotional functions in go/no-go and cool/hot tasks. in addition, protocols for recording electroencephalographic activity are adhered to these examination techniques. 4.9. qualitative cognitive demand tasks qualitative cognitive demand tasks are exercises that require strong clinical content and review by professionals. these tests are used to carry out neuropsychological evaluations that allow us to address the three key dimensions of our methodology: prevention, correction and optimization. amongthisbatteryof vis-a-vis activities are: 1) rey figure test: for memory abilities, visuospatial perception, among others. 2) five digits test. it analyzes the stroop effect of interference between semantic and perceptual tasks, allowing the evaluation of executive functions such as: inhibition, mental flexibility and alternation. quantitative cognitive demand tasks quantitative cognitive demand tasks are carried out through computerized tests that use computerized interfaces and analysis by eeg and event related potentials (see figure 7). among the activities that are usually proposed are: spatial reasoning, logical reasoning, mathematical reasoning, decision making under uncertainty, ethical dilemmas, social cognition and neuroleadership. 4.10. neuro-imaging records our evaluations with neuroimaging technology use advanced qualitative electroencephalographic (eeg) and quantitative electroencephalography (qeeg) activity recording systems for the development of brain mapping for personalized and comparative analysis. our equipment allows the recording of 14 channels of the 10-20 eeg system and monopolar protocols called brain minimapping used in field work with neurofeedback equipment. in summary, these records use highly specialized equipment for eeg, qeeg and mapping, neurofeedback and biofeedback that allow evaluation and training under the neurointegral methodology. among the main eeg analyzes carried out by our laboratory at the neurointegral scientific institute, it allows the interpretation of brain activity according to the type of activity, intrapersonal and intersubject comparison mappings, event-evoked potentials, activity coherence and synchronicity, cortical and arousal tone, all of them, oriented towards the assessment of brain health (figure 8). s sandhya, jyotirmaya satpathy 268 figure 8. eeg analysis processes used in the neurointegral methodology note. recording processes, qualitative and quantitative analysis of electroencephalographic activity with various latest generation eeg devices. the analysis and control of applications is proposed from brain-computer interfaces based on eeg (bansal & mahajan, 2019). 4.11. neurointegral methodology: practical implementation what is the neurointegral methodology? it is a pragmatic approach that translates the theoretical principles and scientific evidence on the study of cognition, emotion, social and brain domain in neuromanagement adapted to concrete, personalized and person-centered interventions. this methodology focuses exclusively on the implementation of advanced techniques and scientific tools to improve cognitive performance and emotional well-being, based on protocol evaluations obtained through adapted neuromanagement (34). 4.12. key dimensions adapted neuromanagement and neurointegral methodology raise key dimensions that are oriented to pragmatic work that is carried out through three clearly identifiable goals (figure 9):  prevention: we understand that the best way to solve a problem is through prevention, which is why it is our main work strategy. in this dimension, the design and implementation of programs is carried out to improve general well-being and prevent the development of pathologies through a comprehensive biopsychosocial approach: the main program is the human flourishing program.  correction: mental health is a pressing issue that should not only be worked on from clinical approaches to psychopathology; on the contrary, ‘positive’ interventions are necessary that contribute to enriching people's general well-being, skills and abilities. . for these reasons, our corrective programs are oriented towards the application of specific interventions and treatments to manage and correct existing pathologies, mainly working from neuropsychological guidance. neuropsychologicalcorrection and rehabilitationprogram (35).  optimization: finally, our third key dimension is oriented to the work of optimizing people's well-being, performance and functioning. to this end, interventions are developed to improve cognitive, emotional and social performance in various groups of people (athletes, executives, students, etc.). the key dimensions of our methodological work are guided by the three main lines of work for governance in the 21st century and are the basis of working with people for the new millennium, we refer to wellbeing, resilience and sustainability, the new trinity of governance (joseph & mcgregor, 2020). thus, our methodology aims to work to increase adapted neuromanagement and integral methodology in decision evaluation cum intervention 269 well-being, develop more resilient behaviors in the face of people's contexts, and to provide the basic elements so that behaviors, thoughts and emotions are independently sustainable by the people we accompany in their lives processes (37). figure 9. methodology: key dimensions evaluation protocol: adults our care protocols involve a biopsychosocial analysis of the people we accompany, so the broad evaluation that is developed allows a 360 neurointegral evaluation that offers an image of the different processes that constitute the human being in its adaptive behavior, the critical path of our procedures are carried out in a total of three sessions carefully prepared and adapted to the needs of our clients and people we accompany, the general route is as follows: session 1 1) record of reasons for consultation and sociodemographic data of the file 2) open interview to examine ego patterns session 2 3) pia assessment a. ip-hexaco-60 b. hmp-cognitive performance c. wellness profile and character strengths 4) five digit test (mental flexibility) 5) neuroimagingrecords a. base line b. in cognitive performance tests c. return to base line session 3 6) customerfeedback 7) return of factor a (adaptive). 4.13. evaluation protocol: children working with school-age children (ages 6 to 12) is vitally important for academic success and life outcomes. research throughout the life cycle has shown that both cognitive and noncognitive skills (personality and attitudes) are vital for professional success and to have better life outcomes in different domains such as health, work, life. as a couple or family, and in general to enjoy greater life satisfaction, well-being and intergenerational social mobility (campos, 2016). s sandhya, jyotirmaya satpathy 270 given these reasons, working with infants is relevant in the neurointegral methodology, which is why a 360 evaluation protocol is developed for this age group. theevaluationproposesthefollowinganalysisroute: session 1 1) record of reasons for consultation and sociodemographic data of the file 2) interview parentsorguardians 3) interview with children and free play activity session 2. parentsorguardians 4) analysis of upbringing and parenting patterns 5) children's adaptive behaviorscale 6) well-being profile and character strengths (adults) session 2. children 7) pia assessment a. perception of child self-concept (pai) b. raven's progressive matrices test for children c. well-being and character strengths profile for children 8) five digit test (mental flexibility) 9) neuroimagingrecords d. base line e. in cognitive performance tests f. returntobaseline session 3 10) feedbackfromparents and children 11) return of the ar (adaptive-relational) factor. 4.14. neurointegral intervention programs based on the protocol evaluations obtained through adapted neuromanagement, we apply a variety of personalized intervention techniques oriented from the neurointegral methodology. these techniques have given rise to different programs that facilitate timely intervention in the evaluation fields: intervention with neurofeedback and biofeedback: personalized training programs to improve neuronal and physiological self-regulation. mindfulness and relaxation techniques: implementation of specific protocols to reduce stress and improve attention, adapted to individual needs. virtual reality exposure therapy: development and application of personalized scenarios to treat phobias, anxiety and ptsd, with more than 150 environments available for various therapeutic applications. cognitive performance training based on computational interface: implementation of adaptive programs to improve specific executive and cognitive functions, based on the individual neurocognitive profile (see figure 7). qualitative neuropsychological training: implementation of rehabilitation and neuropsychological correction programs aimed at improving the psychological and brain functioning of people. adapted neuromanagement and integral methodology in decision evaluation cum intervention 271 emotional freedom techniques: application of emotional reprocessing protocols to improve self-regulation, adapted to specific emotional needs. guided neuroplasticity interventions: application of cognitive stimulation techniques designed to promote neuroplasticity in specific brain areas. character strengths program: implementation of psychological well-being management programs based on scientific evidence. personalized neuromanagement education: development and implementation of personalized educational programs on brain functioning, adapted to the level of understanding and needs of each individual or group. 4.14. neurointegral intervention with children neurointegral intervention programs for children use most of the interventions carried out with adults, however, there is an important differentiator in working with neuropsychological factors for the correction and optimization of children's activity. these factors are: programming and control, sequential organization of movements and actions, phonemic hearing, kinesthetic analysis and synthesis, audio-verbal retention, visual retention, perceptual-analytical, global perceptual and cortical tone (gonzález-moreno, et al., 2012), which are described from greater to lesser integrative complexity (see figure 10). figure 10. neuropsychological of child intervention in 360 protocols note. adapted neuromanagement and its derivation in the neurointegral methodology take up the work of sociocultural neuropsychology to provide solutions for neuropsychological correction and rehabilitation in children and adults, therefore it recognizes the impact of the analysis and work from the factors inherent to the activity. prepared and adapted with information from gonzález-moreno, et al. (2012). 4.15. implementation process  intervention design: based on the results of the multimodal neurocognitive diagnosis, a personalized intervention plan is designed.  gradual application: the techniques are implemented gradually, allowing adaptation and adjustment according to the individual's response.  continuous monitoring: during the intervention, constant monitoring is carried out using the diagnostic tools of adapted neuromanagement.  dynamic adjustment: the intervention plan is dynamically adjusted according to the individual's progress and responses.  results evaluation: established success metrics are used to evaluate the effectiveness of the intervention. s sandhya, jyotirmaya satpathy 272 4.15. scientific validation our adapted neuromanagement approach contains theoretical-epistemological foundations that have been described in the first part of this document. its derivation in the neurointegral methodology is offered from this foundation of practical work that is based on the discoveries and applications of neuromanagement, psychology, artificial intelligence and cognitive management in general, as well as interdisciplinary fields such as neuroeconomics and behavioral economics. likewise, the methodology has been validated through rigorous case studies and publications in scientific journals. our recent article ‘adaptive neuromanagement and neuro-integral methodology’ presents empirical evidence demonstrating the effectiveness of our interventions in various contexts. 4.16. success metrics we measure the success of our interventions by:  changes in brain activity: using eeg and qeeg, we observed positive changes in brain activity after the interventions.  reduction of stress and anxiety levels: we use standardized questionnaires to evaluate reductions in stress and anxiety levels.  improvements in cognitive performance: through neuropsychological tests, we measure improvements in executive functions, working memory and attention.  participant feedback: we collect testimonials and evaluations from participants to measure satisfaction and perceived impact. 4.17. ethical considerations all our interventions are carried out under strict ethical standards, with informed consent, guaranteeing the privacy and confidentiality of the data, and respecting the highest ethical standards in research and clinical practice. our commitment to social responsibility and innovation raises this strong ethical and bioethical commitment that is reflected in our care protocols:  safeguarding of files and client information  informedconsentforevaluation  informedconsentforinterventionprocesses  feedbackpapers and adaptive factors  ethics protocols in research and intervention 4.18. limitations and future directions we recognize current limitations and are working on:  database expansion: collect more data to improve our ai-based predictive models.  continuing research and longitudinal studies: conduct long-term studies to evaluate the lasting effects of our interventions.  improved adaptability and personalization of interventions: continue developing techniques to better adapt them to different populations and contexts. adapted neuromanagement and integral methodology in decision evaluation cum intervention 273 conclusions icn, bogota has created something that truly sets us apart: we “ask” the brain, and it responds. the neurointegral 360 diagnosis, a powerful tool for well-being and human potential optimization, offers a comprehensive and personalized view of the brain. this innovative approach, grounded in solid scientific research in neuroimaging, adaptive psychometrics, and cognitive neuromanagement, uses cutting-edge technologies to assess cognitive and emotional functioning in real-world contexts. complementing traditional clinical assessments, neurointegral 360 provides a holistic perspective that enhances the participant’s understanding and supports informed decision-making about their health and well-being. through real-life simulations, the diagnosis can detect indicators of potential pathologies or anomalies, facilitating referral to specialized medical care when necessary. paper remains at disposal to discuss in greater depth the technical and methodological aspects. we strongly believe that our approach represents a significant advance in the field of applied neuromanagement and we are excited to share our findings and methodologies with the scientific community. prepare for a quantum leap in understanding and optimizing the human brain. after a decade of intensive research, we present the neurointegral methodology: an approach that not only revolutionizes neuromanagement but also redefines our interaction with the human mind. herman and neethling whole brain assessment is a powerful tool designed to uncover the unique cognitive preferences and strengths of individuals. this assessment dives deep into the four quadrants of the brain: analytical, practical, relational, and experimental thinking. by evaluating how a person naturally approaches problems, makes decisions, and interacts with others, the assessment provides a comprehensive understanding of their cognitive profile. it not only highlights areas of strength but also identifies potential blind spots, offering valuable insights for personal and professional growth. by leveraging these insights, individuals can enhance their communication, teamwork, and overall effectiveness, fostering a more balanced and holistic approach to challenges and opportunities. in the evolving landscape of talent acquisition, brain-based approaches are setting new standards. by integrating quantitative electroencephalogram (qeeg) findings into the recruitment process, organizations can gain profound insights into a candidate’s cognitive functions and mental aptitudes. qeeg assessments provide a detailed map of brain activity, highlighting areas of strength and potential challenges. this data-driven approach allows recruiters to identify candidates whose cognitive profiles align with the specific demands of a role. for instance, high beta activity might indicate strong analytical and problem-solving skills, while elevated theta activity could suggest creative thinking and innovation potential. by understanding these nuances, companies can match candidates to roles where they are most likely to excel and thrive. moreover, brain-based talent acquisition goes beyond traditional metrics like experience and education. it focuses on innate cognitive abilities and neuroplasticity, ensuring a more holistic and precise fit between the candidate and the role. this not only enhances job performance and satisfaction but also contributes to a more dynamic and adaptable workforce, capable of meeting the complex challenges of today’s business environment. s sandhya, jyotirmaya satpathy 274 acknowledgement: the authors are grateful to prof dr julio ramirez, director general, icn bogota, republic of colombia for his inputs in this paper references 1. alexander, r., aragón, o. r., bookwala, j., cherbuin, n., gatt, j. m., kahrilas, i. j., kästner, n., lawrence, a., lowe, l., morrison, r. g., mueller, s. c., nusslock, r., papadelis, c., polnaszek, k. l., helene richter, s., silton, r. l. andstyliadis, c. (2021). the neuromanagement of positive emotions and affect: implications for cultivating happiness and wellbeing. neuromanagement and biobehavioral reviews, 121: 220–249. https://doi.org/10.1016/j.neubiorev.2020.12.002 2. aristóteles (trad. 2009). ética eudemia. alianza editorial. 3. aristóteles (trad. 2016). ética a nicómaco. alianza editorial. 4. ashton, m. c. and lee, k. (2020). objections to the hexaco model of personality structure—and why those objections fail. european journal of personality, 34(4), 492-510. https://doi.org/10.1002/per.2242 5. bansal, d. and mahajan, r. (2019). eeg-based brain-computer interfaces: cognitive analysis and control applications. academicpress, elsevier. 6. campos, r. (2016). inteligencia y personalidad. efectos en movilidad social y resultados de vida. el colegio de méxico, centro de estudios espinosa yglesias. 7. campos, r. m. (2017). economía y psicología. apuntes sobre economía conductual para entender problemas económicos actuales. fondo de cultura económica. 8. daly, a., ritunnanno, r., gallagher, s., kirmayer, l., van dam, n. andkleinman, j. (2024). examination of self patterns: framing and alternative phenomenological interview for use in mental health research and clinical practice. frontiers in psychology, 15. https://doi.org/10.3389/fpsyg.2024.1390885 9. darwin, c. (1859/2023). el origen de las especies mediante selección natural. alianza editorial. 10. duckworth, a. l., and gross, j. j. (2024). self-control. in j. j. gross and b. q. ford (eds.), handbook of emotion regulation (3rd ed., pp. 250–257). the guilford press. 11. favela, l. h. (2020). dynamical systems theory in cognitive management and neuromanagement. philosophy compass, 15 12. gallagher, s. (2024). the self and its disorders. oxford university press. 13. garland, e. l., fredrickson, b., kring, a. m., johnson, d. p., meyer, p. s., and penn, d. l. (2010). upward spirals of positive emotions counter downward spirals of negativity: insights from the broaden-and-build theory and affective neuromanagement on the treatment of emotion dysfunctions and deficits in psychopathology. clinical psychology review, 30(7), 849-864. https://doi.org/10.1016/j.cpr.2010.03.002 14. giorgi, a. (2015). the search for the psyche. a human management perspective. in k. j. schneider, j. f. pierson and j. f. t. bugental (eds.), the handbook of humanistic psychology (61-71). sage. 15. glimcher, p. w. (2018). decisiones, incertidumbre y el cerebro. la ciencia de la neuroeconomía. fondo de cultura económica. 16. gonzález-moreno, c. x., solovieva, y. and quintanar-rojas, l. (2012). neuropsicología y psicología histórico-cultural: aportes en el ámbito educativo. revista de la facultad de medicina, 60 (3): 221-231. 17. harrison, p. l. and oakland, t. (2008). sistema para la evaluación de la conducta adaptativa abas-ii [test psicométrico]. tea ediciones. 18. joseph, j. and mcgregor, j. a. (2020). wellbeing, resilience and sustainability. the new trinity of governance. palgrave macmillan. https://doi.org/10.1016/j.neubiorev.2020.12.002 https://doi.org/10.1002/per.2242 https://doi.org/10.3389/fpsyg.2024.1390885 https://doi.org/10.1016/j.cpr.2010.03.002 adapted neuromanagement and integral methodology in decision evaluation cum intervention 275 19. kahneman, d. (2012). pensarrápido, pensardespacio. debate. 20. kahneman, d., sibony, o. and sunstein, c. r. (2021). ruido. una falla en el juicio humano. debate. 21. lomas, t., waters, l., williams, p., oades, l. g., and kern, m. l. (2021). third wave positive psychology: broadening towards complexity. the journal of positive psychology, 16(5), 660–674. https://doi.org/10.1080/17439760.2020.1805501 22. méndez, s., méndez, a., hernández-sampieri, r. morúa, j. (2024). escala para la evaluación del clima organizacional: análisis de propiedades psicométricas [manuscrito inédito en dictamen por revista]. 23. mitchell, m. (2009). complexity. a guided tour. oxford press university. 24. mullainathan, s. and shafir, e. (2016). escasez.por qué tener poco significa tanto? fondo de cultura económica. 25. newen, a., gallagher, s. andbruin, l. d. (2018). 4e cognition: historical roots, key concepts, and central issues. in a. newen, l. d. bruin, and s. gallagher (eds.), the oxford handbook of 4e cognition, oxford library of psychology https://doi.org/10.1093/oxfordhb/9780198735410.013.1 26. niemiec, r. m. (2019). fortalezas de carácter. guía de intervención. manual moderno. 27. pinker, s. (2021). racionalidad. qué es, por qué escasea y cómo promoverla. paidós. 28. rich, p., de haan, r., wareham, t., and van rooij, i. (2021). how hard is cognitive management? proceedings of the annual meeting of the cognitive management society, 43. https://escholarship.org/uc/item/8cr8x1c4 29. rottenberg, j., goodman, f. r., and kashdan, t. b. (2024). well‑being after psychopathology. in j. j. gross and b. q. ford (eds.), handbook of emotion regulation (3rd ed., pp. 308–314). the guilford press. 30. rutschmann, r., romanczuk-seiferth, n., gloster, a., and richter, c. (2024). increasing psychological flexibility is associated with positive therapy outcomes following a transdiagnostic act treatment. frontiers in psychiatry, 15. https://doi.org/10.3389/fpsyt.2024.1403718 31. seligman, m. (2021). la auténtica felicidad. penguin random house grupo editorial. 32. thaler, r. h. (2019). todo lo que he aprendido con la psicología económica. booket. 33. uribe, j. f. (2016). psicología del trabajo. un entorno de factores psicosociales saludables para la productividad. unam, manual moderno. 34. varela, f., thompson, e. androsch, e. (2011). de cuerpo presente. las ciencias cognitivas y la experiencia humana. gedisa. 35. villa, a. and auzmendi, e. (1999). desarrollo y evaluación del autoconcepto en la edad infantil. ediciones mensajero, universidad de deusto. 36. zettler, i., thielmann, i., hilbig, b. e., andmoshagen, m. (2020). the nomological net of the hexaco model of personality: a large-scale meta-analytic investigation. perspectives on psychological management, 15(3), 723-760. https://doi.org/10.1177/1745691619895036 https://doi.org/10.1080/17439760.2020.1805501 https://doi.org/10.1093/oxfordhb/9780198735410.013.1 https://escholarship.org/uc/item/8cr8x1c4 https://doi.org/10.3389/fpsyt.2024.1403718 https://doi.org/10.1177/1745691619895036 agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 18, no. 1 (2024), pp. 223-239 223 nothing new in marketing communication of ecigarettes – the new wave of fake news i. sila iztok sila všpv ljubljana, slovenia, e-mail: iztok@sila-modic.si abstract: the tobacco industry is using the same methods of persuasion as they were doing since the start of advertising cigarettes and other tobacco products in 1914. producers of tobacco products have been accused of spreading misinformation and fake news since the 1980. main objective of our paper is to describe the evolution of “fake” marketing communication, especially of e-cigarettes lately the deceptive strategies of e-tobacco companies in their advertising campaigns, where they minimize the dangers of smoking and portray it as a beneficial or attractive practice are coming under the control of the relevant institutions. since the e-tobacco companies are using all the modern means and platforms of communication, especially young generations are quite successfully targeted. results of desk research will be presented as well as some of the activities performed by state owned, and private institutions aimed to prevent harmful and shameless spreading of this conflicting information. keywords: fake news, e-cigarettes, desk research. introduction this paper is partly based on a previous piece from 2018 where effect of fake news in marketing (communication) was illustrated using two examples: content of iron in spinach and danger of smoking (sila, 2018). since e-cigarettes of different styles and shapes evolved in these years, we decided to broaden our research into this area. the goal of this paper is to describe the marketing (communication) tools, approaches, and perfidious ways of persuasion that made people believe smoking (e-cigarettes) is a good and even healthy decision. or, since e-cigarettes tend to be more advanced, they “allow individuals to enjoy nicotine or flavored vapes at their own discretion. while there is still some stigma attached to vaping, it is becoming more widely accepted, and the devices are certainly safer than when they first appeared on the market decades ago« (indejuice, 2024). it is estimated that 1.1 billion people on the planet are smoking (healthdata, 2021). 90% of new smokers start smoking in the age between 15 and 24. the ten countries with the largest number of tobacco smokers in 2019, together comprising nearly two-thirds of the global tobacco smoking population, are china, india, indonesia, the usa, russia, bangladesh, japan, turkey, vietnam, and the philippines – one in three current tobacco smokers (341 million) live in china. (healthdata, 2021). mailto:iztok@sila-modic.si nothing new in marketing communication of e-cigarettes – the new wave of fake news 224 additionally, tobacco kills more than 50% of regular smokers, 6 million a year (plus more than 884.000 secondhand smokers) and has a two trillion-dollar economic cost to society each year (martin, 2018; smith, 2018; tobacco 2018). e-cigarettes are electronic devices which belong to an enlarging number of electronic nicotine delivery systems (ends) that mimic tobacco smoking without combustion of tobacco (bhatt, ramphul and bush, 2020). the first patent introducing electronic cigarette was granted as early as in 1930 to joseph robinson. nevertheless, »it was never commercialized, and it is not entirely clear that even a prototype of this primitive device was manufactured« (history of vaping 2022). there were a lot of unsuccessful attempts of developing and producing e-cigarettes until 2003 when a chinese pharmacist hon lik produces »the first modern e-cigarette«. his father died from lung cancer and he »sought to create a device that would more deliver nicotine in a less harmful manner than cigarettes« (indejuice, 2024). in april 2006 electronic cigarettes were first introduced in europe and in august 2006 to the united states. (history of vaping, 2022) »in march 2009, the e-cigarette business hit a roadblock with the fda. the government agency released import alert 66-41, effectively banning all imports of e-cigarettes, citing they were not fda-approved drug delivery devices«. soon, canada and hong kong banned ecigarettes. the fda continued to claim all kinds of e-cigarettes were drug delivery systems and required advanced approval from the fda (indejuice, 2024). the share of e-cigarettes in february 2024 in a selection of countries was (bashir, 2024):  indonesia: 32%  india: 28%  brazil: approximately 25%  russia: around 23%  united states: approximately 20% fake news fake news is “false, often sensational, information disseminated under the guise of news reporting” (collins, 2017). fake news was selected the word of the year by collins dictionary. usually, fake news relates to media, public relations, or similar activities. in our article we want to explain how fake news is diligently and quite successfully used by manufacturers of e-tobacco products (hereafter e-cigarettes). big and important advertisers have been communicating several facts that later proved to be false – they were often excused as alternative facts. tobacco industry used all of tools you can imagine avoiding telling the truth (sila, 2018) – this contains all of characteristics that can be attributed to fake news their successors are no less ingenious in this respect. the internet as a platform and ubiquitous, especially mobile broadband with smartphones as equipment have opened a new dimension in the topic of fake news. due to the number of messages, the superficiality, and the speed of the user (and the slightly smaller screen on the mobile device), if you are not careful enough who is the source of your information -, you can be easily misled. even the largest and most respected media were once owned, controlled or economically dependent on the tobacco industry (sila, 2018) which is still happening in one way or another today. iztok sila 225 research objectives in our paper, three objectives were meant to be achieved: firstly, whether the communication practices employed by e-tobacco companies exhibit attributes akin to those of fake news; then, whether these strategies bear semblance to historically recognized modes of deceptive communication; and finally, do modern institutions that are supposed to take care of the protection (health) of consumers take appropriate actions and regulate this domain? method the present research continues our work from 2018, but since it is a subject that is of particular interest to us due to its controversy, it is constantly monitored. the desk research was carried out from january, especially in march and april 2024. a huge number of different online and offline sources were reviewed, both those favoring the production and consumption of e-cigarettes and those against especially the websites of public and private "concerned" initiatives and scientific institutions (such as stanford university). the practice of some european self-regulatory advertising institutions, the european commission and the slovenian advertising chamber was also reviewed. results as stevens et.al. (2020) found out in their research, e-cigarette advertising was minimally regulated and therefore meant an important factor for increasing e-cigarette use among younger customers. smoking conventional cigarettes is still declining among youth and young adults, in contrast to e-cigarette smoking, which is increasing. advertising themes there are a lot of different ways how to advertise e-smoking. researchers at stanford university srita (stanford research into the impact of tobacco advertising) organized ecigarette advertising themes into 28 collections, of which we will focus on some, in our opinion, the most interesting in our paper: table 1 examples of selected adverting themes theme brand main message freedom blu victory take back your freedom no limitations no tar no odor healthier, health giving blu shenzhen tobeco technology more doctors vape than use traditional cigarettes! no second-hand smoke, no unpleasant smell, no fire, no ash helps you quit quitters lmae let smokeless delite be your last cigarette (lifetime warranty, 30-day money-back guarantee) why quit? just switch! try now! smart, pure & fresh veppo novus weak people smoke, strong people smoke less, intelligent people vape inspired by science. the harmonic balance of science and nature provides inspiration for the nothing new in marketing communication of e-cigarettes – the new wave of fake news 226 development of an integrative solution such as novus (sweet) flavors vapor wise vest shore vapes milk chocolate: inhale flavor, curb cravings, lose weight try our new red white&blue e-juice. it’s the bomb! woman targeting wink vape goddes eversmoke let’em, know you ‘re single? 0 mg guilty pleasure (cookies & milk) save a life. save a lung. save a boob sex sells weston blu i've got some bad habits but smoking isn't one of them. slim. charged. ready to go eco-friendly logic smoke green smoke it’s simple. (send us 10 disposable logic e-cigs, and we’ll send you 1 new disposable e-cig for free) tastes real… feels real… it’s not a cigarette. it’s electric e-cig designs njoy antonio villard the most amazing thing about this cigarette? it isn’t one. all of the good, none of the bad tobacco owned brands e-lites vuse the satisfying smoking alternative (uk’s best electronic cigarette) welcome to tomorrow. a perfect puff. first time, every time source: srita (n.d.) regulation of (e-)cigarette marketing slovenia in slovenia, the legal regulation of e-cigarettes is governed by the act on restrictions on the use of tobacco and related products (zoutpi), which entered into force in 2017. this act sets the following restrictions on e-cigarettes (nijz, n.d.-a; uradni list, 2017): prohibition on the sale of e-cigarettes to minors (under 18). prohibition of remote sales of e-cigarettes (via the internet or telephone). prohibition of advertising, promotion, and sponsorship of e-cigarettes. ban on the use of e-cigarettes in closed public places and workplaces, except in specially designated smoking areas. mandatory warnings about health risks on the packaging of e-cigarettes and liquids with nicotine. limiting the maximum nicotine content in e-cigarette liquids to 20 mg/ml. limiting the maximum volume of containers for e-cigarette liquids to 10 ml. limiting the maximum volume of containers for filling e-cigarettes to 2 ml. europe the marketing communication of e-cigarettes in eu countries is regulated by article 20 of the tobacco products directive (2014/40/eu), which lays down rules for electronic cigarettes sold iztok sila 227 as consumer products in the eu. according to this article, e-cigarettes must comply with safety and quality requirements (i. e. a maximum nicotine concentration and volume, child-resistant and tamper-evident packaging, and a mechanism for refilling without spillage). you can’t enter the new market with e-cigarettes without notification of regulatory institution in the country. you must provide information on the ingredients, nicotine content, and harmful effects of the products. moreover, e-cigarettes must carry health warnings advising consumers that they contain nicotine and should not be used by non-smokers, and a leaflet with instructions for use and additional information. any promotional elements on e-cigarette packaging are prohibited, and any cross-border advertising and promotion of e-cigarettes in the eu as well. the article also requires manufacturers, importers, eu countries, and the commission to monitor and report on the developments related to e-cigarettes, such as market trends, preferences of various consumer groups, and health effects. the commission has adopted implementing acts and reports to facilitate the implementation of article 20 of the directive. (public health, n.d.-a) questionable communication practices manufacturers and sellers of e-cigarettes use many tricks in their marketing and sales activities, below we will list only some of them (k., 2023; r., 2020; bandur, pust, jaklič, 2019; tobaccofreekids, n.d.) misleading consumers about the safety and health effects of e-cigarettes e-cigarettes are said to be safer and less harmful than regular cigarettes, although there is insufficient evidence to support this. in addition, some ignore warnings about potential risks such as nicotine addiction, lung and heart damage, and exposure to aerosols and toxic chemicals. while the american media is still following young people who have recently been affected by an unknown lung disease, which, according to doctors, is most likely related to smoking electronic cigarettes or vaping, it is also noted in slovenia that the use of such cigarettes is quite widespread in primary and secondary schools. in a survey conducted by nijz (nacionalni inštitut za javno zdravje nacionalni inštitut za javno zdravje (national institute of public health) in 2018, school workers reported its use in 43 percent of participating schools from slovenia. the mysterious lung disease, as it was called in the american media, including the washington post and the new york times, reportedly affected about a hundred people. although it is not yet known what caused it, it can be linked to electronic cigarettes or to the ingredients that people inhale while vaping. nor is there sufficient evidence that an infectious disease is to blame for their condition. since patients do not respond to antibiotics, doctors suspect that the cause of their discomfort is a toxic ingredient. targeting young and vulnerable groups using attractive and trendy elements. nicotine is a highly addictive substance and can greatly affect the development of the adolescent brain. in particular, it can damage the parts of the brain responsible for attention, memory and learning. if someone consumes nicotine at a young age, the likelihood of future addiction to other drugs increases. thus, some advertisers use colorful and tasty aromas, fashion designs, celebrities, music, and humor in their messages to attract young people (and other vulnerable groups). they are less critical, less experienced, and more susceptible to the influence of advertising. nothing new in marketing communication of e-cigarettes – the new wave of fake news 228 exploiting legal loopholes and lack of regulation entrepreneurs are always looking for opportunities to avoid excessive restrictions. manufacturers of (e)cigarettes are real masters at this, they cleverly take advantage of the fact that in most countries e-cigarettes are not subject to the same legal restrictions as regular cigarettes. for example, some advertise e-cigarettes on television, radio, the internet, and other media where advertising of regular cigarettes is prohibited. social networks and certain events are also an excellent opportunity to spread recognition and your own truth. also, some do not respect age restrictions or the ban on smoking in public places. advertising of e-cigarettes as a smoking cessation aid it is often easy to understand from advertisements that e-cigarettes are an effective way to quit smoking regular cigarettes, although there is no scientific evidence for this. but we do know that e-cigarettes can increase nicotine addiction and make the process of quitting smoking more difficult. in addition, e-cigarettes may encourage substantial use—along with regular cigarettes—increasing the effects of exposure to tobacco smoke and other harmful substances. corruption of academic research juul bought and entire may/june 2021 edition of the american journal of health behavior (for 51.000 usd). that means they can control the proof that juul’s products are safe. 11 studies were written by 26 co-authors, of which 18 were employed by or had strong connections with juul. most of the articles were influenced by juul, which claims that e-cigarettes help dissuade smokers from combustible tobacco products and thus help public health. virtually nowhere in these articles can we find information that juul and similar vaping companies make money by getting new smokers addicted to nicotine. but what can the quality of research even be if all the results come from the same corporate source (juul e-cigarettes, n.d.) discussions in the continuation, we describe selected examples of advertising topics, examples of limitations and restrictions of marketing communication and other examples of marketing activities in more detail. in the previous chapter, the reader could already find many characteristics that can be attributed to fake news, and below, these descriptions additionally confirm our claims. comment on advertising topics freedom freedom marketing is very powerful, since free style can also mean freedom to smoke anywhere – without worrying too much about smoking restrictions. e-cig brands market freedom-based messages both through traditional advertising in magazines and billboards and through direct consumer interactions through social media channels. blu cigs frequently posts on its facebook page with images associated with a free lifestyle and with posts asking followers to comment on their own “freedom stories.” (daddis, 2011, in srita, n.d.). freedom and rebellion-based communication messages are aimed primarily at a younger population that is less critical of advertising messages (srita, n.d.). iztok sila 229 picture 1 blu: take back your freedom source: srita (n.d.) health in the 1950s, tobacco company advertisements often featured doctors selling cigarettes or cigars. doctors have always been idealized. consumers who saw these ads felt that they had to follow the doctor's instructions after all, doctors represent the authority in the field of health. it is unlikely that such an advertising strategy would be tried in the 21st century. this is exactly what is happening in the electronic cigarette industry not only is it newer, it is also less understood and the consequences of e-smoking are less studied. e-cigarette brands such as vapestick, vape doctor and love are resorting to the old and familiar tactic of using the image of a "trustworthy" doctor to sell their products. in a more obvious push for the product by the online retailer, we see two surgeons in an operating theater laughing (!) at a patient who we understand is being treated for a tobacco-related illness. the headline of the ad reads: "still smoking tobacco cigarettes?" the rest of the text reads: "haven't you heard of e-cigarettes?" electronic cigarette companies distance themselves from the risk of lung cancer in their advertisements by stating that their product does not contain carcinogenic substances (green smoke, clearette, headlines, e-ciglife) or "no cancer substances" (ehealth-cigarette). the steamz brand even states that their cartomizers are "non-cancer" and "90% safer than traditional cigarettes" (srita n.d.). to date, not enough research has been done on the health effects of e-cigarettes, so this is a very immoral advertising tactic designed to emphasize people's fear of this, often fatal, disease. (u.s. national library of medicine, n.d.) picture 2 blu: doctors&nurses source: srita (n.d.) nothing new in marketing communication of e-cigarettes – the new wave of fake news 230 helps you quit in advertisements for e-cigarettes, their manufacturers convince consumers that ecigarettes are a "safer" alternative to traditional cigarettes. manufacturers thus market e-cigarettes as a "healthier" and more "environmentally friendly" recreational product to which consumers would be "wise" to switch. the advertisement for blu states that the e-cigarette is "a smart choice for smokers who want a change." the ad headline reads: "why stop, switch to blu." another ad for an e-cigarette vendor shows an image of a well-built woman who kicks a man smoking a regular cigarette (srita n.d.). picture 3 lmae: why quit? just switch! try now! source: srita (n.d.) smart, pure & fresh many e-cigarette company brands use numerous forms of the word "smart" in their ads (eg, intellicig, smart e-cigarette, kanger e-smart). one of the reasons for choosing such names is the effort of tobacco companies to alleviate the concerns of worried smokers. the purpose of such brand names is to communicate to potential users that they are smarter about choosing a digital product over a regular cigarette and that they can trust such a brand. likewise, e-cigarette producers often use positive images and slogans that divert attention away from the negative effects of smoking – the implicit message being that you would be smarter to use an e-cigarette than conventional cigarettes. visual images, which contain symbols of health, pleasure, and social desirability, similarly want to convince consumers that these are healthy products (srita, n.d.). in 2010, the use of light, mild, or fresh descriptors to prevent smoking cessation became legally prohibited. even though scientific studies have not shown any health benefits in switching to low-tar cigarettes (e.g., light, low-tar, mild cigarettes), many smokers still think that these products are better for their health. however, most smokers are not aware that they just found another way to achieve the same "target" level of nicotine. other studies show that using low-tar cigarettes actually delays quitting efforts (shopland et.al., 2001)! examples of companies using soothing descriptors and brand names include e-lites, go-lites, vapourlites, ezlite, and mild e-vaporizer. even when designing the packaging, they use white, green, light blue or silver color shades that remind us of lighter and healthier products (wakefield et.al., 2002). iztok sila 231 picture 4 veppo: weak people smoke, strong people smoke less, intelligent people vape source: srita (n.d.) (sweet) flavors the e-cigarette industry intensely claims that it only targets adults and established smokers. the abundance of vape juices with alcoholic or sweetened flavors and sweet names serve to make these products attractive to children and teenagers who like to experiment with tobacco products and are overwhelmed by misconceptions about the "safe nature" of ecigarettes. e-cigarettes and e-juices come in a variety of chocolate flavors, including milk chocolate, coffee chocolate, chocolate mint, chocolate caramel, chocolate peanut butter, chocolate banana, and chocolate strawberry. you can also find ice cream, candies, cookies, donuts, cakes and pies, mint, beverages and other flavors, colors, and shapes. when advertising chocolate-flavored e-cigarettes, images of decadent pieces of chocolate are common. some examples of packaging are designed to closely resemble popular chocolate brands (srita, n.d.). picture 5 vapor wise: inhale flavor, curb cravings, lose weight source: srita (n.d.) nothing new in marketing communication of e-cigarettes – the new wave of fake news 232 women targeting e-cigarette manufacturers often target women through dedicated brands such as vapor couture and luli. some companies are using ads that feature highly successful and independent women in occupations that have long been considered exclusively male. it is normal to see pink e-cigarettes next to a bouquet of red roses or lipstick. these images are intended to allow women to associate e-cigarettes with a harmless fashion accessory that is as crucial and fundamental as a make-up mirror or lipstick. a common trick they use is to use social/health reasons for their own benefit. in 1992, the pink ribbon became the official symbol of breast cancer awareness. since then, the color pink has often been linked with support for women who survived breast cancer, and women's solidarity. in this way, the manufacturers of e-cigarettes try to gain the willingness of the public and indicate to potential consumers that the product is not unsafe (srita, n.d.). picture 6 eversmoke: save a life. save a lung. save a boob source: srita (n.d.) sex sells e-cigarette manufacturers know this well and don’t hesitate to use phallic symbols or objectify women to sell their products. for example, blu also sponsored playboy parties that allowed visitors to meet playmates. playboy itself tackled this when it created its own playboy e-cigarettes. certain ads for playboy e-cigarettes with the registered bunny symbol advertised free condoms if you bought a vaporizer. phantom smoke shamelessly emphasized the objectification of women in its advertising. many ads show scantily clad women in submissive positions to men. ad for krave e-cigarettes shows a woman wearing a bodysuit sitting on the side of a sofa with her legs slightly apart, looking towards the viewer. in addition to online and print ads that abuse sexuality to sell a product, online videos are full of sexual innuendo. for instance, ad for the vip e-cigarette featured a sultry-looking woman saying, " i want you to get it out. i want to see it. feel it. hold it. put it in my mouth. i want to see how great it tastes." the online and tv ad, which aired in britain, attracted 937 complaints about its "overtly sexual" tone (srita, n.d.). iztok sila 233 picture 7 westons: i've got some bad habits but smoking isn't one of them. source: srita (n.d.) eco friendly "going green" is a very popular behavior these days, so it is understandable that the marketing mechanism of the e-cigarette industry also loudly proclaims that its products are environmentally friendly and better for health and the environment than conventional cigarette products. a lot of e-cigarette companies mention that their products do not produce smoke, only vapor, and are therefore less littering than conventional tobacco products. green smoke says it "aspires to create a greener planet" by offering cigarettes that are free of second-hand smoke, ash and fire hazards. southbeach smoke similarly equates the healthier aspect of ecigarettes i.e. without carcinogenic substances and without smoke, as a more environmentally friendly product. companies often use subliminal brand names such as green smoke, eco-cigs, ever smoke, evergreen vapor, enviro and green nicotine. many ads also use claims such as "additive-free," "organic," and "eco-friendly," meaning that the ingredients are "clean" and not harmful to humans or the environment. manufacturers are also keen to point out that their products are mostly reusable. that's why we don't throw them away and don’t accumulate in landfills and pollute the environment. nonetheless, the eco-friendly nature of e-cigarettes should be closely inspected. e-cigarettes contain numerous plastic and metal components that must be disposed of properly. furthermore, nickel-cadmium or lithium batteries used in e-cigarettes should be properly disposed of in an e-waste recycling container. if e-cigarettes are not disposed of properly, they pose an even greater polluting burden than traditional cigarettes (srita, n.d.). picture 8 logic smoke: it’s simple source: srita (n.d.) nothing new in marketing communication of e-cigarettes – the new wave of fake news 234 ecig designs there are two different styles of e-cigarettes. e-cigarettes that are shaped like technologically superior pens and smartphones, and e-cigarettes that seem and work like traditional cigarettes. for numerous heavy smokers, the whole smoking experience is important. for example, how they feel the cigarette in their hand, the taste and smell of the product, the way it burns their throat all this contributes to their enjoyment of smoking. some studies have shown that satisfaction with smoking decreases if smokers do not experience these feelings (srita, n.d.). picture 9 v2cigs: it’s new. it’s cool. it’s blue! source: srita (n.d.) tobacco owned brands tobacco producers entered the e-cigarette industry. among them are imperial tobacco, british american tobacco, japan tobacco international and philip morris international. table 2 selection of producers and brands company brand classic brand – e-cig cntc – the china national tobacco corporation hongmei, yunyan, lesser panda, furong, red goldem dragon, chunghwa kuanzhai kungfu, mc, mok bat british american tobacco, incl. r. j. reynolds and lorillard dunhill, kent, lucky strike, pall mall, rothmans, camel vuse, glo, velo imperial tobacco jps (john player special), davidoff, gauloises, west, winston, kool blu, pulze, zone x jti – japan tobacco international winston, camel, ld, benson&hedges with, logic, ploom, pmi – philip morris international marlboro, parliament, l&m, muratti, chesterfield iqos, bonds by iqos, lil hybrid, veev one, zyn source: companies’ web pages (for cntc, tobaccotactics, 2023) iztok sila 235 lorillard was the third largest cigarette producer in the us and a market leader in ecigarettes (49% market share in 2011). they entered the british market for e-cigarettes in 2013 by acquiring skycig, a british e-cigarette company. skycig was rebranded to blu (with a 20 million gbp marketing campaign). in 2014, lorillard was acquired by rj reynolds – that had to sell blu (to imperial tobacco). in 2017, the company was sold to british american tobacco (lorillard, n.d.) curbing the cloud: prohibited e-cigarette marketing campaigns in europe in some countries they have already started strong activities to minimize the effect of e-cigarettes themselves and fake news about them. e-cigarettes have appeared as a controversial product in the european market. while supporters push them as a harm-reduction tool for smokers, public health concerns regarding their long-term effects and potential appeal to non-smokers, particularly youth, have fueled regulatory debates. we try to present some examples of specific e-cigarette marketing campaigns in europe that were prohibited due to contravening regulations. the european union (eu) enacts a framework for tobacco advertising and promotion through directive 2014/40/eu. this directive prohibits most forms of advertising for tobacco products, including e-cigarettes. the definition of advertising is broad, encompassing "any form of commercial communication, regardless of the medium used, that directly or indirectly promotes a tobacco product", and it also restricts product placement and free samples (european commission, 2014). additionally, member states have the authority to implement stricter regulations. however, the evolving digital landscape and the fact that e-cigarettes are still a relatively new phenomenon have presented challenges in implementation. nevertheless, several e-cigarette marketing campaigns across europe have been prohibited for disregarding these regulations. one prominent example of a prohibited campaign is the use of social media influencers by tobacco companies. they partnered with influencers to promote their products in a seemingly organic way, often without clear disclosure of sponsorship. in 2019, concerns arose around british american tobacco's (bat) marketing of their vype e-cigarette brand in the uk. the campaign allegedly involved social media influencers posting photos showcasing themselves vaping vype products, usually without evident disclaimers that this activity was sponsored (furlong, 2019). this tactic exploits a potential loophole in regulations, as influencer marketing can be seen as a form of indirect promotion rather than explicit advertising. another marketing strategy that has been restricted is the use of flavors. e-cigarette marketing often portrays vaping as a trendy, glamorous, or rebellious activity. fruity, bubblegum and candy-like flavors are heavily promoted, especially in disposable vapes, which can be particularly attractive to young people (stead et.al., 2021), who might be tempted by the taste rather than the presence of nicotine (european commission, 2014). finland, for instance, has stricter regulations than the eu as a whole. their legislation bans not only the marketing of e-cigarettes but also flavored nicotine liquids (ollila, 2020). misrepresentation of health benefits is also one of prohibited tactics, especially unsubstantiated claims about e-cigarettes being a safer alternative or even smoking cessation tool. public health authorities argue such claims downplay the potential health risks associated with e-cigarette use (furlong, 2019; ieva 2023). nothing new in marketing communication of e-cigarettes – the new wave of fake news 236 measures authorities implement to improve the situation strengthening regulations: the european union is constantly evaluating and updating actions to address emerging market tactics. this also means the gradual banning of certain flavors of e-liquids and the tightening of controls on online advertising (conway, 2024). enforcement of existing regulations: authorities are intensifying prosecution efforts to detect and punish companies that violate the advertising ban. social media platforms must cooperate in removing unauthorized or suspicious content (conway, 2024). public health campaigns: public health agencies are launching campaigns to combat messages that promote vaping. these campaigns usually highlight the (potential) health risks of vaping and highlight the lack of effectiveness of vaping as a smoking cessation tool (east et.al., 2024). conclussions we have only touched the tip of the iceberg of the issue of e-tobacco products and the false communication related to them. several parts of the world, especially where the data is more difficult to access, were not taken into account. in our research, we found many controversial practices similar to those used by tobacco companies in the past to promote cigarettes. e-cigarettes are also presented as safe, modern, fun, and attractive, especially for young people. tobacco companies still deny or try to relativize the harmful effects of e-cigarettes on health and the environment, despite the fact that so far, no serious research has been done. what's more, e-cigarettes are often mentioned as a (safer) alternative to smoking traditional cigarettes, or even as an aid for quitting smoking! in any case, in addition to nicotine, the aerosol contains humectants (propylene glycol and/or glycerol), various aromas, carcinogenic substances (formaldehyde, tobacco-specific nitrosamines, benzene), heavy metals (nickel, chromium, lead, aluminum, cadmium, manganese, tin, copper), other chemical substances (acrolein, glycosal...), small particles... (nijz, n.d.). there is still not enough research to prove how harmless smoking e-cigarettes might be (sila, 2018). in addition, tobacco companies exert strong pressure on politicians and public opinion to prevent or weaken the regulation of tobacco products. the ban on e-cigarette advertising campaigns in europe highlights the ongoing debate about the public health implications of these products. as the regulatory environment continues to evolve, the focus on protecting public health, particularly the health of young people, is likely to remain dominant. the situation in some parts of the world, especially in asia, is much less regulated, which the governments of these countries will have to deal with in particular. it is difficult to assess the effects of bans and restrictions, as both manufacturers and retailers are constantly looking for shortcuts to consumers, who are often not even aware of the promotion of e-cigarettes. the use of modern advertising approaches, neuromarketing techniques and the insufficiently controlled use of social networks affect the success of etobacco companies. further research is needed to assess the long-term health effects of e-cigarette use in all forms and the effectiveness of current marketing restrictions. iztok sila 237 fake news, fake facts, myths – different words for the same phenomena have flourished uncontrollably with the development of the internet and the tools of artificial intelligence and social media. the effect of fake news is as strong as it is widely distributed. in the shortest possible time, an interesting new piece of information, a fact, a piece of evidence, which we may forget the next moment, will land in the readers' minds. the problem and the beauty of the internet is that even forgotten information can quickly appear again. it is our responsibility as recipients of information to be careful when consuming media. if we want to avoid the effect of fake news (in marketing), we need to follow a few simple rules that apply even more today than in the past: follow quality and objective media, be a responsible and well-informed audience, and use common sense (sila, 2017). references 1. about us. japan tobacco international – a global tobacco company. (n.d.). retrieved from https://www.jti.com/about-us 2. bandur, s., pust s., jaklič t. (2019, august 20). vejpanje: škodljiva iniciacija v kajenje. delo. retrieved from https://www.delo.si/prosti-cas/zdravje/vejpanje-skodljiva-iniciacija-v-kajenje/ 3. bashir, u. (2024, march 13). e-cigarette smokers in selected countries worldwide 2024. statista. retrieved from https://www.statista.com/forecasts/1452540/share-of-e-cigarette-smokers-inselected-countries-worldwide 4. bhatt, j. m., ramphul, m. & bush, a. (2020). an update on controversies in e-cigarettes. paediatric respiratory reviews, 36, 75–86. https://doi.org/10.1016/j.prrv.2020.09.003 5. brands of choice. imperial brand plc 2022 corporate website 2022. (n.d.). retrieved from https://www.imperialbrandsplc.com/brands-of-choice 6. china national tobacco corporation. tobaccotactics. (2023, march 24). retrieved from https://tobaccotactics.org/article/china-national-tobacco-corporation/ 7. collins the collins word of the year 2017 is..., collinsdictionary.com, retrieved from https://www.collinsdictionary.com/woty, 8. conway, l. (2024) house of commons library. advertising, marketing and promotion of vaping products. [research briefing] retrieved from https://commonslibrary.parliament.uk/researchbriefings/sn07001/. 9. east, k., taylor, e., simonavičius, e., nottage, m., reid, j. l., burkhalter, r., brose, l., wackowski, o. a., liber, a. c., mcneill, a., & hammond, d. (2024, january 23). noticing education campaigns or public health messages about vaping among youth in the united states, canada and england from 2018 to 2022. health education research. retrieved from https://www.ncbi.nlm.nih.gov/pmc/articles/pmc10805379/ 10. e-cigarettes: lorillard. tobaccotactics. (n.d.). retrieved from https://tobaccotactics.org/article/ecigarettes-lorillard/ 11. electronic cigarettes. public health. (n.d.). retrieved from https://health.ec.europa.eu/tobacco/product-regulation/electronic-cigarettes_en 12. electronic cigarettes. public health. (n.d.-a). retrieved from https://health.ec.europa.eu/tobacco/product-regulation/electronic-cigarettes_en#safety-and-qualityrequirements-for-e-cigarettes 13. european commission. (2014). directive 2014/40/eu of the european parliament and of the council of 3 april 2014 on the approximation of the laws, regulations and administrative provisions of the member states concerning the manufacture, presentation and sale of tobacco products and related products [lex navigator]. retrieved from https://eur-lex.europa.eu/eli/dir/2014/40/oj https://tobaccotactics.org/article/china-national-tobacco-corporation/ https://www.collinsdictionary.com/woty https://health.ec.europa.eu/tobacco/product-regulation/electronic-cigarettes_en https://eur-lex.europa.eu/eli/dir/2014/40/oj nothing new in marketing communication of e-cigarettes – the new wave of fake news 238 14. furlong, a. (2019, november 28). influencers cloud debate over vaping promotion. politico.eu. retrieved from https://www.politico.eu/article/hazy-regulations-on-vaping-e-cigarettes-vape-couldobscure-ad-sponsored-advertisement-influencer-violations/ 15. juul e-cigarettes: fueling a youth epidemic. campaign for tobacco-free kids. (n.d.). retrieved from https://www.tobaccofreekids.org/what-we-do/industry-watch/e-cigarettes 16. k., g. (2023). stroka: elektronska cigareta je škodljiva in ni pripomoček za opuščanje kajenja. rtvslo.si. retrieved from https://www.rtvslo.si/zdravje/stroka-elektronska-cigareta-je-skodljiva-inni-pripomocek-za-opuscanje-kajenja/662233 17. the lancet & the lancet public health: latest global data finds nearly 8 million deaths from smoking in 2019, and 90% of new smokers addicted by age 25. institute for health metrics and evaluation. (2021). retrieved from https://www.healthdata.org/news-events/newsroom/news-releases/lancetlancet-public-health-latest-global-data-finds-nearly-8 18. martin, t. (2018): smoking statistics that few people know about (global smoking statistics), verywell mind (online), retrieved from https://www.verywellmind.com/global-smoking-statisticsfor-2002-2824393 19. media stories and features press releases media resources subscribe to news alert media contacts social media. bat. (n.d.). retrieved from https://www.bat.com/brands-and-innovation/buildingbrands 20. nijz. (n.d.-a). retrieved from https://www.nijz.si/sites/www.nijz.si/files/uploaded/priloga_ elektronske_cigarete.pdf 21. ollila, e. (2020). see you in court: obstacles to enforcing the ban on electronic cigarette flavours and marketing in finland. tobacco control, 29(e1), e175 lp-e180. https://doi.org/10.1136/tobaccocontrol-2019-055260 22. our business. pmi. (n.d.). retrieved from https://www.pmi.com/our-business our companies altria. (n.d.). retrieved from https://www.altria.com/about-altria/our-companies 23. r., v. (2020). 12. marec, 2. današnja novinarska konferenca s tolmačem ob 18. uri, prenos na tv slo 1. rtvslo.si. retrieved from https://www.rtvslo.si/zdravje/novice/oglasujete-e-cigareto-kotzdravo-alternativo-kajenju-to-je-zavajanje/516992 24. responsible marketing. ieva – independent european vape alliance. (2023, april 25). https://eurovape.eu/the-industry/responsible-advertising/ 25. shopland d. r., burns d. m., benowitz n. l., amacher r. h. eds. (2001): risks associated with smoking cigarettes with low machine‐measured yields of tar and nicotine (smoking and health monograph 13). bethesda, md: national cancer institute 26. sila, i. (2017): effect of fake news on the buying behavior of consumers. presentation at the `real problem, real solution, real professional` student camp, eprofman 27. sila, i. (2018): fake news in marketing: the spinach and tobacco cases. challenges of applied business and social studies: 2018 monograph of the doba business school (p. 232-240) 28. smith, o.: mapped: the countries that smoke the most, the telegraph [online] 31. 5. 2018. available at retrieved from https://www.telegraph.co.uk/travel/maps-and-graphics/world-according-totobacco-consumption/ 29. srita. srita. (n.d.). retrieved from https://tobacco.stanford.edu/ 30. stead, m., hitchman, s.c., angus, k., aleyan, s., ford, a., mackintosh, a.m., purves, r., mitchell, d., hammond, d., fong, g.t., driezen, p., reid, j., craig, l., chung-hall j., cummings, k.m., thrasher, j.f., cho y.j., cowell, c., coker, t., bullock, s., froguel, a., vohra, j., “e-cigarette marketing in the uk: evidence from adult and youth surveys and policy compliance studies.” cancer research uk. 2021. retrieved from https://itcproject.org/findings/reports/e-cigarette-marketing-inthe-uk-mar-2021-english/ https://www.politico.eu/article/hazy-regulations-on-vaping-e-cigarettes-vape-could-obscure-ad-sponsored-advertisement-influencer-violations/ https://www.politico.eu/article/hazy-regulations-on-vaping-e-cigarettes-vape-could-obscure-ad-sponsored-advertisement-influencer-violations/ https://www.verywellmind.com/global-smoking-statistics-for-2002-2824393 https://www.verywellmind.com/global-smoking-statistics-for-2002-2824393 https://www.nijz.si/sites/www.nijz.si/files/uploaded/priloga_%20elektronske_cigarete.pdf https://www.nijz.si/sites/www.nijz.si/files/uploaded/priloga_%20elektronske_cigarete.pdf https://www.rtvslo.si/zdravje/novice/oglasujete-e-cigareto-kot-zdravo-alternativo-kajenju-to-je-zavajanje/516992 https://www.rtvslo.si/zdravje/novice/oglasujete-e-cigareto-kot-zdravo-alternativo-kajenju-to-je-zavajanje/516992 https://www.telegraph.co.uk/travel/maps-and-graphics/world-according-to-tobacco-consumption/ https://www.telegraph.co.uk/travel/maps-and-graphics/world-according-to-tobacco-consumption/ iztok sila 239 31. stevens, e. m., johnson, a. l., leshner, g., sun, f., kim, s., leavens, e. l. s., tackett, a. p., hébert, e. t., & wagener, t. l. (2020). people in e-cigarette ads attract more attention: an eye-tracking study. tobacco regulatory science, 6(2), 105–117. https://doi.org/10.18001/trs.6.2.3 32. the history of vaping. casaa. (2022, october 18). retrieved from https://casaa.org/education/vaping/historical-timeline-of-electronic-cigarettes/ 33. tobacco (2017) world health organization [online] retrieved from http://www.who.int/newsroom/fact-sheets/detail/tobacco 34. tobaccofreekids. (n.d.). retrieved from https://www.tobaccofreekids.org/assets/global/pdfs/en/global_cigarette_industry_pdf.pdf. 35. u.s. national library of medicine. (n.d.). the health consequences of smoking: a report of the surgeon general. national center for biotechnology information. retrieved from https://pubmed.ncbi.nlm.nih.gov/20669512/ 36. uradni list. (n.d.). retrieved from https://www.uradni-list.si/glasilo-uradni-list-rs/vsebina/2017-010404/zakon-o-omejevanju-uporabe-tobacnih-in-povezanih-izdelkov-zoutpi?h=zoutpi 37. wakefield, m., morley, c., horan, j. k., & cummings, k. m. (2002). the cigarette pack as image: new evidence from tobacco industry documents. tobacco control, 11 suppl 1(suppl 1), i73–i80. https://doi.org/10.1136/tc.11.suppl_1.i73 38. when were e-cigarettes invented? indejuice. (2024). retrieved from https://indejuice.com/vapeguides/when-were-e-cigarettes-invented 39. world health organization. (2019). who study group on tobacco product regulation: report on the scientific basis of tobacco product regulation: seventh report of a who study group. world health organization. retrieved from https://iris.who.int/handle/10665/329445 http://www.who.int/news-room/fact-sheets/detail/tobacco http://www.who.int/news-room/fact-sheets/detail/tobacco https://indejuice.com/vape-guides/when-were-e-cigarettes-invented https://indejuice.com/vape-guides/when-were-e-cigarettes-invented https://iris.who.int/handle/10665/329445 agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 18, no. 1 (2024), pp. 191-199 191 globalization dynamics to foster growth and development within circular economy: a case study of albania k. nikolla klea nikolla agricultural university of tirana, albania https://orcid.org/0009-0007-4407-0376, e-mail: kleanikolla2136@gmail.com abstract: the linear economy of today's society conflicts with many environmental, social, and economic challenges. as a result, policymakers and researchers prioritize the implementation of the circular economy concept. the european union supports a smooth transition to a circular economy through the circular economy strategy, the european green deal (carbon neutrality by 2050), and the united nations' sustainable development goals (sdgs). replacing traditional business models with circular business models necessitates a shift in technology features that incorporate r strategies (refuse, reduce, recycle, etc.). this study looks into how globalization dynamics affect the transition to a circular economy, as well as the implications for growth and development. albania, as a transitioning economy in southeast europe, provides an important backdrop for understanding the problems and opportunities given by globalization when embracing circular economic principles. keywords: circular economy, waste management, innovation, globalization. introduction adequate waste management has been in the spotlight for the last decade, as recent media attention highlights the tragic impacts caused by anthropogenic activity on the environment. due to industrial and economic activities as well as the ever-rising population growth worldwide, the amount of waste accumulated rises in all classifications: domestic, industrial, municipal, agricultural, commercial, etc. (okedu et al., 2022). in this sense, the circular economy concept has gained increasing momentum in urban and business settings, while the public, policymakers, and members of the scientific community have given the circular economy considerable attention. the circular economy concept constitutes a system that tackles global challenges (i.e., climate change, waste, pollution, etc.) and is based on three main principles: (i) elimination of waste and pollution, (ii) circulation of products and materials in their highest value form; and (iii) regeneration of the natural environment. the main goal is to decouple economic activities from consumption patterns of limited resources. a circular economy constitutes a resilient system striving to leave nobody behind (ellen macarthur foundation, 2017). however, policymakers can either facilitate or constrict the process by enacting a regulative climate, increasing their authority and proper implementation of their https://orcid.org/0009-0007-4407-0376 mailto:kleanikolla2136@gmail.com globalization dynamics to foster growth and development within circular economy: a case study of albania 192 policies, as well as boosting entrepreneurship (kruja, 2020b; ahmeti & kruja, 2021; maione et al., 2021). 1.1 circular economy in the focus of the european union in the context of developing a modernized and sustainable economy, in december 2015, the eu commission introduced the circular economy package, which defines the economy as ‘where the value of products, materials, and resources is maintained in the economy for as long as possible, and the generation of waste is minimized. because resource extraction and processing account for half of total greenhouse gas emissions as well as more than 90% of biodiversity loss and water stress, the european green deal1 started a coordinated approach for a climate-neutral, resource-efficient, and competitive economy. scaling up the circular economy from early adopters to mainstream economic participants would make a significant contribution to attaining climate neutrality by 2050 and decoupling economic growth from resource use, while also maintaining the eu's long-term competitiveness and leaving no one behind. 1.2 circular economy in albania regarding the situation in albania, the circular economy concept is still in its early stages. therefore, firms may play a significant role in driving the transition to sustainability through their participation in the circular economy (heras-saizarbitoria et al., 2023, marshall et al., 2023, ting et al., 2023). the circular economy concept was introduced in the draft integrated waste management strategy (2018-2024) which was produced in january 2018. the revised integrated waste management strategy focuses on the concept of "zero waste," treating waste as raw materials and managing it through circulatory systems to preserve raw material resources. in the strategy policy paper and integrated national waste management plan 2020-2035(the document of strategic politics and national integrated waste management plan 2020-2035) published by giz in collaboration with the ministry of tourism and environment, the main aim, mentioned the very beginning of the document is the transition from a linear economy to a circular economy. this document develops on the vision or perception of the "zero waste" concept, that waste is collected and treated as raw material and management is to be done by the concept of circular economy systems, to benefit the standardized use and preservation of raw material resources. the specific objectives of the strategic policy paper aim to provide practical solutions to:  address issues in the current management system  implement the legal framework in force make the necessary preparations to meet the obligations arising from the amendments stipulated in eu directives, including the ambitious objectives of the circular economy package. methodology https://www.sciencedirect.com/topics/earth-and-planetary-sciences/environmental-impact-assessment https://www.sciencedirect.com/science/article/pii/s2352186423003000#b46 https://www.sciencedirect.com/science/article/pii/s2352186423003000#b46 https://www.sciencedirect.com/science/article/pii/s2352186423003000#b63 https://www.sciencedirect.com/science/article/pii/s2352186423003000#b95 klea nikolla 193 the present study is a result of a thorough analysis of the existing literature. therefore, the methodology used is a literature review. it is a type of academic writing, which helps in understanding a subject in detail. in this article, the sources of information were collected through a search engine named google scholar by searching the following keywords: circular economy, waste management in albania, x. the data are mainly extracted from local municipalities and the national environment agency and institut of statistics in albania and also the co-plan report 2020 by the european commission about albania. results accurate and easily accessible data is necessary to assess the growth of the country's circular economy, particularly in key sectors. the evaluation of the current status of circular economy components in albania is based upon the structure of the monitoring framework and indicators put forward by the eu. production and consumption albania has had limited success in reducing waste output through circular economy manufacturing and consumption trends. when you expand this phase, the four indicators described in the monitoring framework will be discussed more below (qak, 2020). according to data from the institute of statistics, the flow of goods increased by 1.2% to 25 billion all in september 2020, compared to the same month the previous year. in 2019, the flow of products decreased. approximately 4% higher than in 2018. however, imports have consistently climbed by 19% between 2015 and 2019.29 imports increased by 0.3% compared to the same time last year. during the first nine months of 2020, exports declined by 13.6% and imports by 10.9% compared to the previous year (instat, 2020). according to 2019 statistics from the institute of statistics, there were about 1.2mil. ton of urban waste generated, where the dominant constituent is organic waste which counts for about 58.4% of total waste. the rest is a mixture of wood, paper/paperboard, glass plastics, textiles, metals, etc. listed in descending order. the major waste generators include the oil industry, cement production, steel and mining, and households. (ibid) food production generates waste throughout the manufacturing and delivery process. the majority of food waste comes from home cooking, restaurants, catering, and retail establishments. food waste occurs when manufacturing resources, such as water, energy, and limited environmental resources, are wasted. food waste undermines the circular economy concepts. managing food waste properly is challenging due to a lack of data and variable waste generation sources. this would assist both societal budgets and the environment. (european parliament, 2021). waste management sustainable waste management in albania remains at a relatively low level, with urban waste management services only covering about 87.9% of the resident population, residing globalization dynamics to foster growth and development within circular economy: a case study of albania 194 mainly in urban areas (referring to instat in 2019), marking an increase of 22.2% compared to the previous year. the national territory council approved the national plan for solid waste management33 on january 1, 2020. the strategy aims to provide sustainable solid garbage management services across the country, including minimizing and recycling garbage, reducing uncontrolled and unsanitary deposits/landfills, and protecting the environment. the current strategy aims to standardize national waste management guidelines to align with eu legal frameworks, similar to the previous one (qarkonomi, 2020). the approach aims to preserve both the environment and human health and can promote sustainable waste management by implementing policies, financing efficient practices, separating waste streams at the source, and encouraging businesses to recycle and reduce waste output. (world bank, 2019) albania lacks the necessary infrastructure to manage waste in an environmentally acceptable manner, including decreasing, reusing, collecting waste separately, and recycling, which are the most ecological activities according to the waste hierarchy pyramid. with linear economy being our current economy model, every product we buy and consume, for instance, smartphones, is mostly purchased with the sole purpose of replacing old ones. the latter gets disposed of and creates waste, resulting in larger issues for a planet with finite resources (taylor, 2020). secondary raw materials the usage of secondary raw materials accounts for a low or insignificant number of materials used for making new products, considering that the amount of recycled and reused wastes constitutes a small portion of the total waste volume. metals: scrap metal recycling is prevalent in albania. steel, aluminum, copper, and other metals are collected, processed, and reused in various industries. plastics: plastic recycling efforts have been increasing in albania to mitigate environmental pollution. pet bottles, hdpe containers, and other types of plastics are collected and recycled into new products or materials. paper and cardboard: recycling paper and cardboard is another significant aspect of waste management in albania. these materials are collected from households, businesses, and industries, processed, and reused to produce new paper products. glass: glass recycling programs exist in albania, focusing on collecting glass bottles and containers. recycled glass is melted down and used to manufacture new glass products. organic waste: organic waste, such as food scraps and yard waste, is often composted to produce organic fertilizers or biogas for energy generation. textiles: textile recycling initiatives are emerging in albania to address textile waste from clothing and other textile products. used textiles are collected, sorted, and either recycled into new fabrics or repurposed for various applications. electronics: e-waste recycling programs aim to collect and properly dispose of old and obsolete electronic devices, such as computers, smartphones, and appliances. valuable materials like metals and plastics are extracted for reuse, while hazardous components are disposed of safely. klea nikolla 195 efforts to improve recycling infrastructure and promote sustainable practices are ongoing in albania, driven by both government initiatives and private sector involvement. competitiveness and innovation albania is at an early stage of ensuring competitiveness and innovation, as seen by its numerous circular economy initiatives. albania has been gradually enhancing its competitiveness and fostering innovation in recent years. efforts include improving infrastructure, investing in education and skills development, and promoting entrepreneurship. initiatives like the national strategy for development and integration aim to strengthen the business environment and attract foreign investment. additionally, the government has been focusing on digitization and promoting research and development to spur innovation across various sectors. however, challenges such as bureaucracy and limited access to finance still need to be addressed to further stimulate competitiveness and innovation in albania. advance sustainable practices for all parts of the circular economy. the institute of statistics collects data on creative contributions from small and medium-sized businesses in technology, telecommunications, and optical, electronic, and computer device manufacturing. the centre for competitive skills in albania conducted a quantitative study on circular economy awareness and sensitivity among the general public and businesses. (qarkonomi 2020). questionnaires were distributed to the public and businesses to assess their familiarity with the term "circular economy." figure 1 public awareness of circular economy in albania *source: study report on circular economy awareness & sensitivity among general public and businesses (2020) based on the study report on circular economy in figure 1 about public awareness & sensitivity 24% of the population are familiar with circular economy and have information, 37% are familiar and do not have any information and 39% have never heard about it. figure 2 business awareness on circular economy in albania globalization dynamics to foster growth and development within circular economy: a case study of albania 196 *source: study report on circular economy awareness & sensitivity among general public and businesses (2020) the data in figure 2 represent that online marketing, especially social media, is the main source of information among albanians about the circulating economy, a finding which is consistent with the general information behavior of the country in recent years. traditional media such as tv and radio, have little role in this matter due to their low concentration in sustainability and chronicles of international development, and high concentration in the news local and daily. the audience complains about the lack of documentaries about science, technology, and new economic trends on albanian television platforms. newspapers, magazines, and academic publications are an important source of information for 37% of those familiar with the circular economy, followed by the educational system and groups of the environment. figure 3 the main barriers to circular economy in albania *source: study report on circular economy awareness & sensitivity among general public and businesses (2020) klea nikolla 197 figure 3 above summarizes the perceptions of citizens and entities on the main barriers of circular economy implementation in albanian to be lack of knowledge in general by all parties involved (58%); lack of pressure and awareness from the consumer side (54%); lack of interest among businesses (43%); lack of government incentives (41%); lack of laws framework and regulations (35%); increased costs for businesses (28%); corruption, poverty, low consumption (6%). improving the circular economy in albania involves a multi-faceted approach that addresses various sectors and stakeholders. here are some strategies to enhance the circular economy in albania: policy framework enhancement: strengthening policy frameworks to support circular economy principles is crucial. this includes implementing regulations and incentives to promote waste reduction, recycling, and sustainable production practices. additionally, integrating circular economy principles into national development plans and strategies can provide a cohesive roadmap for sustainable growth. investment in infrastructure: investing in infrastructure for waste management, recycling facilities, and renewable energy is critical. building a strong infrastructure network will make it easier to gather, classify, and process resources, increasing resource efficiency and lowering environmental impact. promotion of innovation and technology: encouraging innovation and technology adoption can boost efficiency and sustainability across a variety of industries. supporting research and development projects for eco-friendly materials, waste-to-energy technology, and circular business models can boost economic growth while reducing environmental impact. capacity building and education: providing training and educational programs on circular economy ideas can increase awareness and capacity among enterprises, government organizations, and the general public. workshops, seminars, and vocational training can all help to promote sustainable practices and develop a culture of resource conservation. encouragement of circular business models: encouraging enterprises to use circular business models such as product-as-a-service, remanufacturing, and sharing platforms can help to improve resource efficiency and reduce waste generation. incentives, tax benefits, and financial support for companies that embrace circularity can help to drive adoption. public-private partnerships (ppps): encourage collaboration among the government, private sector, and civil society organizations to drive circular economy initiatives. ppps can use their resources, skills, and networks to create novel solutions and expand successful interventions. consumer awareness and behavior change: it is critical to educate customers about the benefits of circular economy practices and encourage them to adopt sustainable purchasing habits. public awareness efforts, eco-labeling schemes, and green procurement rules can help customers make educated decisions and support firms that are committed to sustainability. integration with regional and global initiatives: aligning albania's circular economy goal with regional and global initiatives has the potential to improve cooperation, information exchange, and resource sharing. participating in circular economy-focused international forums, collaborations, and networks can help you gain access to best practices, funding globalization dynamics to foster growth and development within circular economy: a case study of albania 198 possibilities, and technical assistance. by implementing these strategies in a coordinated manner, albania can advance its transition towards a circular economy, fostering sustainable growth, environmental protection, and social well-being. conclusions the need to implement and promote sustainable economic activity in the global market is increasing limited resources. the primary purpose of this research was to better understand what the circular economy is and how it benefits the albanian market. ce attempts to preserve raw materials and keep them at their best value while minimizing pollution, which includes gas emissions, energy leakage, and water contamination. circular economy's business model is concerned with the sustainability of the environment. ce is not very common in albanian business. the lack of local government to push the implementation of the circular economy business model is discouraging, however, it is willingness and determination to implement green behavior from companies in albania and the said business model is only beginning to develop. the circular economy can address the problems of waste pollution and the depletion of raw materials from an environmental perspective. in terms of business, the circular economy may be very advantageous and opportune for enterprises; it can help with brand extension and new market expansion. improving the circular economy in albania necessitates a multifaceted strategy combining governmental policy initiatives, private sector engagement, public awareness campaigns, and collaborative efforts among stakeholders. key measures include the development and implementation of comprehensive policies promoting recycling, waste reduction, and sustainable production methods, alongside the establishment of extended producer responsibility (epr) programs. investment in recycling and waste management infrastructure, coupled with the promotion of green technologies, will be crucial. additionally, raising public awareness through education campaigns and integrating circular economy concepts into educational curricula are essential steps. supporting circular businesses with financial incentives and fostering collaboration among various sectors will further accelerate progress. monitoring progress and adapting strategies based on evaluation findings are vital for sustained success in transitioning albania toward a more circular economy. the linear model of consumption and production predominates, leading to resource depletion, environmental pollution, and landfill overflow. however, there is growing recognition among policymakers, businesses, and civil society of the need to transition towards a circular economy model. efforts are underway to improve waste management practices, promote recycling initiatives, and encourage the adoption of sustainable production methods. despite challenges such as limited financial resources and institutional capacity, there is a burgeoning interest in circular economy principles, driven by the potential for job creation, resource efficiency, and environmental preservation. as albania endeavors to align with european union sustainability goals and enhance its competitiveness on the global stage, the promotion of circular economy practices is becoming increasingly integral to its development agenda. klea nikolla 199 references 1. ahmeti, e., & kruja, a. d. (2020). challenges and perspectives of supply chain management in emerging markets: a case study approach. leadership strategies for global supply chain management in emerging markets, 132-146 2. ellen macarthur foundation. (2017). circular economy overview. retrieved from www.ellenmacarthurfoundation.org:https://www.ellenmacarthurfoundation.org/circular economy/overview/concept 3. european parliament. (2021, march 3). circular economy: definition, economy and benefits. retrieved from www.europarl.europa.eu: https://www.europarl.europa.eu/ news/en/headlines/economy/20151201sto05603/circular-economy-definitionimportance-and-benefits 4. heras-saizarbitoria i., boiral o., testa f. (2023) circular economy at the company level: an empirical study based on sustainability reports 5. instat https://www.instat.gov.al/al/temat/mjedisi-dhe-energjia/mjedisi/ 6. kruja, a.d. (2020b). entrepreneurial challenges of albanian agribusinesses: a content analysis. journal of eastern european management studies, 25(3), 531-555 7. maione, g., sorrentino, d., & kruja, a. d. (2021). open data for accountability at times of exception: an exploratory analysis during the covid-19 pandemic. transforming government: people, process and policy. 8. qak. (2020 february) analize e legjislacionit dhe inciativave mbi ekonomine qarkulluese www.qarkonomi.al:https://qarkonomi.al/wp-content/uploads/2020/11/analize-elegjislacionit-dhe-iniciativave-%e2%80%a9mbi-ekonomineqarkulluese-ne-shqiperi_2020.pd 9. qarkekonomia. (2020, february). study report on circular economy awareness and sensitivity among general public and businesses. www.qarkonomi.al: https://qarkonomi.al/wp-content/uploads/2020/11/study-report-on-circular-economyand-environmental-issues-awareness-albania-2020.pd 10. taylor, l. (2020, october 14). what is the linear economy and why do we need to go circular? retrieved from https://planetark.org/newsroom/news/what-is-the-lineareconomy-and-why-do-we-need-to-go-circular 11. the world bank. (2019, september 23). solid waste management. retrieved from www.worldbank.org: https://www.worldbank.org/en/topic/urbandevelopment/brief/solidwaste-management https://www.europarl.europa.eu/%20news/en/headlines/economy/20151201sto05603/circular-economy-definition-importance-and-benefits https://www.europarl.europa.eu/%20news/en/headlines/economy/20151201sto05603/circular-economy-definition-importance-and-benefits https://www.europarl.europa.eu/%20news/en/headlines/economy/20151201sto05603/circular-economy-definition-importance-and-benefits https://www.instat.gov.al/al/temat/mjedisi-dhe-energjia/mjedisi/ https://qarkonomi.al/wp-content/uploads/2020/11/analize-e-legjislacionit-dhe-iniciativave-%e2%80%a9mbi-ekonomine-qarkulluese-ne-shqiperi_2020.pd https://qarkonomi.al/wp-content/uploads/2020/11/analize-e-legjislacionit-dhe-iniciativave-%e2%80%a9mbi-ekonomine-qarkulluese-ne-shqiperi_2020.pd https://qarkonomi.al/wp-content/uploads/2020/11/analize-e-legjislacionit-dhe-iniciativave-%e2%80%a9mbi-ekonomine-qarkulluese-ne-shqiperi_2020.pd https://qarkonomi.al/wp-content/uploads/2020/11/study-report-on-circular-economy-and-environmental-issues-awareness-albania-2020.pd https://qarkonomi.al/wp-content/uploads/2020/11/study-report-on-circular-economy-and-environmental-issues-awareness-albania-2020.pd https://planetark.org/newsroom/news/what-is-the-linear-economy-and-why-do-we-need-to-go-circular https://planetark.org/newsroom/news/what-is-the-linear-economy-and-why-do-we-need-to-go-circular http://www.worldbank.org/ https://www.worldbank.org/en/topic/urbandevelopment/brief/solid-waste-management https://www.worldbank.org/en/topic/urbandevelopment/brief/solid-waste-management agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 no. 1 (2023), pp. 154-161 154 social responsibility of business as sustainable development approach in management r. zvarych, i. rivilis roman zvarych¹, igor rivilis² west ukrainian national university, international economic relations department, ukraine ¹ orcid.org/0000-0003-3741-2642, e-mail: romazvarych@yahoo.com ² orcid.org/0000-0003-3764-2843 abstract. the feature of the effective functioning of social relations and the condition of sustainable dynamics of the country's development is socially responsible behaviour of business. in times of crisis, socio-economic processes become unstable, social risks increase and deepen. it is important to balance of social processes by reconciling the interests of economic entities and society, social proportions and certain priorities. in this aspect, the problem of social responsibility of business through the creation of a favourable business environment is of particular importance. as a result, it is important to study the process of corporate social responsibility as sustainable development approach in management. the objective of article is methodological research the concept of social responsibility of business, the key elements of its development, the obstacles to its implementation and systematic improvements of its management. it is proved that responsible business supports high rates of economic growth, ensuring career growth for all employees, as a growing business constantly needs to attract new employees. it is justified that the policy of social responsibility of business must be implemented at the level of strategic management in the activities of the marketing, production and sales departments, as well as in the understanding of the strategy and the readiness to implement it in the workplace. it is suggested that in order to increase the social responsibility of business, it is necessary to ensure the reliability of indicators of financial and non-financial (social) reporting and assessment of the effectiveness of socio-economic costs. keywords: business ethics, corporate culture, social responsibility of business, sustainable management introduction structural shifts in the economy create challenges for society. today, the issues of rational nature use (greening) of industrial productions, reduction of the material intensity of products and stabilization of resource provision of productions are still unresolved. as a result, there is a reduction in the number of enterprises, the environmental condition of industries is deteriorating, which is accompanied by a significant level of environmental pollution, negatively affecting the deterioration of the nation's health. at the business level, the health care crisis has enabled the adoption of corporate social responsibility practices, prompting the adaptation of business strategy, thus contributing to the mitigation of social and environmental problems. mailto:romazvarych@yahoo.com roman zvarych, igor rivilis 155 i. methodology concept of social responsibility of business the concept of social responsibility of business (srb) appeared at the end of the twentieth century and is at the stage of approval. that is why there is no single approach to its definition, but its essence remains unchanged – business must be socially oriented in relation to its own employees, the state, society, the environment and consumers. in many developed concepts, social responsibility is replaced by other definitions, in particular, such as: “corporate social activity”, “business ethics” (kroese, 2022). social responsibility of business has become part of the management system, has acquired special importance and includes several stages of development (see fig. 1). the first stage of the formation of srb (1920-1950) – the main ideologist – h. bowen (1953, research “social responsibility of a businessman”). according to the author, the social responsibility of a businessman consists in “implementing policies, making decisions or choosing a line of behaviour that would be desirable from the standpoint of society's goals and values”. the same time, p. drucker (1986, research “management practice”) considers public responsibility as one of the eight key factors for achieving business goals. at the second stage of srb (1970), the word combination of sr and business ethics was introduced, and special attention was focused on volunteering. according to m. friedman (1970), “social responsibility of business means using one's own resources and involving them in activities aimed at increasing profits, in conditions of open and free competition”. according to a. carroll (1999), the social responsibility of business is compliance with the economic, legal, ethical and philanthropic expectations presented by the society to the organization in this period. figure 1. stages and approaches of social responsibility of business [authors]. і. formation srb іі. business ethics and srb ііі. srb and sustainable developmen t iv. business case for srb v. institutionalization srb approach srb corporate selfishness the enterprise is a tool for creating wealth, and its social activity achieves an economic result corporate altruism businesses have the ability to influence society, and therefore must use this ability responsibly social requirement s the enterprise should focus its activities on determining the social demands of society and responding to them, thereby contributing to the strengthening of its positions stakeholder sthe social role of business should be determined by the requirements of stakeholders, thereby replacing the concept of society with the concept of "stakeholders" ethical duty it is based on the idea of the ethical duty of business and individual managers to society social responsibility of business as sustainable development approach in management 156 the third stage of social responsibility of business was characterized by strengthening its connection with sustainable development (1980). during this period, m. friedman's stakeholder theory was developed, the organizational structure of business social responsibility management began to be discussed, and the concept of sustainable development (development that meets the needs of the present without limiting the ability of future generations to meet their own needs) appeared. the fourth stage (1990) formed the business case for srb. at this stage, three motivational reasons for the development of the concept were formed: environmental protection, ecological diversity and stakeholders (latapi agudelo et al., 2019). the concept of a triangular balance between economic, social and environmental goals of development appeared. the fifth stage saw the institutionalization of business social responsibility at the national level and the emergence of international standards. in the 21st century a new impetus for srb development was achieved through the adoption of the iso 26000 standard, national strategies, state programs on social responsibility and un directives. as a result, the definition was formed: “social responsibility – company's responsibility for the impact of its decisions and actions on society and the environment through transparent and ethical behaviour that contributes to the well-being of society; takes into account the expectations of interested parties; complies with the legislation” (zvarych et al., 2022). having studied the existing theories, it is possible to distinguish the following types of approaches to the concept of corporate social responsibility of business (fig. 1). from the point of view of corporate egoism, corporations are instruments of wealth creation, and all social activity is aimed at achieving economic results. in this way, organizations fulfil their economic functions by producing goods and providing services needed by society, while creating jobs and maximizing profits for shareholders. proponents of this concept emphasize that only in the long-term profit maximization internally determines the real responsibility of the company, since this approach combines the interests of shareholders and other stakeholders (wickert, 2021). the approach from the point of view of corporate altruism defines the entrepreneurial ability to influence society, and, accordingly, the responsibility to use this ability. the most famous is the concept of “corporate citizenship”, which considers the role of business in the sense of social investments and obligations to local communities (lindeque et al., 2022). from the point of view of social requirements, the company should focus its activities on identifying the social requirements of society and responding to them. that is, there was a change from “what is good for society” to “what society requires from business”. the stakeholder approach assumes that, regardless of the type of business or organization, there is a group of people (stakeholders) who influence the company or are influenced by the company, i.e. delegate certain responsibilities. these groups are called “stakeholders” and they include: employees, buyers, shareholders, suppliers, communities, countries and society in general (seely, 2022). the ethical approach is based on the idea of moral responsibility of business managers and individuals to society. according to bukreieva (2022), every business has an economic, environmental and social responsibility to society, ensuring its viability. so, the social responsibility of business is a system of consistent economic, environmental and social measures of the company, implemented on the basis of constant interaction with stakeholders and aimed at reducing non-financial risks, long-term image improvement and ensuring the profitability and sustainable development of the enterprise (clendaniel, 2022). roman zvarych, igor rivilis 157 ii. results ii.1. key elements of entrepreneurship development analysing business activities, it is worth noting that socially responsible companies attach special importance to the training of their professionals, devoting approximately 10% of their own resources to this. companies also lobby for the teaching of specialized subjects in higher education institutions, both for master's and postgraduate studies, as well as in business schools, provide sponsorship and award the best projects of the final year at universities. sustainable development involves reducing inequality, and corporate social responsibility includes an antidiscrimination policy aimed at avoiding any discrimination or inequality based on race, gender, sexual identity, sexual orientation, age, religion or belief, disability, marital status, pregnancy or maternity. the company's anti-discrimination policy includes: cooperation agreements aimed at promoting social and labour inclusion of people with disabilities in the normal working environment; participation in the training program on labour inclusion of young people with certain disabilities; charity sports events for social integration of people with disabilities (bukreieva & denysenko, 2022). the key elements of entrepreneurship development are innovation and industry specialization: investment in business capacity, research and development; financing of analytical research and creation of databases; digital transformation and development of artificial intelligence; exchange of knowledge, participation in specialized forums; participation in industry associations. in addition, socially responsible companies have a corporate culture that assumes equal opportunities and gender equality, without any discrimination, as a basic principle. that is why companies are constantly taking measures aimed at equality between women and men in such key areas as access to work, job stability, pay, regardless of the legal system in the country. responsible business supports high rates of economic growth, ensuring career growth for all employees, as a growing business constantly needs to attract new employees (young graduates) (boiko, 2022). the main points of such obligations include: creation of quality employment; cooperation agreements with schools that give high school students the opportunity to get their first experience working in a business environment; cooperation with universities and business associations – seminars and courses on entrepreneurship; participation in programs that promote innovation and entrepreneurship, fosters critical thinking, problem solving, teaching children and youth certain skills; support for microfinancing, facilitating access to credit and financing for the most disadvantaged groups in society; sponsorship of family entrepreneurship and family business programs (tuxbury, 2022). ii.2. obstacles to implementation of social responsibility of business many factors influence the possibility and scale of corporate policy regarding the social responsibility of business, namely (fig. 2): the level of socio-economic development of the country; the quality of the institutional environment; specifics of the business and social business environment (international business integration, company size, law and order, level of income, consumer protection, level of competition; pandemic; war); differentiation of areas of social responsibility of business; the nature of the impact of social responsibility on financial and economic results in the shortand long-term periods; value orientations of company owners and top managers (greenaway, 2022). the problems and obstacles of social responsibility of social responsibility of business as sustainable development approach in management 158 business include its limited promotion and practical application, in particular (fig. 2): employers violate international norms of human and labour rights; non-compliance with sociallegal and labour rights; low wages; salary arrears; insignificant investments in labour protection, health of employees and professional development (stern, 2022). in addition, it is worth noting the lack of a sufficient number of interested and competent managers, because the policy of social responsibility of business must be implemented at the level of strategic management in the activities of the marketing, production and sales departments, as well as in the understanding of the strategy and the readiness to implement it in the workplace. in addition, there are problems such as low product quality, failure to meet technical production requirements, environmental pollution and unfair competition. also, lack of financial resources, inconsistency of criteria for assessing corporate social responsibility; low level of corporate culture; legal nihilism; and lobbying interests (kurland et al., 2022). figure 2. the problems and obstacles to implementation of social responsibility of business [authors]. ii.3. systematic improvement the social responsibility management regarding the macroeconomic environment in which companies operate during the crisis, it is worth noting that more sustainable growth in markets requires complex and interconnected actions at the national and regulatory levels. to adjust the growth rates, it is necessary to improve corporate governance. the structure of economy can be segmented to accelerate growth by improving corporate governance using a two-step algorithm. prospects for the development of social responsibility projects in developing markets require a national mechanism to promote the systematic improvement of social responsibility of business entities (fig. 3). problems legal economic informational facts of infringement of srb violation of labor standards non-compliance with rights of employees low level of salary arrears from the payment of salary savings on professional development non-compliance with technical requirements environmental pollution obstacles srb limited incentive distorted role of mass media capacity of influence groups limited culture of cooperation adaptation of international policies lack of competent managers factors srb level of socio-economic development of country specifics of the business and social environment the nature of connection of the srb directions the nature of the influence of srb value orientations of top managers roman zvarych, igor rivilis 159 figure 3. mechanism of systematic improvement the social responsibility of business entities [authors]. also, the social responsibility of business is closely interconnected with social consumption. socially responsible consumers consider the social consequences of their consumption and use their purchasing power to incorporate social change into the company (gilles, 2021). in this sense, it is a conscious choice of consumption based on moral and personal beliefs. it is conceptualizing the consumer as the responsible person who, based on the purchase of a certain product or service, minimizes or eliminates harm to society, thus maximizing positive impact in the long term (zvarych et al., 2022). ethical consumer behaviour, on the other hand, refers to their choice of one company and one or another product based on political, religious, environmental or social motives, as well as considering labour issues when shopping. in this case, in order to increase the srb, it is necessary to: create a system for obtaining reliable and timely information about the social, economic and public impact of companies; ensuring the reliability of indicators of financial and non-financial (social) reporting and assessment of the effectiveness of socio-economic costs; financial support of the social package through the social security plan of the organization's employees (an integral part of the event organization plan) (zvarych et al., 2022). conclusions global crises have encouraged companies to increasingly include social and environmental aspects in their business activities. this was largely driven by government regulations and is a potential source of competitive advantage for companies. in addition to government pressure, coercion has been another catalyst for the adoption of corporate social responsibility practices. actions focused on environmental outcomes have become central to sustainable development, as the adoption of such practices drives corporate development as well as investment. the debate between interest groups and shareholders has intensified in recent years as regulatory and enforcement pressures on companies have led to the inclusion of sustainable indicators such as esg (environmental, social and governance indicators), which include aspects of related to climate change, pollution, working conditions. the components that make up social responsibility have been disrupted by the pandemic, which has greatly affected the global economy due to the policies put in place to stop the spread of the virus. protection of social and labor rights of employees and consumer rights improving community life and reducing gaps in regional development ensuring the sustainable development of the country's economy and society increasing the competitiveness of the economy, social consumption reduction of unemployment, removal of social tension raising the standard of living, creating a middle class rational use of natural resources and reduction of pollution promotion of investment and innovation processes economic and social integration social responsibility of business as sustainable development approach in management 160 environmental performance during the pandemic and war in ukraine prompts a decline in proactive environmental action, as these issues are central to the world (zvarych et al., 2022). responsible business supports high rates of economic growth, ensuring career growth for all employees, as a growing business constantly needs to attract new employees: creation of quality employment; cooperation with universities and business associations; support for microfinancing; sponsorship of family entrepreneurship. the obstacles of social responsibility of business include: violation by employers the international norms of human and labour rights; non-compliance with social-legal and labour rights; low wages; salary arrears; insignificant investments in labour protection, health of employees and professional development. the prospects for the development of social responsibility projects require a national mechanism to promote the systematic improvement of social responsibility of business entities. also, socially responsible consumers consider the social consequences of their consumption and use their purchasing power to incorporate social change into the company. future research in this direction should be directed to the problems of sustainable business development in the conditions of war, as well as to the areas of manifestation of the implementation of social responsibility of business in the post-war period. references 1. boiko, o. (2022). social responsibility of business during martial law. https://eba.com.ua/sotsialna-vidpovidalnist-biznesu-u-period-voyennogo-stanu 2. bowen, h. r. (1953). social responsibility of the businessman. new york: harper & row. 3. bukreieva, d., denysenko, k. (2022). social responsibility of business as a basis for ensuring business activity of enterprises: european integration aspect. ekonomika ta suspilstvo, (38). https://doi.org/10.32782/2524-0072/2022-38-52 4. carroll, a. b. (1999). the pyramid of corporate social responsibility: toward the moral management of organizational stakeholders. business horizons, 34(4), 39-48. 5. clendaniel, m. (2022). the 10 most innovative companies in corporate social responsibility of 2022. https://www.fastcompany.com/90724377/most-innovativecompanies-corporate-social-responsibility-2022 6. drucker, peter. (1986). management: tasks, responsibilities, practices. harper business. http://dspace.vnbrims.org:13000/jspui/bitstream/123456789/4735/1/management%20%20tasks%2c%20responsibilities%2c%20practices.pdf 7. friedman, milton. (september 13, 1970). a friedman doctrine: the social responsibility of business is to increase its profits. the new york times magazine. https://www.nytimes.com/1970/09/13/archives/a-friedman-doctrine-the-socialresponsibility-of-business-is-to.html 8. gilles, thibaut. (2021). understanding corporate csr in the digital era. blog qhse. quality & ehs management in the digital age. https://www.blogqhse.com/en/understanding-corporate-csr-in-the-digital-era 9. greenaway, k. (2022). 5 ways to win at corporate social responsibility in 2022. https://onetribeglobal.com/sustainable-business/5-ways-to-win-at-corporate-socialresponsibility-in-2022/ 10. kroese, m. (2022). steps toward building more sustainable organizations. harvard https://eba.com.ua/sotsialna-vidpovidalnist-biznesu-u-period-voyennogo-stanu https://doi.org/10.32782/2524-0072/2022-38-52 https://www.fastcompany.com/90724377/most-innovative-companies-corporate-social-responsibility-2022 https://www.fastcompany.com/90724377/most-innovative-companies-corporate-social-responsibility-2022 http://dspace.vnbrims.org:13000/jspui/bitstream/123456789/4735/1/management%20-%20tasks%2c%20responsibilities%2c%20practices.pdf http://dspace.vnbrims.org:13000/jspui/bitstream/123456789/4735/1/management%20-%20tasks%2c%20responsibilities%2c%20practices.pdf https://www.nytimes.com/1970/09/13/archives/a-friedman-doctrine-the-social-responsibility-of-business-is-to.html https://www.nytimes.com/1970/09/13/archives/a-friedman-doctrine-the-social-responsibility-of-business-is-to.html roman zvarych, igor rivilis 161 business review. https://hbr.org/sponsored/2022/05/steps-toward-building-moresustainable-organizations 11. kurland, n., baucus, m., & steckler, e. (2022). business and society in the age of covid‐ 19: introduction to the special issue, business and society review, 1, 147-157. https://onlinelibrary.wiley.com/doi/full/10.1111/basr.12265 12. latapi agudelo, m., johannsdottir, l., davidsdottir, b. (2019). a literature review of the history and evolution of corporate social responsibility. international journal of corporate social responsibility, 4(1). https://www.researchgate.net/publication/330563745_a_literature_review_of_the_history_and_e volution_of_corporate_social_responsibility/link/5fc4823fa6fdcc6cc6846b04/download 13. lindeque j., samuel o., kraft c. (2022). small businesses’ social responsibility and political activity survey studies: a review, synthesis, and research agenda. https://journals.sagepub.com/doi/full/10.1177/21582440221085020 14. seely h. (2022). top corporate social responsibility trends 2022. work for impact. https://www.workforimpact.com/blog/top-corporate-social-responsibility-trends-2022 15. stern, j. (2022). the business benefits of corporate social responsibility impact assessments. forbes. https://www.forbes.com/sites/forbestechcouncil/ 2022/01/24/thebusiness-benefits-of-corporate-social-responsibility-impact-assessments/?sh=67db47883209 16. tuxbury, sarah. (2022). the changing nature of corporate social responsibility. https://umdearborn.edu/news/changing-nature-corporate-social-responsibility 17. wickert, ch. (2021). corporate social responsibility research in the journal of management studies: a shift from a business-centric to a society-centric focus. journal of management studies, 58(8), e1-e17. https://onlinelibrary.wiley.com/doi/10.1111/joms.12775 18. zvarych, r., dudnyk, yu., homotiuk, v., & bodnar, s. (2022). risk management of digital transformation under pandemic. herald of economics, 1, 38-53. https://doi.org/10.35774/visnyk2022.01.038 19. zvarych, r., homotiuk, v., rivilis, i., deyneka, yu. (2022). risk management of digital transformation under pandemic. herald of economics, 2, 142–156. https://doi.org/10.35774/visnyk2022.02.142 https://onlinelibrary.wiley.com/doi/full/10.1111/basr.12265 https://www.researchgate.net/publication/330563745_a_literature_review_of_the_history_and_evolution_of_corporate_social_responsibility/link/5fc4823fa6fdcc6cc6846b04/download https://www.researchgate.net/publication/330563745_a_literature_review_of_the_history_and_evolution_of_corporate_social_responsibility/link/5fc4823fa6fdcc6cc6846b04/download https://journals.sagepub.com/doi/full/10.1177/21582440221085020 https://onlinelibrary.wiley.com/doi/10.1111/joms.12775 https://doi.org/10.35774/visnyk2022.01.038 https://doi.org/10.35774/visnyk2022.02.142 agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 17, no. 2 (2023), pp. 1-9 1 the implementation of digital channels in business processes and access to finance for msmes in azerbaijan n. akhundzada, i. rzayeva nazrin akhundzada1, inara rzayeva2 azerbaijan state university of economics (unec), azerbaijan 1 http://orcid.org/0000-0001-8049-0318, e-mail: nazrin.akhundzada@gmail.com 2 http://orcid.org/0000-0003-2122-0603, e-mail: inara_rzayeva@unec.edu.az abstract: digitalization is assessed as a factor contributing to the sustainable growth of business entities. implementation of digital solutions has been recognized as a key tool stimulating expansion and development of micro, small and medium enterprises into the economy. micro small and medium enterprises represent a vast majority of firms in azerbaijan. limited access to financial resources is one of the key challenges exhibited by this size of enterprises. the rate of usage of online services by firms accelerated after covid-19 pandemic. despite significant progress during recent years, the adoption level of digital technologies particularly for financial services among population and entrepreneurs still needs to be developed. this article applies time series regression analysis and finds the existence of positive relationship between digitalization of business activities exemplified by e-commerce and the amount of credit funds allocated micro, small and medium business entities. the authors suggest about the existence of other factors that contribute to financial inclusion of small and medium-sized enterprises. keywords: digitalization; access to finance; entrepreneurship; e-commerce; e-banking introduction during recent years azerbaijan experienced remarkable reforms in the improvement of the business environment. according to oecd (2022), the expansion of e-government services by using digital technologies for completing many procedures such as company registration, business licensing, public procurement, customs and visa applications online is evidence of significant progress. the development of smes stands out as a crucial goal because these firms are the main contributors to job creation and sustained economic growth. they can also be interpreted as a source of prompt for diversification in the economy which eventually leads to an increase in productivity (oecd, 2019). according to state statistical committee of the republic of azerbaijan (2022) in 2021, the value added generated by msmes was 16.4% of the total value added in the economy. this figure was by 16.7% in the previous year. when it comes to the distribution of value added across sectors, 32.7 percent of value added generated by msmes was recorded in trade and repair of transport means sector, 13.6 percent in industry and 12.9 percent in construction. as it was mentioned before msmes play an important role in job creation. while looking at employment figures of msmes, we can observe that there was a 41.8 percent contribution in 2021 to total employment across all firms. other interesting results were given about investments made by msmes. according to published figures in statistical yearbook 2021, more than 74.7 percent of investments of msmes in fixed assets were financed through internal sources. http://orcid.org/0000-0001-8049-0318 mailto:nazrin.akhundzada@gmail.com http://orcid.org/0000-0003-2122-0603 mailto:inara_rzayeva@unec.edu.az the implementation of digital channels in business processes and access to finance for msmes in azerbaijan 2 in general, msmes represented 99.7 percent of all active enterprises in the country in 2021. meanwhile, micro firms make up 97.3 percent of all msmes. in terms of distribution of msmes by economic activity shown in figure 2, firms registered in trade; repair of transport means constitute 32 percent of the total number, to be precise is 119306 out of 355906 of all enterprises. the next largest share of enterprises is found in the sector with the label "other" which contributes to approximately 21 percent of the total number of firms. these two sectors compose more than half of all msmes in the economy. the third place is allocated to transportation and storage activity with 20 percent share. the goal of this article is to prove empirically the existence of a link between digitalized business services and the accessibility of funding for msmes in azerbaijan. msmes that usually suffer from lack of collateral or find it difficult to prepare relevant financial statements about their business may explore the advantages of using digital financial services for payments, savings and borrowing issues. demand for bank digital services mainly concentrated on consumer products related to mobile banking and payments. figure 1. sectorial distribution of msmes in azerbaijan source: the state statistical committee of the republic of azerbaijan azerbaijan has taken many important actions to support the development of entrepreneurship in the country. there have been implemented several state programs for the development of entrepreneurship and improvement of the business environment up to nowadays. swot analysis performed for smes in azerbaijan mentions strengths and weaknesses along with opportunities and threats that smes exhibit in the country in the strategic roadmap. from the strong sides, we can point to the existence of legislative framework for the entrepreneurship and constant expansion of the scope of the "electronic governance" system among many other points, whereas from the weakness part, it is worth mentioning the lack of highly qualified professionals, poor business skills, particularly at medium management level and difficulty in access to financial resources. introduction of private credit bureaus and movable collateral registry creates an opportunity for msmes to get financing. small and medium business (smb) development agency of the republic of azerbaijan otherwise called “kobi̇a” was established to support small and medium businesses by ensuring proper coordination and regulation. one of the steps taken towards the adoption of digital channels by smes is introduction of online sales platform for micro, small and medium entrepreneurs called “kobmarket”. smes can easily register there and sell their products according to relevant guidelines. nazrin akhundzada, inara rzayeva 3 as admitted by the state statistical committee of the republic of azerbaijan (2022), the role of banks in financing capital investments declined in 2021 compared to the importance of internal sources of funding. meanwhile, the enterprise survey conducted by world bank by interviewing 225 firms from july 2019 to march 2020 demonstrates in figure 2 that the percentage of firms of different size not feeling necessary to obtain a loan is higher in azerbaijan compared to the average of europe and central asia (eca) region (world bank, 2020). figure 2. percentage of firms not needing a loan source: world bank enterprise survey world bank (2020) collected data to measure regulations applied to smes across 190 economies. one of the dimensions quantitatively measured in this report is getting credit. this indicator focuses on two sets of issues. the first one is the strength of the credit reporting system and the second one is the effectiveness of collateral and bankruptcy laws in facilitating lending. there are two main indexes captured in figure 3 for getting credit score: ● strength of legal rights (0-12) ● depth of credit information ( 0-8) the score for strength of legal rights was at a maximum of 12, whereas depth of credit information stood at maximum of 8. these indexes reflect important issues regarding legal framework, collateral registry and distribution of credit data. figure 3. getting credit2020. azerbaijan source: world bank doing business 2020 the implementation of digital channels in business processes and access to finance for msmes in azerbaijan 4 digital payments strategy of central bank of azerbaijan for 2021-2023 has been developed to ensure access to affordable payment services for all groups of population and businesses (cbar, 2021). according to statistics, the volume of e-commerce transactions in the country has increased from 2016 to 2020 by 12.1 times. an upward trend was also found in the usage of e-banking services. as a piece of evidence, 61.6 percent of customer transfers from current accounts were made through e-banking in 2020 compared to 4.5 percent in 2016. however, despite the rapid growth over the last few years, the level of adoption of cashless payments among the population still lags behind those of advanced countries. analysis of trends about sources of loans issued for msme reveals that funding of credits given by banks is mainly financed through internal funds of banks. according to financial stability report prepared by cbar (2022), the percentage of funds provided by banks accounts for more than 80% of total sources from 2020 to 2022. regarding the share of msmes lending in total business loans, there is a strong upward trend from 2018 until 2022. this indicator obviously states a surge in access to finance for msmes so that recently more than half of distributed credit has been given to these types of firms. the growth of business loans continued due to implemented anti-crisis measures to minimize the negative impact during the pandemic period as it is mentioned in financial stability report of 2021(cbar, 2021). figure 4. percentage of business loans allocated to msmes in azerbaijan source: central bank of azerbaijan on the other side, the number of opened current accounts in banks for individual entrepreneurs who comprise micro businesses increased dramatically since 2016. basically, this fact suggests an increase in the usage of banking services by them. nazrin akhundzada, inara rzayeva 5 figure 5. number of opened current accounts by individuals engaged in entrepreneurship source: central bank of azerbaijan methodology the absence of relevant financial statements is one of the factors preventing access to finance for msmes (cbar, 2021). on the other hand, the adoption of ict-based services facilitates access to formal financial resources for msmes by making available records of business transactions via digital platforms. by using these records financial institutions can assess the creditworthiness of business entities. e-commerce platforms are one of the bright examples of such experience that enables banks and other financial institutions to obtain relevant information about the business performance of msmes. entrepreneurs who use e-commerce to run their businesses are more likely to achieve financial inclusion (wirdiyanti, rosnita, et al. 2022). digitalization also has an impact on the profitability of banks by increasing return on equity (roe). this article applies time series regression analysis for azerbaijan and investigates the following hypothesis: ● integration of digital tools into business processes improves the financial inclusion of msmes. figure 6. proxy variables for regression analysis to start research, we need to identify relevant variables for running a quantitative analysis. firstly, we perform correlation analysis. there are two variables in figure 7 that are the most relevant ones, according to the existing literature, to analyse the relationship between the digitalization of business operations and getting access to financial resources for msmes. another factor which plays number of loans allocated to msmes represents accessibility of finance for msmes number of e-commerce transactions -represents the degree of digitalization of business the implementation of digital channels in business processes and access to finance for msmes in azerbaijan 6 an important role for msmes in getting access to financial resources is asset quality in the banking system, according to armand, ndoye and sydorenko (2020). asset quality can be measured by portfolio of non-performing loans (npl) of the banking sector. the ratio of defaulting loans in azerbaijan followed a sharp decline within consecutive years and reached 3.8 percent in 2022 (central bank of the republic of azerbaijan, 2022). to normalize figures for the variables we use logarithmic functional forms. two explanatory variables with intercept are included in the regression. the tendency to turn to digital channels expanded intensively after the covid-19 pandemic when due to circumstances many operations were held online. due to the novelty of this trend in the country and the relative scarcity of available data, the time span for analysis is short. the preliminary check of the time series indicates the existence of an upward trend from 2018 to 2022 for e-commerce transactions and loans provided to msmes, whereas for the portfolio of non-performing loans the opposite downward trend comes true as it is shown in figure 7. the baseline regression model 1 is the following equation:  𝑳𝒏𝑳𝒐𝒂𝒏𝒕= 𝛼+ 𝛽𝟏𝑳𝒏𝒆𝒄𝒐𝒎𝒎𝒆𝒓𝒄𝒆𝒕+ 𝛽𝟐𝑳𝒏𝑵𝑷𝑳𝒕+𝜀𝒕 (1) notation: ● 𝛼intercept ● 𝛽1 slope coefficient on log function of e-commerce transactions held within country ● 𝛽2slope coefficient on log function of non-performing loans portfolio figure 7. time series graphs of key variables: lnecommerce, lnloan, lnnpl respectively nazrin akhundzada, inara rzayeva 7 (source: authors’ calculations) results the data set is obtained from central bank of azerbaijan and captures years from 2018 to 2022. the correlation coefficient measures the linear association between two variables. this coefficient is computed as the square root of r-squared obtained by regressing one variable on the other. a sign of coefficient shows whether the relationship is positive or negative. the correlation matrix in table 1 illustrates a strong positive correlation with a correlation coefficient 0.95 between credit funds allocated to msmes and e-commerce transactions conducted in the country. by contrast, the number of non-performing loans demonstrates a strong negative correlation with the amount of loans given to msmes. their coefficient of correlation is -0.69. table 1: correlation analysis (source: authors’ calculations) variable lnloan lnecommerce lnnpl lnloan 1.0 1.0 lnecommerce 0.95 lnnpl -0.69 -0.85 1.0 the implementation of digital channels in business processes and access to finance for msmes in azerbaijan 8 assuming that classical linear regression model assumptions hold, we regress our dependent variable log function of loans to msmes on two independent variables namely log function of ecommerce transactions and log function of npl portfolio. regression output (table 2) demonstrates coefficients of both regressors 𝛽1 and 𝛽2. table 2: regression results for model 1 (source: authors’ calculations) variable coefficient p-value lnnpl 0.06 0.24 lnecommerce 0.39 0.03 cons. 13.6 0.02 r-squared which measures goodness of fit is around 96 percent. according to obtained estimates, the implementation of e-commerce practices within the country positively affects the accessibility of credit funds for msmes. however, the regression output did not illustrate a significant coefficient for asset quality. presumably, a small sample creates bias and inconsistency. another possible explanation could be the irrelevance of npl portfolio as an indicator for analysis as it captures asset quality within all the types of issued loans not only business loans. the only reasonable concluding remark from this time series analysis is that there is a strong positive relationship between the financial inclusion of msmes and digitalization of business in azerbaijan. it implies that these variables move in the same direction. to eliminate the assumption of heteroskedasticity, we apply breusch-pagan test for heteroskedasticity in table 3. as it is obvious from p-value, we accept the null hypothesis of homoscedasticity and there is no need to use robust standard errors. table 3: breuschpagan test for heteroskedasticity chi2(1) 0.02 prob (chi2) 0.87 conclusions this article discussed the current state of msmes in the framework of digitalization trends in azerbaijan. the importance of the digital technologies is highlighted to achieve sustainable development. access to formal financial resources has been recognized as one of the main obstacles for msmes. considering that nowadays digitalization stands as a prominent factor for the development of msmes, the analysis includes an evaluation of the digitalization process and its implementation into business practices through conduction of e-commerce transactions. this hypothesis was tested for azerbaijan as we have found positive dynamics in loans attributed to msmes as well as in the usage of digital tools by business owners within the country during recent years. the results showed a positive correlation for both indicators and suggested a positive impact on the external financing of msmes generated by the appliance of digital mechanisms in business processes. however, due to the scarcity of data, we could not prove the existence of a statistically significant relationship between loans issued for msmes and asset quality in the banking sector as it was expected. further investigation may involve a detailed analysis of all possible determinants of financial inclusion of small and medium-sized enterprises including firm-specific, macroeconomic and institutional factors. nazrin akhundzada, inara rzayeva 9 references 1. central bank of the republic of azerbaijan. (2023). digital payments strategy of the central bank of the republic of azerbaijan for 2021-2023. 2. central bank of the republic of azerbaijan. (2021). financial stability report. 3. central bank of the republic of azerbaijan. (2022). financial stability report. 4. fouejieu, a., ndoye, a., & sydorenko, t. (2020). unlocking access to finance for smes: a cross-country analysis. 5. oecd. (2019). azerbaijan: driving diversification through strengthened entrepreneurship. oecd publishing, paris. 6. oecd. (2022). promoting enterprise digitalisation in azerbaijan. oecd publishing, paris. 7. strategic roadmap for the production of consumer goods in azerbaijan at the level of small and medium entrepreneurship. monitoring.az. 8. the state statistical committee of the republic of azerbaijan. (2002). micro, small and medium entrepreneurship in azerbaijan. statistical yearbook. 9. wirdiyanti, r., et al. (2022). how does e-commerce adoption impact micro, small, and medium enterprises' performance and financial inclusion? evidence from indonesia. 10. world bank. (2019). world bank enterprise survey. 11. world bank. (2020). doing business 2020. agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 18, no. 1 (2024), pp. 1-17 1 the impact of product innovation on female entrepreneurship success: a case of saudi arabia s. ahmad shabir ahmad college of business, al khobar, al yammah university, kingdom of saudi arabia https://orcid.org/0000-0002-0523-6536, e-mail: s_ahmad@yu.edu.sa abstract: recent reforms in saudi arabia granted empowerment to women, opening new entrepreneurial avenues for them. this study aims to assess the influence of product innovation on the success of female entrepreneurs in saudi arabia. employing a quantitative approach, data was collected through a survey questionnaire. the primary data set included responses from 256 saudi female entrepreneurs. smartpls was utilized for analysis, employing the pls-sem statistical technique. the results revealed a positive overall effect of product innovation on female entrepreneurs and their intentions. the study offers practical insights for female entrepreneurs and the saudi government to address challenges faced by saudi women. recommendations include the formulation of policies that provide sustained support for women entrepreneurs. additionally, the study suggests potential avenues for future research in this domain. keywords: product innovation, innovation creed, innovation conviction, innovation mindset, female entrepreneurship, saudi arabia introduction in the current business environment, the entrepreneurial population of female ventures is growing rapidly, which holds huge potential for making a major contribution towards wealth creation, innovation, and employment generation around the world (demartini, 2018). innovative businesses have created prominent opportunities for female entrepreneurs to enhance their competitiveness. because trends in female entrepreneurship are growing around the world, the representation of female entrepreneurs is still quite low in comparison with male entrepreneurs. as mentioned in the study of al-kwifi et al. (2020), the unequal status of women compared to men in most developing countries is a major factor that restricts women from carrying out their entrepreneurial activities. particularly in the context of the middle eastern region, unequal status for women is regarded as one of the major challenges to women's entrepreneurship. however, most countries have now recognized the important role of women entrepreneurs in economic well-being, so they are making efforts to harness equality and open up the opportunity for women to practice their entrepreneurial activities (ahmad & bajwa, 2022; ahmad & bajwa, 2021). saudi arabia is one of the countries recently acknowledging the importance of prioritizing entrepreneurship and f encouraging women's involvement in these endeavors to realize economic prosperity and growth (bereczki, 2015; danish & smith, 2012). female entrepreneurs, similar to their male counterparts, are now considered catalysts for innovation https://orcid.org/0000-0002-0523-6536 mailto:s_ahmad@yu.edu.sa the impact of product innovation on female entrepreneurship success: a case of saudi arabia 2 and job creation. the government's efforts to transform women's status in society by creating different opportunities for them (welsh et al., 2014). however, despite different reforms and initiatives from the ksa government, women entrepreneurs are still faced with an apparent form of discrimination when taking part in entrepreneurial activities. according to (bulsara et al., 2014), innovation works as an instrument or catalyst for entrepreneurship to achieve its main goals; thus, an effective entrepreneurial society requires continuous and steady development of innovation and entrepreneurship. similarly, peter ducker, one of the most prominent authors and educators of management studies, has stated that innovation is a particular feature of entrepreneurship, that bestows resources with a new capacity to generate wealth (agarwal, 2019). as per (dastourian et al., 2017), in the evolution from an industrial society to a knowledge and information society, the component of innovation and product development plays a crucial role in providing a distinctive advantage to entrepreneurs. while innovation positively influences different entrepreneurial activities, it eases up the attainment of resources, and the appropriate application of new knowledge and ideas tends to reduce risk, improve learning levels, and simplify different entrepreneurial activities. though research investigating the impact of product development on entrepreneurship in general is ample (lee et al., 2016; nambisan et al., 2018; ressin, 2022), evidence of the impact of product innovation on women's entrepreneurship is scarce. women's empowerment remained one of the understudied research areas in saudi arabia. recent reforms empowering saudi women across diversified domains, it attracted researchers' attention in recent years (alotaibi, 2020). however, women's entrepreneurship is a relatively less explored area. particularly, its relationship with product innovation and how it is influenced by that is almost unexplored in saudi arabia. though evidence from other geographical contexts has generally provided a positive relationship, both variables have been studied from different perspectives, as discussed in the literature review. by addressing prevailing gaps, this study aims to contribute to the body of knowledge in the following ways: firstly, while previous studies mainly focused on product development, this research shifts the focus to product innovation. product innovation has been conceptualized with three dimensions: innovation convention, innovation mindset, and innovation creed. secondly, current studies investigate the role of product innovation in entrepreneurship in general, whereas this study primarily focuses on female entrepreneurship. female entrepreneurship is conceived with three dimensions: perseverance, a need for achievement, and risk-taking behavior. thirdly, this study provides empirical evidence of women's entrepreneurship from saudi arabia, where women have recently been empowered. therefore, the body of knowledge on this novel area is very limited. lastly, this study contributes to the global body of knowledge with relatively novel insights on how innovation conventions, innovation creeds, and innovation mindsets can lead women to entrepreneurial success. the expected findings hold important implications for saudi female entrepreneurs, the government, society, and future researchers, as discussed in the end. shabir ahmad 3 literature review entrepreneurship and female entrepreneurs' success the term ‘entrepreneurship’ refers to the process of establishing a new business venture by bearing all risks associated with it to generate a substantial profit (ramadani et al., 2015; syed et al., 2019). radovic-markovic and salamzadeh (2012) defined entrepreneurship as the process of creating new value by entrepreneurs through the investment of their financial resources, time, and efforts to attain greater monetary profits and success in the corporate sector. however, due to the lack of a universal definition of entrepreneurship, numerous definitions highlight the different perspectives (burns, 2016; drucker, 2014). however, a successful entrepreneur needs analytical thinking, expertise, creativity, and competitiveness that enable the individual to take the lead in the market regardless of their gender, identity, and background (goby & erogul, 2011; terjesen & lloyd, 2015). in the current era, the world is moving towards modernization, where males and females are at an equal pace with each other to attain success and take the lead in a professional environment. in this regard, female entrepreneurs are those women who intend to and possess the potential to start their business venture either based on innovation (danish & smith, 2012). according to arab news (2017), there were 37% of female entrepreneurs in saudi arabia in 2017, compared to 35% in 2016. female entrepreneurship success refers to the ability of a woman to successfully initiate and manage an entrepreneurial startup that shows financial resilience, survives, and sustains in the long run. a successful female entrepreneur possesses a clear vision for the business and the resilience to overcome obstacles along the way. they exhibit perseverance to pursue their goals despite facing gender biases and systemic barriers in society. in addition, they are high-risk takers and possess a higher need for achievement. these components are elaborated on in the following sections. perseverance the term perseverance refers to the phenomenon of the persistence of an individual to achieve a certain goal by remaining adhered to the plan (manzanera-román & brändle, 2016). noguera et al. (2015) stated that perseverance plays an imperative role in successful entrepreneurship because it motivates individuals to keep trying and remain focused on goals by overcoming all the obstacles that stand in their way. in the competitive era, being a successful business leader in a dynamic market is highly difficult, and most people tend to give up in the initial stage without striving further for success (radovic-markovic & salamzadeh, 2012). for female entrepreneurs, perseverance is important because social obstacles and a lack of support greatly hinder their journey to becoming successful entrepreneurs. al-kwifi et al. (2020) implied that the culture of the kingdom of saudi arabia (ksa) specifies that females of the country should head towards running the business and refrain from communicating with the opposite gender due to societal, religious, and cultural norms. similarly, meyer and mostert (2016) asserted that the structure of society and the male dominance concept confine females to the home and create a barrier for women who intend to work professionally. the impact of product innovation on female entrepreneurship success: a case of saudi arabia 4 need for achievement the concept of a need for achievement is defined as the inner desire and source of motivation of the individual to achieve excellence and take the lead in a competitive environment. tanveer et al. (2013) asserted that the need for achievement can be considered the motivating factor for entrepreneurs that urges them to stand firm against all barriers and fill the market void. however, poggesi et al. (2016) argued that the need for achievement reflects the competitive behavior of an individual that motivates them to move in a smooth forward direction. mcclelland's need for achievement theory states that a person motivated by a high achievement orientation does not get easily influenced by monetary benefits or other external factors (khurana & joshi, 2017). similarly, lai et al. (2010) advocated the need for achievement as the principle of motivation and consistency in attaining success. the phenomenon of the need for achievement can be different for both male and female entrepreneurs, depending on their requirements (barba-sanchez & atienza-sahuquillo, 2011). furthermore, for female entrepreneurs, the need for achievement can be related to competing with the main players in the market at an equal level, standing strong in a dynamic environment, and making an impact on different segments of the state's economy (popescu et al., 2015). risk-taking behaviour in entrepreneurship, risk and uncertainties are major factors that are directly associated with the new business idea or venture because competition and a dynamic environment can impact the particular business negatively or positively (yordanova & alexandrova‐ boshnakova, 2011). it is essential for entrepreneurs to always prepare themselves to bear any sort of risk in newly established businesses because, without taking the risk, they cannot accelerate in a forward direction (bolton & lane, 2012). eroglu and picak (2011) defined risk as the attribute that can cause loss or failure in certain ventures and drag the organization into crises. makhbul and hasun (2011) implied that it is evident that where the rate of profits and success is greater, the number of risks associated with it is also high. the risk-taking behavior reflects the potential, willingness, and persistence of entrepreneurs to achieve new heights and set unique milestones (sánchez, 2011). according to makhbul and hasun (2011), the risktaking behavior of female entrepreneurs depends on their general attitude, and they depend on a substantial amount of strategic planning before adopting any risk associated with their business venture. product innovation the term innovation has multiple definitions and concepts that vary according to the perception and knowledge of every individual (bucherer et al., 2012). de medeiros et al. (2014) defined innovation by highlighting that it is the process of presenting a new creative idea regarding the establishment of certain products or services that can help create a competitive advantage and a firm position. furthermore, evanschitzky et al. (2012) advocated that innovative ideas can help fill the void in the market and can be generated from experience, problem-solving skills, and the creative thinking process. however, hughes et al. (2012) advocated the concept of innovation by stating that it involves making new changes and incorporating creativity into existing products or services. product innovation refers to the development and establishment of a product by introducing a product that does not exist in the shabir ahmad 5 market already or possesses some creative feature that adds to the uniqueness of the product and encourages the consumers to purchase that certain product (berends et al., 2014; galanaki & papalexandris, 2017; zivanovic et al., 2023). in a complex business environment, innovation helps entrepreneurs compete with key players in the market, establish their position, and effectively attract consumers' attention toward new ventures (lai et al., 2010). however, the likelihood of failure of a certain innovative product is always high because of the resistance of the target audience to new changes (slater et al., 2014). innovation conviction the term innovation conviction (icn) refers to the attitude towards commitments and achieving a certain goal (lai et al., 2010). every entrepreneur tends to establish their business venture with some mission and vision statement they intend to address in the future (waychal et al., 2011). however, over time, the goals do not align with the actual practices and activities of the organization. some entrepreneurs lack the ability to deliver specified commitments due to the absence of determination and motivation (mcadam et al., 2014). conviction is necessary to transform the innovative idea into a real-world entity, and it keeps the entrepreneurs motivated toward their goal of achieving success through an innovative idea (romero & martínez-román, 2012). motivation and determination are two major components that act as the driving source for innovation conviction because the sole attitude of the entrepreneur toward innovation cannot bring success if motivation is absent (waychal et al., 2011). furthermore, a lack of innovation conviction among entrepreneurs also affects the behavior of their employees in the workplace, because when they experience the non-alignment of the mission statement of the organization and business activities, negative perceptions are created for their employer (popescu et al., 2015). innovation mindset the innovation mindset (imt) reflects the attitude and approach of entrepreneurs towards innovation and new business ventures. in general, there are two different types of people: first, they always seek to follow the conventional pursuit and refrain from innovation (abu-saifan, 2012; lai et al., 2010). whereas, some individuals are flexible towards new changes and innovation. (gundogdu, 2012) advocated that for the success of an organization that follows the innovation pursuit, its employees must possess a positive mindset and be flexible enough to embrace it. similarly, (secundo et al., 2015) claimed that if entrepreneurs manage to change the attitude of the employees towards the adoption of innovation in a positive way, then they are quite close to success because, in dynamic and competitive environments, creativity and uniqueness can help them to accelerate smoothly. however, israel and johnmark (2014) specified that strategic changes and uniqueness in product or service characteristics are required to encourage and motivate employees towards innovation in a positive manner. if entrepreneurs tend to follow conventional pursuits from scratch and intend to transform them into an innovation mindset, suddenly they might need to face resistance from their employees (durkin & gunn, 2016). the impact of product innovation on female entrepreneurship success: a case of saudi arabia 6 innovation creed the phenomenon of innovation creed (icd) is closely related to the concept of innovation conviction because icd reflects the beliefs of entrepreneurs that are derived from their attitudes (lai et al., 2010). if entrepreneurs possess a strong belief in their innovative ideas, it would work as a source of motivation for them to pursue and transform their innovative ideas into a successful reality (schaltegger & wagner, 2011). rettberg (2016) asserted that personal beliefs can help entrepreneurs withstand their innovation convictions firmly and struggle to achieve success through continuous motivation. the study accumulated by evanschitzky et al. (2012) highlighted that a lack of belief and confidence in an innovative idea can demotivate entrepreneurs to step back due to uncertainties and a lack of motivation. impact of product innovation on the success of female entrepreneurship entrepreneurs do not solely depend on innovation to seek opportunities and achieve success; sometimes innovation is derived from the need for a certain product or service in the market (brush & cooper, 2012). innovation is a significant prospect for successful entrepreneurship. the phenomenon of successful entrepreneurship can be different for both males and females because obstacles and barriers in their way of success are also different, which leads to a difference in attitude, mindset, and belief of the individual towards innovation (noguera et al., 2015). for female entrepreneurs, cultural, financial, and societal pressures are major barriers that hinder their way of attaining success, specifically in middle eastern countries such as ksa (danish & smith, 2012). according to the study accumulated by alkwifi et al. (2020), in ksa, despite the numerous initiatives of the government, female entrepreneurs have to face strong setbacks and discrimination when they struggle to contribute to the economic development of the country. however, innovation conviction, which is their firm belief in their innovative idea, and a positive attitude can help them remain motivated towards the achievement of success (valdivia, 2015). subsequently, the study assembled by (lai et al., 2010) asserted that for women entrepreneurs, continuous motivation is necessary to remain intact with their goal and lessen the influence of external pressure on them. this discussion led us to the following hypotheses: h1: innovation convention positively impacts female entrepreneurship success. h1a: innovation conviction positively impacts the need for achievement. h1b: innovation conviction positively impacts perseverance. h1c: innovation conviction positively impacts risk-taking behavior. h2: innovation mindset positively impacts female entrepreneurship success. h2a: innovation mindset positively impacts the need for achievement. h2b: innovation mindset positively impacts perseverance. h2c: innovation mindset positively impacts risk-taking behavior. h3: innovation creed positively impacts female entrepreneurship success. h3a: innovation creed positively impacts the need for achievement. h3b: innovation creed positively impacts perseverance. h3c: innovation creed positively impacts risk-taking behavior. based on these hypotheses, the conceptual framework of the study is presented in figure 1. the framework highlights innovation convention, innovation mindset, and innovation creed (three facets of product innovation) as independent variables that positively influence shabir ahmad 7 female entrepreneurship success. female entrepreneurship success is a dependent variable with three dimensions: perseverance, the need for achievement, and risk-taking behavior. figure 1 conceptual framework of the study methods the population of this study includes women entrepreneurs in saudi arabia, as the study aims to examine the role of product innovation in women's entrepreneurship success. an exclusive list of women entrepreneurs' population is not available. to determine the minimum sample size, we followed the 10:1 rule proposed by hair et al. (2021), where ten responses are required for each indicator. the questionnaire includes 24 indicators, thus requiring a minimum sample size of 240. since the exact population size is not known, this study employed the snowball sampling technique to reach out to the desired respondents from across saudi arabia. the authors initially sent the online survey link through personal contacts to female entrepreneurs and requested them to snowball it to their contacts. a total of 489 responses were received. however, 233 responses were incomplete or unengaged, which were dropped from the analysis. a total of 256 complete responses were considered for final data analysis, yielding a 52% response rate. the majority of the female entrepreneurs (44%) were aged between 26 and 40 years, followed by around 28% between 41 and 55 years. 64% of the entrepreneurs had a graduate degree, followed by secondary education (17%), and a minor percentage (1%) had no formal education, while 10 percent had a master's or higher degree. the survey questionnaire was designed with due care and following the guidelines outlined by saunders et al. (2016). it was structured to gather data for the six latent constructs of this study using likert scales, alongside collecting anonymous demographic details. respondents' responses were collected using a 5-point likert scale, with 1 representing strong disagreement and 5 representing strong agreement. to operationalize the study variables, we utilized pre-validated measurement instruments for product innovation from lai et al. (2010), and for women entrepreneurship success from gupta and mirchandani (2018) and abd rani and hashim (2015). to ensure the suitability of these measurement scales for this study, reliability was ensured through confirmatory factor analysis and cronbach's alpha. additionally, the scales underwent testing the impact of product innovation on female entrepreneurship success: a case of saudi arabia 8 for convergent and discriminant validities, as well as face and content validity with input from three experts. the final data was analyzed using smartpls 4 statistical software, employing a partial least squares (pls) approach of structural equation modeling (sem). this approach was mainly used due to non-normal data distribution and reflective nature of study constructs, as used by other similar recent studies such as bajwa et al. (2023), mahmood et al. (2022), and ahmad and iqbal (2022). following hair et al. (2021) guidelines, the analysis was conducted in two stages: the first stage involved assessing the validity and reliability of the latent variables, while the second stage focused on evaluating the structural model to test the research hypotheses. results measurement model specifications the foremost prerequisite for the primary quantitative investigation is to assess the reliability of the designed instrument. in general, reliability is used to evaluate internal consistency in the responses that are measured through instruments; specifically, when the construct produces consistent results, this implies that the instrument is accurately designed and is reliable to be used for survey questionnaires. similarly, a second important prerequisite for the analysis is the validity of the construct; the validity of the construct refers to the extent to which an instrument measures what it was intended (planned) to measure. to assess the reliability of the scales, hair et al. (2021) recommended factor loading scores above 0.60 and cronbach’s alpha values above 0.60. as shown in table 1, factor loadings for all the items of the latent variables are greater than 0.60, which has been used as a rule of thumb to accept the factor into the sem modeling. any items loaded below the 0.60 threshold were excluded from the analysis. for instance, one item for perseverance had a value of 0.249; hence, it was dropped from the final dataset. for the acceptable value of cronbach’s alpha and composite reliability, scholars recommend a value greater than 0.60 and 0.70, respectively. as the value of all six constructs for cronbach’s alpha and composite reliability exceeded the threshold, there is enough empirical evidence to claim that measurement instruments for all latent variables are reliable. table 1 reliability and validity results factor loading cronbach's alpha composite reliability average variance extracted (ave) innovation creed 0.835 0.892 0.677 icd1 0.650 icd2 0.864 icd3 0.844 icd4 0.767 innovation conviction 0.790 0.865 0.617 icon1 0.884 icon2 0.895 shabir ahmad 9 icon3 0.858 icon4 0.624 innovation mindset 0.766 0.852 0.592 im1 0.649 im2 0.803 im3 0.845 im4 0.766 need for achievement 0.864 0.908 0.712 na1 0.833 na2 0.877 na3 0.908 na4 0.750 perseverance 0.707 0.831 0.585 p1 0.863 p2 0.906 p3 0.249 (dropped) p4 0.843 risk-taking behavior 0.846 0.895 0.682 rtb1 0.753 rtb2 0.839 rtb3 0.866 rtb4 0.841 to assess the convergent validity of the measurement scales, scholars have suggested three conditions: 1) the average extracted variance (ave) value should be greater than 0.5, 2) cr values should be greater than 0.7, and 3) the cr value should be greater than the ave value. as shown in table 1, all ave and cr values significantly exceeded their respective thresholds, and all cr values were greater than their corresponding ave values. hence, it is evident that the instrument measures what it is designed to measure. discriminant validity, on the other hand, ensures that the measures that are theoretically expected to be unrelated are indeed not strongly correlated. there exist several methods to assess the discriminant validity of the scales. while fornell and larcker (1981) and crossloading have been the traditional methods to ensure discriminant value, the heterotraitmonotrait (htmt) ratio of correlations is the most recent, stringent, and recommended method. as per henseler et al. (2015), the value of htmt should be less than 0.9 to confirm that the two measures are distinct conceptually. as presented in table 2 the htmt ratio between the constructs is less than the threshold of 0.9; thus, it can be claimed that there is discriminant validity and that the constructs being used in the paper measure different concepts and are unrelated as well. the impact of product innovation on female entrepreneurship success: a case of saudi arabia 10 table 2 discriminant validity by htmt ratio innovation conviction innovation creed innovation mindset need for achievement perseverance innovation conviction innovation creed 0.587 innovation mindset 0.812 0.722 need for achievement 0.494 0.471 0.559 perseverance 0.695 0.515 0.795 0.691 risk-taking behaviour 0.808 0.613 0.706 0.687 0.856 structural model specifications in structural equation modeling (sem) the explanatory power of the model is discussed to evaluate the extent to which the observed variable is being explained by the regressors of the model. for this purpose, the coefficient of determination (r-squared) for each observed value is used to assess the explanatory power of the model (sarstedt et al., 2017). this study has only one dependent variable i.e. women entrepreneurship success which is a higher-order construct with three dimensions including the need for achievement, perseverance, and risktaking behavior. however, in this study, it has been examined in first order with the independent variables. table 3 illustrates the specifications of the revised model after dropping one factor from perseverance. table 3 model specifications dependent variables r square r-square adjusted need for achievement 0.262 0.253 perseverance 0.365 0.358 risk-taking behavior 0.547 0.542 therefore, the three observed variables are the need for achievement, perseverance, and risk-taking behavior and have r-squares of 0.262, 0.365, and 0.547, respectively. as shown in figure 2, it is found that the regressors of the model, which include innovation conviction, innovation creed, and innovation mindset, can explain 26.2% of the variability of the need for achievement, 36.5% of the variability of perseverance, and 54.7% of the variability of risktaking behavior, respectively. it infers that there is residual in the model, and residual is explanatory power that has not been explained by regressors, and residual can only be estimated and explained by variables that are not included in the model. thus, the inclusion of the other variables in the model could explain the residual variable and further strengthen the model. meanwhile, it can also be interpreted that other regressors could be used to predict the need for achievement, perseverance, and risk-taking behavior among the women entrepreneurs in saudi arabia. table 4 provides the results of hypotheses testing using path coefficient (β). the table infers that if there is one unit of positive variation in the innovation conviction, then it will shabir ahmad 11 affect the need for achievement, perseverance, and risk-taking by 0.181 [p = 0.023], 0.239 [0.001], and 0.523 [0.00], respectively. this clarifies that innovation conviction has a significant and positive impact on the need for achievement, perseverance, and risk-taking; this means women entrepreneurs' determination and readiness to accept innovation and sincerity to deliver commitments are the innovation factors that lead to the success of the business. figure 2 final measurement model table 4 model coefficients estimation output path path coefficient t statistics p values innovation conviction -> need for achievement 0.181** 2.288 0.023 innovation conviction -> perseverance 0.239*** 3.448 0.001 innovation conviction -> risk-taking behaviour 0.523*** 8.982 0.000 innovation creed -> need for achievement 0.187*** 2.611 0.009 innovation creed -> perseverance 0.043 0.758 0.449 innovation creed -> risk-taking behaviour 0.182*** 3.395 0.001 innovation mindset -> need for achievement 0.238*** 2.663 0.008 innovation mindset -> perseverance 0.396*** 5.833 0.000 innovation mindset -> risk-taking behaviour 0.148** 2.362 0.019 ***: showing significance at 1%; **: showing significance at 5% the impact of product innovation on female entrepreneurship success: a case of saudi arabia 12 on the other hand, if there is one unit of change in the innovation creed, then it is expected that needs for achievement, perseverance, and risk-taking will change by 0.187 [p = 0.009], 0.043 [= 0.449], and 0.182 [p = 0.001], respectively. this implies that innovation positively and significantly affects the need for achievement and risk-taking behavior, but perseverance is being affected insignificantly. therefore, it implies that women entrepreneurs’s beliefs and motivations for innovation play an important role in the success of their businesses, but this belief does not influence their perseverance. this can be interpreted as a sign that entrepreneur women do not believe that facing adversity can significantly contribute to the success of the business. in addition to this, a single unit of variance in the innovation mindset would change the need for achievement, perseverance, and risk-taking by 0.238 [p = 0.008], 0.396 [0.000], and 0.148 [p = 0.019], respectively. therefore, it can be determined that all regressors have a positive and significant impact on the observed variables. meanwhile, this can also be translated into that an innovation mindset means envisioning and projecting the future positively influencing the success of the business and significantly affecting the need for achievement, perseverance, and risk-taking behavior. following the path assessment, the summary of hypotheses is presented in table 5. table 5 summary of hypotheses hypotheses results h1: innovation convention positively impacts female entrepreneurship success. accepted h2: innovation mindset positively impacts female entrepreneurship success. accepted h3: innovation creed positively impacts female entrepreneurship success. accepted discussion and implications in the contemporary business environment, women seek equal rights in every aspect of life, including business, which has led to significant growth in female-led ventures around the world (demartini, 2018). meanwhile, the competitiveness of men or women lies with the approach and characteristics of the entrepreneurs, and it has been determined by lee et al. (2016), provasnek et al. (2017), and nambisan et al. (2018) that the characteristics of the men and women entrepreneurs tend to differ based on the gender difference. however, the phenomenon of factors affecting the success of the business remains uniform in either condition. in addition, the equal status of women in the western world has not been completely adopted in the eastern countries (ghita, 2015), specifically middle eastern countries, including saudi arabia. however, recent developments have suggested that female entrepreneurship in the middle east has been stimulated by the government’s support and changing perceptions within the region, and this has provided numerous opportunities for women (danish & smith, 2012). in contrast to governmental support and societal change, women have been facing discrimination while pursuing entrepreneurship in the country. shabir ahmad 13 apart from this, product innovation has been studied to determine how certain characteristics of women have been affecting the success of entrepreneurship, and it has been found that innovation conviction and innovation mindset have been affecting the need for achievement, perseverance, and risk-taking behavior significantly and positively. this implies that sincerity in conveying commitments and a positive attitude toward innovation affect the success of entrepreneurship. in contrast, the innovation creed has been found to have a statistically insignificant effect on perseverance, which means that belief and motivation for innovation do not influence success even after facing adversity in business. meanwhile, based on the current findings of the study, it can be stated that women's entrepreneurship in saudi arabia has been growing, but product innovation can significantly influence the success of entrepreneurship; it is also critical that women have achievement, perseverance, and risk-taking behavior. it is because the need for achievement enables women to consistently work in a direction that is aligned with the mission statement and are eager to achieve something, irrespective of hardship. similarly, perseverance has also been found critical, along with risktaking behavior, where both factors have been significantly affected by product innovation. these findings have important practical implications as discussed below. towards government and regulatory authorities, there is still a long way to go to bring gender equality in businesses specifically and in society generally. although vision 2030 emphasizes innovation and gender equality in society, its implementation will take its due course. our findings highlight the importance of cultivating innovation conviction, mindset, and creed in women entrepreneurs to be successful in their entrepreneurial ventures. in this regard, the government can take several practical steps to promote women's entrepreneurship and remove the barriers that hinder women's participation in entrepreneurship in the country. the government needs to implement legal and regulatory reforms to create gender equality, simplify the business registration process, provide equal access to financial resources, and provide dedicated funding programs, loans, and financial incentives for women entrepreneurs. in addition, the government may enhance entrepreneurial skills and foster acumen for innovation in women by developing educational and training programs and even including courses at the school and university levels. likewise, the government needs to facilitate networking events, industry-specific forums, and mentorship programs that connect women entrepreneurs with experienced mentors, industry leaders, and potential collaborators. these platforms can provide valuable guidance, support, and access to networks and resources. in addition, innovation and entrepreneurship can be encouraged through incentives, grants, and support for research and development initiatives. other than that, the government can launch awareness campaigns to promote the benefits of women's entrepreneurship by highlighting the success stories of women entrepreneurs and showcasing their achievements. overall, this requires building a supportive ecosystem for women entrepreneurs by investing in infrastructure, such as co-working spaces, incubators, and accelerators, that provide access to facilities, resources, and support services. additionally, fostering partnerships between government, the private sector, academia, and civil society organizations can create a collaborative environment conducive to entrepreneurship. the impact of product innovation on female entrepreneurship success: a case of saudi arabia 14 limitations and future research direction in this study, the impact of product innovation on the success of female entrepreneurs in ksa has been analyzed with the help of quantitative data gathered through the surveys. therefore, the findings are limited to the quantitative assessment. however, future researchers can extend this study by incorporating and investigating the qualitative information that can help them compare both findings and explore the phenomenon further in detail. moreover, future researchers can identify numerous other factors to investigate the impact of product innovation on female entrepreneurs’s success in saudi arabia and beyond. in addition, they can also investigate the challenges and barriers faced by women in saudi arabia and other countries that hinder their way of attaining entrepreneurial success. conclusions innovation is considered a vital component for the success of a business venture because it allows the creation of a competitive advantage and takes the lead in a complex business environment. however, from the analysis carried out in this research, it was determined that the beliefs, attitudes, and mindsets of individuals play a central role in keeping entrepreneurs motivated toward innovation and objectives. for female entrepreneurs, motivation is considered the driving force that allows them to adhere to their business goals and accelerate in a forward direction, standing firm against all barriers and challenges. furthermore, empirical results suggest that perseverance, the need for achievement, and risktaking behavior are imperative determinants that reflect the success of women entrepreneurs in ksa. in this regard, the impact of innovation, such as innovation convention, innovation creed, and innovation mindset, was tested over perseverance, need for achievement, and risk-taking behavior. every determinant of innovation has a positive impact on women's entrepreneurship success in ksa. considering this aspect, the research has certain implications for the government of ksa, which needs to create opportunities to support women and promote the ones already in business. references 1. abd rani, s. h., & hashim, n. (2015). factors that influence women entrepreneurial success in malaysia: a conceptual framework conference on business management research ii (cbmr ii), kedah, malaysia. 2. abu-saifan, s. (2012). social entrepreneurship: definition and boundaries. technology innovation management review, 2(2), 22-27. 3. agarwal, j. (2019). women entrepreneurship and innovations: evidence from india. the international journal research publications rjssm, 8(10), 64-68. 4. ahmad, s., & bajwa, i. (2022). social entrepreneurship and economic development: a bibliometric analysis. social entrepreneurs, 18, 55-75. 5. ahmad, s., & bajwa, i. a. (2021). the role of social entrepreneurship in socio-economic development: a meta-analysis of the nascent field. journal of entrepreneurship in emerging economies. 6. ahmad, s., & iqbal, t. (2022). the role of management commitment in adoption of occupational health and safety at higher education institutions. entrepreneurship and sustainability issues, 9(3), 103-117. shabir ahmad 15 7. al-kwifi, o. s., tien khoa, t., ongsakul, v., & ahmed, z. u. (2020). determinants of female entrepreneurship success across saudi arabia. journal of transnational management, 25(1), 3-29. 8. alotaibi, f. t. (2020). saudi women and leadership: empowering women as leaders in higher education institutions. open journal of leadership, 9, 156-177. 9. arab news. (2017). saudi female entrepreneurs increase by 35% in 10 years: report. retrieved 11 may 2023, from https://www.arabnews.com/node/1200291/saudi-arabia 10. bajwa, i. a., ahmad, s., mahmud, m., & bajwa, f. a. (2023). the impact of cyberattacks awareness on customers’ trust and commitment: an empirical evidence from the pakistani banking sector. information & computer security, 31(5), 635-654. https://doi.org/https://doi.org/10.1108/ics-112022-0179 11. barba-sanchez, v., & atienza-sahuquillo, c. (2011). reasons to create a new venture: a determinant of entrepreneurial profiles. african journal of business management, 5(28), 11497. 12. bereczki, r. l. (2015). the crisis of modernity of the arab-islamic world. agora int'l j. jurid. sci., 9, 1. 13. berends, h., jelinek, m., reymen, i., & stultiëns, r. (2014). product innovation processes in small firms: combining entrepreneurial effectuation and managerial causation. journal of product innovation management, 31(3), 616-635. 14. bolton, d. l., & lane, m. d. (2012). individual entrepreneurial orientation: development of a measurement instrument. education+ training, 54(2/3), 219-233. 15. brush, c. g., & cooper, s. y. (2012). female entrepreneurship and economic development: an international perspective. entrepreneurship & regional development, 24(1-2), 1-6. 16. bucherer, e., eisert, u., & gassmann, o. (2012). towards systematic business model innovation: lessons from product innovation management. creativity and innovation management, 21(2), 183198. 17. bulsara, h. p. b., chandwani, j., & gandhi, s. b. (2014). women entrepreneurship and innovations in india: an exploratory study. bulsara, h., chandwani, j., & gandhi, s.(february 2014). women entrepreneurship and innovations in india: an exploratory study. international journal of innovation-iji, 2(1), 32-44. 18. burns, p. (2016). entrepreneurship and small business. palgrave macmillan limited. 19. danish, a. y., & smith, h. l. (2012). female entrepreneurship in saudi arabia: opportunities and challenges. international journal of gender and entrepreneurship, 4(3), 216-235. 20. dastourian, b., kawamorita kesim, h., seyyed amiri, n., & moradi, s. (2017). women entrepreneurship: effect of social capital, innovation and market knowledge. ad-minister(30), 115130. 21. de medeiros, j. f., ribeiro, j. l. d., & cortimiglia, m. n. (2014). success factors for environmentally sustainable product innovation: a systematic literature review. journal of cleaner production, 65, 7686. https://doi.org/http://dx.doi.org/10.1016/j.jclepro.2013.08.035 22. demartini, p. (2018). innovative female-led startups. do women in business underperform? administrative sciences, 8(4), 70. 23. drucker, p. (2014). innovation and entrepreneurship. routledge. 24. durkin, c., & gunn, r. (2016). social entrepreneurship: a skills approach. policy press. 25. eroglu, o., & picak, m. (2011). entrepreneurship, national culture and turkey. international journal of business and social science, 2(16). 26. evanschitzky, h., eisend, m., calantone, r. j., & jiang, y. (2012). success factors of product innovation: an updated meta‐analysis. journal of product innovation management, 29, 21-37. 27. fornell, c., & larcker, d. f. (1981). evaluating structural equation models with unobservable variables and measurement error. journal of marketing research, 18(1), 39-50. https://www.arabnews.com/node/1200291/saudi-arabia https://doi.org/https:/doi.org/10.1108/ics-11-2022-0179 https://doi.org/https:/doi.org/10.1108/ics-11-2022-0179 https://doi.org/http:/dx.doi.org/10.1016/j.jclepro.2013.08.035 the impact of product innovation on female entrepreneurship success: a case of saudi arabia 16 28. galanaki, e., & papalexandris, n. (2017). demographic challenges for the future business leader: evidence from a greek survey. evidence-based hrm: a global forum for empirical scholarship, 29. ghita, o. (2015). an analysis of women's status in the muslim system as opposed to the european. agora int'l j. jurid. sci., 9, 38. 30. goby, v. p., & erogul, m. s. (2011). female entrepreneurship in the united arab emirates: legislative encouragements and cultural constraints. women's studies international forum, 31. gundogdu, m. c. (2012). re-thinking entrepreneurship, intrapreneurship, and innovation: a multiconcept perspective. procedia-social and behavioral sciences, 41, 296-303. 32. gupta, n., & mirchandani, a. (2018). investigating entrepreneurial success factors of women-owned smes in uae. management decision, 56(1), 219-232. 33. hair, j., hult, g. t. m., ringle, c. m., & sarstedt, m. (2021). a primer on partial least squares structural equation modeling (pls-sem). sage publications. 34. henseler, j., ringle, c. m., & sarstedt, m. (2015). a new criterion for assessing discriminant validity in variance-based structural equation modeling. journal of the academy of marketing science, 43, 115135. 35. hughes, k. d., jennings, j. e., brush, c., carter, s., & welter, f. (2012). extending women's entrepreneurship research in new directions. entrepreneurship theory and practice, 36(3), 429-442. 36. israel, k. j., & johnmark, d. r. (2014). entrepreneurial mind-set among female university students: a study of university of jos students, nigeria. chinese business review, 13(5), 320-332. 37. khurana, h., & joshi, v. (2017). motivation and its impact on individual performance: a comparative study based on mcclelland’s three need model. clear international journal of research in commerce and management 8(7), 110-116. 38. lai, k. p., nathan, r. j., tan, k. s., & chan, b. b. (2010). effect of innovation to the success of female entrepreneurs. journal of innovation management in small and medium enterprises, 2010(1), 1-14. 39. lee, c., hallak, r., & sardeshmukh, s. r. (2016). innovation, entrepreneurship, and restaurant performance: a higher-order structural model. tourism management, 53, 215-228. 40. mahmood, c. k., ahmad, s., khalil, t., ali, h., & sarfaraz, t. (2022). does product related knowledge and non-functional cues matter for financial decisions: consumer perception towards islamic banking of pakistan? ibima business review, 2022(2022). https://doi.org/doi: 10.5171/2022.503506 41. makhbul, z. m., & hasun, f. m. (2011). entrepreneurial success: an exploratory study among entrepreneurs. international journal of business and management, 6(1), 116-125. 42. manzanera-román, s., & brändle, g. (2016). abilities and skills as factors explaining the differences in women entrepreneurship. suma de negocios, 7(15), 38-46. 43. mcadam, r., reid, r., & shevlin, m. (2014). determinants for innovation implementation at sme and inter sme levels within peripheral regions. international journal of entrepreneurial behavior & research, 20(1), 66-90. 44. meyer, n., & mostert, c. (2016). perceived barriers and success factors of female entrepreneurs enrolled in an entrepreneurial programme. international journal of social sciences and humanity studies, 8(1), 48-66. 45. nambisan, s., siegel, d., & kenney, m. (2018). on open innovation, platforms, and entrepreneurship. strategic entrepreneurship journal, 12(3), 354-368. 46. noguera, m., alvarez, c., merigo, j. m., & urbano, d. (2015). determinants of female entrepreneurship in spain: an institutional approach. computational and mathematical organization theory, 21, 341-355. 47. poggesi, s., mari, m., & de vita, l. (2016). what’s new in female entrepreneurship research? answers from the literature. international entrepreneurship and management journal, 12, 735-764. https://doi.org/doi shabir ahmad 17 48. popescu, c., maxim, a., & diaconu, l. (2015). determinants of entrepreneurial intentions among romanian students. transformation in business & economics, 13, 1-17. 49. radovic-markovic, m., & salamzadeh, a. (2012). the nature of entrepreneurship: entrepreneurs and entrepreneurial activities. lap lambert academic publishing. 50. ramadani, v., gërguri-rashiti, s., & fayolle, a. (2015). female entrepreneurship in transition economies: trends and challenges. 51. ressin, m. (2022). product innovation paradigm of modern entrepreneurship. quality innovation prosperity, 26(3), 190-209. 52. rettberg, a. (2016). need, creed, and greed: understanding why business leaders focus on issues of peace. business horizons, 59(5), 481-492. 53. romero, i., & martínez-román, j. a. (2012). self-employment and innovation. exploring the determinants of innovative behavior in small businesses. research policy, 41(1), 178-189. 54. sánchez, j. c. (2011). university training for entrepreneurial competencies: its impact on intention of venture creation. international entrepreneurship and management journal, 7, 239-254. 55. sarstedt, m., ringle, c. m., & hair, j. f. (2017). treating unobserved heterogeneity in pls-sem: a multi-method approach. in partial least squares path modeling: basic concepts, methodological issues and applications (pp. 197-217). springer nature. 56. saunders, m. n., lewis, p., & adrian, t. (2016). research methods for business students (7th ed.). pearson education limited. 57. schaltegger, s., & wagner, m. (2011). sustainable entrepreneurship and sustainability innovation: categories and interactions. business strategy and the environment, 20(4), 222-237. 58. secundo, g., vecchio, p. d., & passiante, g. (2015). creating innovative entrepreneurial mindsets as a lever for knowledge-based regional development. international journal of knowledge-based development, 6(4), 276-298. 59. slater, s. f., mohr, j. j., & sengupta, s. (2014). radical product innovation capability: literature review, synthesis, and illustrative research propositions. journal of product innovation management, 31(3), 552-566. 60. syed, a. m., alaraifi, a., & ahmad, s. (2019). entrepreneurs in saudi arabia: risk attitude and predisposition towards risk management. journal of entrepreneurship education, 22(4), 1-18. 61. tanveer, m. a., akbar, a., gill, h., & ahmed, i. (2013). role of personal level determinants in entrepreneurial firm’s success. journal of basic and applied scientific research, 3(1), 449-458. 62. terjesen, s. a., & lloyd, a. (2015). the 2015 female entrepreneurship index. kelley school of business research paper(15-51). 63. valdivia, m. (2015). business training plus for female entrepreneurship? short and medium-term experimental evidence from peru. journal of development economics, 113, 33-51. 64. waychal, p., mohanty, r., & verma, a. (2011). determinants of innovation as a competence: an empirical study. international journal of business innovation and research, 5(2), 192-211. 65. welsh, d. h., memili, e., kaciak, e., & al sadoon, a. (2014). saudi women entrepreneurs: a growing economic segment. journal of business research, 67(5), 758-762. 66. yordanova, d. i., & alexandrova‐boshnakova, m. i. (2011). gender effects on risk‐taking of entrepreneurs: evidence from bulgaria. international journal of entrepreneurial behavior & research, 17(3), 272-295. 67. zivanovic, s., abramovic, n., zivanovic, m., & smolovic, s. (2023). innovation management on the way to business excellence. agora international journal of economical sciences, 17(2), 187-204. agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 18, no. 1 (2024), pp. 82-97 82 factors affecting the total foreign exchange reserve adequacy of the central bank: turkey and azerbaijan g. jamalzade, a. saldanli, e. jamalzade gunduz jamalzade¹, arif saldanli², elgiz jamalzade³ ¹ karabuk university, azerbaijan https://orcid.org/0000-0001-7523-7836, e-mail: gunduz.jamalzada@competition.gov.az ² istanbul university, turkey https://orcid.org/0000-0001-9990-9510, e-mail: saldanli@istanbul.edu.tr ³ azerbaijan state university of economics, azerbaijan https://orcid.org/0009-0001-6927-0477, e-mail: elgiz-jamalzada@unec.edu.az abstract: international foreign exchange reserves are widely acknowledged as a global medium of exchange that possesses a readily available characteristic. official public assets, which are foreign assets kept and organized by the monetary authorities of countries, serve as a complement to foreign exchange reserves. adequate levels of foreign exchange reserves are necessary for nations to meet their payment commitments and sustain the stability of their currency. the primary rationale for the central bank's decision to maintain liquid foreign exchange reserves is to establish a safeguard against any speculative assaults or fluctuations in the trade balance. the primary objective of this research was to ascertain the many elements that influence the sufficiency of the aggregate foreign exchange reserves in azerbaijan and turkey. the article examined the sufficiency of the gross foreign exchange reserves of the central bank of the republic of azerbaijan (cbar) and the central bank of the republic of turkey (cbrt) based on the ideal reserve ratios recommended by the imf. following an extensive examination of theoretical and conceptual literature, this study aims to assess the sufficiency of the gross foreign exchange reserves held by the cbar and cbrt. the proposed optimal reserve ratios are utilized to elucidate the reserve adequacy of these countries, while considering the theoretical relationship between the variables. to achieve this objective, a logit regression analysis was conducted using the data spanning from 2012 to 2022. the results indicate that there is a positive and statistically significant relationship between interest rates and the overall adequacy of foreign exchange reserves. considering the influence of interest rates on economic stability and financial performance, this outcome is anticipated. furthermore, it was shown that the exchange rate variable exhibited a statistically significant negative impact on the preceding period. the present empirical study offers an overview of the various elements that influence the sufficiency of the aggregate foreign exchange reserves of azerbaijan and turkey. the findings of this study offer crucial insights to decision makers regarding the variables that must be considered when overseeing foreign exchange reserves. keywords: logit model, macroeconomic indicators, optimum foreign exchange reserves https://orcid.org/0000-0001-7523-7836 mailto:gunduz.jamalzada@competition.gov.az https://orcid.org/0000-0001-9990-9510 mailto:saldanli@istanbul.edu.tr https://orcid.org/0009-0001-6927-0477 mailto:elgiz-jamalzada@unec.edu.az gunduz jamalzade, arif saldanli, elgiz jamalzade 83 introduction foreign exchange reserves are often regarded as a reliable sign of a nation's robust economic and financial framework, therefore playing a crucial role in safeguarding economic stability. the assessment of a country's foreign exchange reserves and the examination of the causes influencing these reserves are significant indicators that provide insights into the economic and political conditions of nations. based on the criteria established by the international monetary fund (imf), it is required that a nation's central bank maintains foreign exchange reserves that surpass the import index of said nation within a timeframe of three to six months (wijnholds and kapteyn, 2001). according to mulder and bussiere (1999), an alternative perspective posits that it is advantageous for a nation's foreign exchange reserves to exceed its short-term external debt. alternatively, if the central bank's reserves are insufficient to cover short-term external debt, it will face a disadvantageous situation (irefin and yaaba, 2011; cinel and yamak, 2014; lehto, 1994). the central bank of the republic of azerbaijan (cbrt) has experienced a rise in its foreign exchange reserves compared to 2022, primarily attributed to the growth in natural resources. the decrease in the foreign exchange reserves of the central bank of the republic of turkey (cbrt) in recent years, as compared to the year 2022, has elicited significant public responses. one of the primary factors contributing to the decrease in foreign exchange reserves is the utilization of foreign currency sales, given the inherent volatility of the exchange rate. given the aforementioned concerns, it is evident that doing research on the gross foreign exchange reserves maintained by central banks holds significant significance. the logistic regression model is a widely employed regression technique in the field of statistical analysis. the aforementioned model is employed for the purpose of quantifying the impact of independent variables and estimating the probability values associated with the dependent variable. the logit model is employed to quantify the impact of individual factors on the sufficiency of foreign currency reserves, while also providing probability values for the purpose of interpreting this impact. upon the conclusion of the study, an analysis will be conducted on the elements that influence the foreign exchange adequacy of turkey and the republic of azerbaijan, utilizing the framework of this particular model. subsequently, the obtained results will be interpreted. foreıgn exchange reserves and theır adequacy definition and composition of foreign exchange reserves reserves refer to foreign exchange assets that are held by a nation's monetary institutions. these reserves function as an insurance mechanism, ensuring the protection of the country during periods of international capital shortages (park and estrada, 2014). previous research conducted by elhiraika and ndikumana (2007) has posited that the primary objective of central bank reserve accumulation is to address unforeseen imbalances in the balance of payments. however, more recent studies conducted by cinel (2015) and eren (2017) have attributed the preference for reserve levels to the reduction of costs incurred by countries during crises and as a preventive measure against potential crises (jeanne and rancière, 2011, pp. 905–930). reserves can be conceptualized as the aggregate value of international securities and gold that are kept by the central banks of republics, in addition to the aggregate value of assets that possess the potential for convenient conversion into foreign exchange reserves. factors affecti̇ng the total forei̇gn exchange reserve adequacy of the central bank: turkey and azerbai̇jan 84 reserves are a component of the balance sheet that is subject to careful scrutiny by central banks due to its significant role in promoting stability during periods of financial imbalances. reserve adequacy can be seen as a significant metric for assessing the vulnerability of financial and economic systems. reserves refer to assets that are within the authority of a country's monetary institutions. these assets serve as political tools during periods of economic recession and downturn, and can be easily exchanged and utilized as international external payment instruments (memiş et al., 2014). according to the international monetary fund (imf), reserves refer to external assets that serve as a safeguard against potential adverse risks. these reserves are managed by monetary policy-making authorities as necessary, aiming to mitigate risks in the balance of payments and reduce instability in the foreign exchange market of a country (imf, 2015, p. 424). based on widely accepted definitions, it may be inferred that reserves encompass the aggregate value of many assets held by a nation's central bank, including foreign currency equivalents and gold. the official reserves that are widely acknowledged in academic research and are incorporated into the balance sheet of central banks as reserves, are worldwide recognized based on the information accepted by the international monetary fund (imf). these reserves comprise the following subcomponents: convertible foreign exchange assets cover a variety of instruments such as international standard gold, imf reserve position, special drawing rights (sdr) and other reserve items. the distribution of reserve components in the global reserve total as of march 2012 and 2022 is depicted in chart 1.1. upon comparing the eras, it becomes evident that the weights assigned to reserve components, with the exception of the imf reserve position, underwent alterations towards the conclusion of the 10-year period. according to the data presented in chart 1.1, it can be observed that foreign exchange reserves occupy a prominent position within the reserve composition, amounting to sdr 9077.3 million as of march 2022. in comparison to the year 2012, there was an increase in the proportion of sdrs and gold, whilst the share of foreign currencies experienced a gain in quantity but a fall in proportion. the aforementioned advancements exemplify the fluidity inherent in reserve components. graph 1.1 2012 and march 2022 official world reserve components source: imf 2022 annual report, appendix, international reserves1 1 source: https://www.imf.org/external/pubs/ft/ar/2022/downloads/appendix.pdf. dövi̇z %83,5 … altin … imf rezerv pozi̇syonu … sdr … 2012 mart dövi̇z %79.6… altin %13.8 … imf rezerv pozi̇syon… sdr %5.5 … 2022 mart https://www.imf.org/external/pubs/ft/ar/2022/downloads/appendix.pdf gunduz jamalzade, arif saldanli, elgiz jamalzade 85 foreign currency assets that can be converted have the greatest level of liquidity and make up the largest portion of reserves. in contemporary circumstances, there are numerous justifications for nations to maintain a substantial proportion of their reserves in foreign currency. the primary factors contributing to this phenomenon are the limited profitability of gold in global markets, as well as the lack of substantial income generated by sdr and imf reserve positions. consequently, central banks maintain a substantial proportion of their international reserves, which are characterized as assets that are readily available for use in overseas markets. these reserves are denominated in foreign currency and are allocated to foreign markets subsequent to a thorough assessment of various investment vehicles, taking into consideration factors such as liquidity and return (imf, 2014). numerous nations accumulate their domestic currency as reserves for foreign exchange, however they exhibit a preference for foreign currencies such as the us dollar, euros, japanese yen, swiss francs, and british pounds (eren, 2017). the primary rationale for assessing the reserves of these nations individually is their utilization as a reserve element within the global market system, thereby augmenting the influence of these countries over the market system. the us dollar has a substantial share of foreign exchange reserves due to many factors. one crucial aspect is that, although the disintegration of the bretton woods system, nations persisted in maintaining the us dollar as a reserve asset owing to their unwavering faith in the american economy. an further significant factor contributing to this phenomenon is the influence exerted by the us dollar on the global economy, stemming from its status as the exclusive superpower following the disintegration of the soviet union (yaman, 2003, p. 13). even nations that engage in the production of raw resources are compelled to establish their exchange rate policies in relation to the united states dollar, as this has a direct impact on their domestic markets. simultaneously, a substantial proportion of manufacturing industry items are priced in dollars and sold in global marketplaces. the data presented in figure 1.1 illustrates the progression of government foreign exchange reserves, as well as the utilization of the us dollar and the euro as reserves, from 2012 to 2021, measured in billions of sdr. figure 1.1. 2012 and march 2021 official world reserve components source: imf annual report, 2012, 2022 0 1000 2000 3000 4000 5000 6000 7000 8000 9000 10000 sum of 2012 sum of 2013 sum of 2014 sum of 2015 sum of 2016 sum of 2017 sum of 2018 sum of 2019 sum of 2020 sum of 2021 currency euro u/s dollar poly. (euro) poly. (u/s dollar) factors affecti̇ng the total forei̇gn exchange reserve adequacy of the central bank: turkey and azerbai̇jan 86 it is evident that the value of the us dollar as a foreign exchange reserve will exceed $5 trillion by the conclusion of 2021. according to the provided data, the united states dollar constitutes 54.9 percent of the aggregate 9.2 trillion foreign exchange reserves, or over half of the total value of such reserves. the primary indicator of the significance of the us dollar in reserves is its representation of around 44 percent of total international reserves during the specified time. the euro, currently the second most prominent currency in foreign exchange reserves after the us dollar, has had a marginal gain in its exchange rate value relative to the us dollar during certain time periods (figure 1.1). the dollar's devaluation during certain time periods and the rise in the euro's proportion of total reserves can be ascribed to the policy actions enacted by the united states in reaction to the ongoing global crisis. gold, classified as a valuable metal, holds the distinction of being the oldest reserve element kept by nations according to global benchmarks. the inclusion of standard gold in a nation's reserve components may be attributed to several key factors. these include its capacity to serve as collateral, its low risk factor index, its function as a safeguard against crises, and the intention to enhance reserve diversification (sümmeoğlu, 2010). figure 1.2. march 2012 and 2022 international standardized gold and share in reserves source: imf annual report, 2012, 2022 according to the data presented in figure 1.2, the aggregate quantity of gold reserves maintained by the central banks of various nations falls within the approximate range of sdr 1100–1500 billion in international reserves from 2012 to 2022. this range exhibits intermittent fluctuations, with certain periods seeing a temporary decrease, succeeded by subsequent periods of expansion. consequently, the limited or nonexistent utilization of gold in the financial systems of nations leads to its displacement from the focal point of the monetary system (yaman, 2003, p. 11). conversely, in the present era, financial instruments like electronic money have gained significance and are increasingly utilized for cross-border and inter-individual transactions. upon comparing the expenses associated with this approach to the expenditures incurred by gold, including storage and transportation, it becomes evident that the overall costs of gold are considerably elevated. consequently, gold is regarded as a less favored financial instrument. 1096,7 802,6 860,4 809,4 917,6 991,3 1010,4 1225,1 1479,3 1475,3 1582,2 0,00% 2,00% 4,00% 6,00% 8,00% 10,00% 12,00% 14,00% 16,00% 0 250 500 750 1000 1250 1500 1750 2000 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 gold as foreign exchange reserves billion sdr(sol) gold/world reserve components (%) gunduz jamalzade, arif saldanli, elgiz jamalzade 87 the reserve position is a reserve resource established by the international monetary fund (imf) in 1969. every member country of the imf is required to maintain a predetermined allocation of special drawing rights (sdrs). the predetermined quota serves as a determinant of the financial contribution a member country must make to the international monetary fund (imf), its allocation of financial resources, and its impact on the imf's decision-making processes. additionally, it serves as an indicator of the country's voting power and its economic standing relative to other nations. the significance of imf quotas for countries is evident (ṕnar & erdal, 2011: 544-545). the determination of these quotas is based on special drawing rights (sdrs), which serve as the international monetary fund's unit of account. as of march 2021, turkey's international monetary fund (imf) quota stands at about sdr 4.659 million (1 sdr = 1.4247 in october 2022), equivalent to usd 6.637 million. in contrast, azerbaijan's allocated quota amounts to sdr 391.7 million, equivalent to around $559 million. special drawing rights (sdrs) refer to a collection of currencies that are generated and made available by the international monetary fund (imf) on the market as a distinct currency element. the money in question does not derive its value from any specific tangible resource or nation. the international monetary fund allocates reserve resources to all its members based on their quotas, with the aim of diversifying countries' reserves (kester, 2001, p. 18). in a concise manner, this currency serves solely as a reserve element in transactions conducted between the international monetary fund (imf) and the member nations of this union. foreign exchange reserves adequacy indicators it can be argued that nations maintain reserves to mitigate potential expenses for diverse purposes, and the magnitude of these reserves is subject to variation according to the distinct structures of each country. measuring the adequacy indicators of reserves is crucial for a country as it serves as a safeguard against potential national and international risks, mitigates the cost of a prospective crisis, and serves as an indicator of financial profitability. the measurement of reserve adequacy and the factors influencing reserve adequacy have been a subject of ongoing debate in numerous research due to advancements in international trade and the monetary system. this study aims to assess the reserve adequacy of two countries by employing widely recognized methodologies. measuring the optimal adequacy of foreign exchange reserves : turkey-azerbaijan nations that maintain high levels of reserves generally exhibit a more rapid recovery from the adverse consequences of financial crises compared to nations with lower levels of reserves. the reserve adequacy level, as defined by heller (1966, p. 317), refers to the point at which the marginal benefit is equal to the marginal cost. conversely, bird and rajan (2002, p. 7) contend that there is no upper limit to the reserve adequacy level. instead, they argue that the monetary authority consistently endeavors to augment the level of reserves. various methodologies have been devised in academic literature to evaluate the sufficiency of reserves. the approach suggested by the imf, which is universally applicable, involves calculating the ratios of reserves to imported goods and services, short-term external debt, and broad money supply (cbrt, 2011a). factors affecti̇ng the total forei̇gn exchange reserve adequacy of the central bank: turkey and azerbai̇jan 88 ratio of short-term debt to international reserves the short-term external debt (sted) method is employed by the monetary authority of a nation with the objective of maintaining adequate reserves to meet both domestic and foreign obligations that are scheduled to mature within a one-year timeframe. this demonstrates the government's capacity to meet its debt obligations (wijnholds & kapteyn, 2001, p. 9). in terms of external debt stock, the republic of turkey occasionally attains the top position among emerging market economies (emes). in comparison to alternative alternatives, it is crucial to evaluate the short-term foreign debt approach with the reserves of these countries. according to the data presented in figure 1.3, it can be observed that the utilization of all reserves in the years 2010, 2011, 2013, 2014, 2014, 2017, 2018, and 2020-2022 would not be adequate to meet the short-term debt obligations of the nation, as depicted in figure 2.10. turkey's creditworthiness in the foreign market and its cds (credit risk premium) are deemed to be very deficient and insufficient due to a gradual decrease in this ratio. figure 1.3 cbrt reserve / short term debt ratio in 2002 and 2022 source: cbrt 2023, (access date: january 1, 2023) the values of the link between azerbaijan's total reserves and short-term external debt up to one year for the periods 2004-2021 are presented in table 1.1. this analysis was conducted using the cvd model to assess the reserve adequacy of azerbaijan. during these time intervals, the mean value of the ratio between reserves and short-term debt exceeds 36. this substantial ratio can be attributed to the country's strategic emphasis on long-term borrowing rather than short-term borrowing. table 1.1 reserves / short-term debt ratio (million usd)2 history tp resparpd k1 (cvb) reserve/cvb 2004 3064,73 198,00 15,48 2005 2872,77 290,00 9,91 2006 4096,31 198,00 20,69 2 source: https://www.cbar.az/page-40/statistical-bulletin 0 0,2 0,4 0,6 0,8 1 1,2 1,4 1,6 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 sum of reserves/kvb sum of greenspan-guidotti rule https://www.cbar.az/page-40/statistical-bulletin gunduz jamalzade, arif saldanli, elgiz jamalzade 89 2007 6265,85 202,00 31,02 2008 16812,27 356,00 47,23 2009 20551,32 502,00 40,94 2010 29661,35 422,00 70,29 2011 40762,92 484,00 84,22 2012 47110,02 572,00 82,36 2013 51884,98 700,00 74,12 2014 52542,41 1 900,00 27,65 2015 40390,59 1 700,00 23,76 2016 39142,98 2 200,00 17,79 2017 43128,85 1 500,00 28,75 2018 46975,79 2 100,00 22,37 2019 54869,28 1 700,00 32,28 2020 56510,45 1 600,00 35,32 2021 59321,54 1 200,00 49,43 ratio of monetary aggregates to international reserves the approach referred to as the broad money supply or monetary base approach, as described in the literature, involves comparing the amount of reserves with monetary aggregates to assess reserve sufficiency (reedy, 2003, pp. 104–105). in the event of a financial crisis within a nation, it is not uncommon for residents to redirect their investment choices away from the domestic currency and towards assets denominated in other currencies. the literature does not reach a consensus on the specific ratio due to the significance of this relationship. however, it is widely acknowledged that the recommended range for a country's reserves is between 10 and 20% of its m2 (cinel, 2015, p. 135). the declining trend of this ratio in turkey since 2007 can be attributed to the consistent growth of the country's m2-defined money supply. considering this methodology, turkey has consistently maintained a ratio above 20% in all years except for 2020-2021, with an average of 30% from 2002 to 2022 (figure 1.4). figure 1.4 cbrt reserve / m2 (usd) ratio in 2002 and 2022 source: evds 2023, (date of access: january 1, 2023) 0 0,1 0,2 0,3 0,4 0,5 0,6 0,7 0,8 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 factors affecti̇ng the total forei̇gn exchange reserve adequacy of the central bank: turkey and azerbai̇jan 90 the analysis of the country's reserve adequacy is conducted using the monetary base approach. this involves calculating the ratio of the total reserves held by the central bank of the republic of azerbaijan and the state oil fund to the m2 dollar values for the period spanning from 2002 to 2021. each of the aforementioned ratios exceeds the commonly acknowledged ratio within the method (10–20%) and has consistently surpassed the arithmetic mean of 4 from 2002 to 2021 (see figure 1.5). figure 1.5 2002 and 2021 ac reserve / m2 (usd) ratio source: acmb 2023, (accessed february 16, 2023) adequacy of international reserves to cover country imports the methodology employed in assessing the sufficiency of foreign exchange reserves relies on the evaluation of international reserves in relation to the yearly import volume. the conventional methodology for assessing reserve adequacy posits that a nation ought to maintain sufficient reserves to meet its import requirements, under the assumption of no capital inflows or outflows. despite the commonly acknowledged guideline of 3 months, the existing reserves of numerous developing nations have been sufficient to meet imports for a much longer duration (imf, 2000; wijnholds and kapteyn, 2001). the utilization of this methodology in the context of turkey demonstrates that the overall reserves are enough. however, during the period from 2017 to 2022, there has been a noticeable decrease in the nation's international reserves, which has hindered its ability to cover its import expenditures. the decrease in the 3-month import payment ratio, which serves as an indicator of adequacy, particularly when it drops below 2%, exhibits similarities to the global crisis experienced between 2004 and 2008, hence suggesting the potential occurrence of a future catastrophe (see figure 1.6). the fall in question can be ascribed to various variables, encompassing global health concerns, conflicts in nations with which the country has close ties, and recent variations in exchange rates. furthermore, the economic position was exacerbated by the earthquake disasters that occurred in the country in 2023. collectively, these elements give rise to a concerning predicament for the nation's economic prospects. 0 1 2 3 4 5 6 7 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 gunduz jamalzade, arif saldanli, elgiz jamalzade 91 figure 1.6 3-month import coverage ratio of cbrt reserves in 2002 and 2022 source: turkstat 2023, (date of access: january 3, 2023) the republic of azerbaijan has experienced a notable growth in the ratio of reserves to quarterly imports since 2009. furthermore, the reserves held by the republic of azerbaijan are deemed adequate to meet its yearly import requirements for an extended period, as depicted in figure 1.7. azerbaijan possesses ample resources to fund its imports, encounters no difficulties in financing imports, and maintains financial stability. figure 1.7 ac reserves and annual imports in 2002 and 2021 source: acmb and sofaz 2023, (accessed february 16, 2023) taking into account all the aforementioned methods for assessing the amount and sufficiency of the cbrt reserves, it can be concluded that reserves are sufficient for all specified years according to the import approach. however, other ways exhibit variations on a year-by-year basis, and in the majority of cases, reserves are insufficient for the period of 20202021. based on the aforementioned methodologies employed to assess the level and sufficiency of the reserves of the republic of azerbaijan, it is evident that the reserves are deemed insufficient for some years (2005-2006) as indicated by the import approach, although they are deemed sufficient for all years according to alternative techniques. 0 0,5 1 1,5 2 2,5 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 0 15000 30000 45000 60000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 factors affecti̇ng the total forei̇gn exchange reserve adequacy of the central bank: turkey and azerbai̇jan 92 factors affecting the adequacy of foreign exchange reserves: turkey-azerbaijan the evolution and patterns of global foreign exchange reserves are contingent upon various criteria. the size and structure of foreign exchange reserves can be influenced by various factors, including a nation's economic growth, levels of exports and imports, policies implemented by central banks, and volatility observed in international financial markets. the phenomenon of international investment flows entails the influx of foreign investment into a nation, which contributes to the augmentation of foreign currency reserves, whilst the outflow of foreign investment from a nation leads to a reduction in foreign exchange reserves. nevertheless, elevated interest rates have the potential to augment foreign exchange inflows by enhancing the appeal of a nation's currency, so bolstering its foreign exchange reserves. simultaneously, an expansion in the money supply heightens the likelihood of inflation within the nation, potentially leading to investor withdrawal and subsequently reducing the country's foreign exchange reserve (kaya, 2012). the escalation of external debt of turkey throughout the year 2022 resulted in a reduction of foreign exchange reserves. the primary determinant of azerbaijan's reserve stock is the volatility of oil prices and the magnitude of oil sales inside the nation. there exists a consistent linear correlation between fluctuations in oil prices and the aggregate reserves of the republic of azerbaijan over many time periods. notably, the escalation in oil prices emerges as the primary factor contributing to the expansion of these reserves. elevated interest rates enhance the appeal of a nation's currency and augment its foreign exchange reserves. as of march 19, 2021, the central bank of the republic of turkey initiated a reduction in the interest rate from 20.50%. by the initial quarter of 2023, the percentage had attained 8.50%. azerbaijan has a low interest rate of 8.75%. the presence of low interest rates restricts the degree of interest from foreign investors in the country, hence posing challenges in augmenting foreign exchange reserves. the inflation rates in turkey have exhibited significant volatility throughout the past two decades. simultaneously, the presence of elevated inflation rates and the expansion of the money supply in turkey exert a mitigating influence on the level of foreign exchange reserves. an examination of the inflationary trends in the azerbaijani economy from 1996 to 2001 indicates that the devaluation of the manat currency resulted in a rise in inflationary pressures. the presence of domestic political problems and uncertainties has the potential to diminish the confidence of foreign investors in a nation, thus resulting in a decrease in foreign exchange reserves. countries' foreign exchange reserves are impacted by foreign policy tensions. the challenges encountered by nations in their interactions with trading partners result in a reduction of foreign exchange reserves. the imposition of sanctions in the global sphere also has an impact on the foreign exchange reserves of nations. investments in nations result in a reduction of foreign exchange reserves through the imposition of trade volume restrictions on countries. an instance of this is the nagorno-karabakh conflict, which has had an impact on azerbaijan's foreign exchange reserves. another instance is to the strained relationship between turkey and the united states around the s-400 missile system. the imposition of sanctions by the united states results in a decline in trade volume and a drop in foreign exchange reserves (demir 2020). gunduz jamalzade, arif saldanli, elgiz jamalzade 93 logit method the current stage of the study involved an examination of the logit technique, which is represented by quantitative preference models. the literature encompasses a regression method that is constructed upon two dependent variables and exhibits linearity through the application of transformations. statistical approaches are employed to elucidate the likelihood of a phenomenon. the validity of the logit technique is contingent upon the binary nature of the dependent variable. the fundamental concept underlying the logit technique entails applying a logarithmic transformation to the probability of the dependent variable's occurrence, followed by conducting regression analysis to ascertain the association between the independent variables (óakmakyapan, 2011). the logit approach reveals the link between the dependent variable and the independent variable when the dependent variable is binary, meaning it can take two distinct values. this model is typically employed when the value to be estimated occurs in two distinct states. 𝜬𝒊 = 𝑬(𝒀 = 𝟏(𝑿𝒊)) = 𝟏 𝟏 + 𝒆 − (𝜷𝟎 + 𝜷𝟏𝑿𝒊) pi = independent variable xi=data i=probability of making a choice e=2.72 analysis of factors affecting the total foreign exchange reserve adequacy of the central bank of azerbaijan-turkey : logit method the objective of employing the logit approach in the empirical investigation is to assess the impact of the identified macroeconomic indicators on the magnitude of foreign exchange reserves, hence leading to the emergence of two distinct values for the dependent variable. the data utilized in this study were acquired from many reputable sources, including the central bank of the republic of turkey (cbrt), the data distribution site (dds), the central bank of the republic of azerbaijan (cbrt), the turkish statistical institute (turkstat), the world bank, and the oecd. the analysis utilizes data spanning from 2012 to 2022. the study considers several aspects to analyze changes in foreign exchange reserves at the factor scale. however, certain components are disregarded due to the study's multilinear nature. in this study, the explanatory variables used to assess the impact of macroeconomic indicators on the level of foreign currency reserves are x1 (interest rates), x2 (inflation rates), x3 (gross national product), x4 (real exchange rate), and x5 (unemployment rates). the selection of the logit regression model for the explanatory variables is determined in the following manner: logit (y)= β0+ β1x1+ β2x2+ β3x3+ β4x4+ β5x5+𝜀 in the given regression equation, the dependent variable, denoted as y, represents the total foreign exchange reserve adequacy. the coefficients of the constant term and the explanatory variables are denoted as β0, β1, β2, β3, β4 and β5 respectively. the model's coefficients represent the impact of each explanatory variable on the overall adequacy of foreign exchange reserves. a categorical variable, known as an indicator variable, typically has two distinct values, typically 0 and 1. in this scenario, we can employ the numerical value "1" to denote that the overall foreign exchange reserve is sufficient, whereas "0" can be used to indicate that it is insufficient. for our study, we will utilize the dependent variable as follows: the variable y is equal to 1, indicating the presence of factors that influence the adequacy of the total foreign exchange reserves of azerbaijan and turkey. factors affecti̇ng the total forei̇gn exchange reserve adequacy of the central bank: turkey and azerbai̇jan 94 conversely, the variable y is equal to 0, suggesting the absence of factors that affect the adequacy of the total foreign exchange reserves of azerbaijan and turkey. table 1.2 logit model analysis results of the established model variable estimated parameter standard error of parameters wald statistics significant(p) odds ratio fixed term 55,365 71,650 0,597 0,440 x1 3,177 0,177 17,454 0,000 24,070 x2 -0,230 0,193 1,424 0,233 0,795 x3 0,000 0,000 2,645 0,104 1,000 x4 -51,894 34,225 2,299 0,129 0,000 x5 -0,019 0,017 1,233 0,267 0,981 logit(p) = β0+ β1x1+ β2x2+ β3x3+ β4x4+ β5x5 here, p represents the probability value and ranges from 0 to 1. the formula includes the constant term, denoted as β0, β1, β2, β3, β4, and β5, as well as the coefficients x1, x2, x3, x4, and x5, correspondingly. logit(p)= 55,365+ (-3,177xx1)+(-1,232xx2)+(0,446xx3)+(-0,454xx4)+(0,139xx5) the model's performance was assessed using the log-likelihood approach. the adequacy of the model was assessed. a model's fit to the data improves as the log-likelihood value increases. the calculation of the log-likelihood value involves taking the logarithm of the probability values that have been determined. the value has the potential to be negative. in order to evaluate the adequacy of the model, it is crucial to compare the log-likelihood values of many models and choose the model with the highest value. it was determined that the loglikelihood value of the model is -53.68. this finding suggests that the model possesses a satisfactory level of fit to the data. the logit regression model coefficients utilized for evaluating the impact on foreign exchange reserve sufficiency are displayed in the table. furthermore, in order to assess the statistical significance of each variable, the wald statistic and p-value are provided. in hypothesis testing, the wald statistic is computed by dividing the coefficient by the standard error. the p value is a statistical measure derived from the hypothesis test of each coefficient, ranging from 0 to 1. a decrease in the p value indicates a higher level of statistical significance in the impact of the independent variable on the dependent variable. the odds ratio quantifies the ratio at which a one-unit increase in an independent variable results in a corresponding change in the probability of the dependent variable. the study revealed that the coefficient of the fixed variable was 55.365. the baseline value for foreign exchange reserve sufficiency is determined by holding other factors constant. the variable of interest rate (x1) exhibits the most significant impact on the adequacy of foreign exchange reserves. the coefficient of the variable is evaluated to be 3.177, with a p-value of 0.000, indicating its statistical significance inside the model. this finding suggests that, while controlling for other variables, a one-unit rise in interest rates would result in a 24.070-fold increase in foreign exchange reserve gunduz jamalzade, arif saldanli, elgiz jamalzade 95 adequacy. the coefficient associated with the inflation rate variable (x2) is -0.230, and the corresponding p-value is 0.233. these results indicate that the coefficient lacks statistical significance inside the model. consequently, if all other factors remain same, a one-unit rise in inflation rates would result in a 0.795-fold reduction in fx reserve adequacy. however, this impact does not have statistical significance. the coefficient for the gdp variable (x3) is 0.000, and the p-value is 0.104, indicating that it lacks statistical significance in the model. consequently, when all other factors remain unchanged, a one-unit rise in gdp does not impact the sufficiency of foreign exchange reserves. the coefficient for the exchange rate variable (x4) is -51.894, and the p-value is 0.129, indicating that there is no statistically significant relationship in the model. this suggests that, while controlling for other variables, a one-unit increase in the exchange rate during the preceding period does not impact the adequacy of foreign exchange reserves. the empirical analysis reveals that the coefficient associated with the unemployment rate variable (x5) is -0.019, while the p-value is 0.267, indicating a lack of statistical significance within the model. consequently, while keeping other factors unchanged, a one-unit rise in unemployment rates is associated with a 0.981-fold reduction in foreign exchange reserve adequacy, but this impact is not statistically significant. conclusions based on the findings of our literature review, it is suggested that in order to enhance reserve adequacy in turkey, it would be advisable to augment the central bank policies pertaining to the diversification and expansion of rediscount credits. these credits are primarily utilized by exporting firms and are converted into us dollars. additionally, it is recommended to incorporate under-pillow scrap gold within the country's central bank reserves and the financial system. in order to mitigate the potential risks associated with currency rates and decrease reliance on natural resource revenues, azerbaijan aims to diversify its investments across other sectors. the data indicate that interest rates have a substantial impact on the overall adequacy of foreign exchange reserves (p<0.05), whilst other variables do not show statistical significance. the odds ratio for total fx reserve adequacy improves by 24.070 when the "interest rates" variable increases by one unit. however, the impact of other factors on total fx reserve adequacy is not statistically significant. the analysis demonstrates that interest rates exert a substantial impact on the overall adequacy of foreign exchange reserves. this finding suggests that the implementation of interest rate policies can serve as a viable strategy for enhancing the sufficiency of the foreign exchange reserves in azerbaijan and turkey. the impact of other variables on the overall adequacy of foreign exchange reserves is not statistically significant. nevertheless, the p-value associated with the exchange rate variable exhibits statistical significance, hence necessitating a more comprehensive examination of its impact through the inclusion of a longer temporal scope. references 1. acmb. 20012022: monetary policy review. october, 17 on 2022: https://www.cbar.az/page13/monetary-policy-review retrieved from factors affecti̇ng the total forei̇gn exchange reserve adequacy of the central bank: turkey and azerbai̇jan 96 2. cinel, e. 2015: are foreign exchange reserves adequate in turkey? mehmet akif ersoy university journal of institute of social sciences, 12, 131-144. retrieved from: http://dergipark.ulakbim.gov.tr/makusobed/article/view/109800117/0 on june 2022. 3. demir, y. 2020: evaluation of foreign exchange reserve adequacy indicators for turkey. journal of ömer halisdemir university faculty of economics and administrative sciences, 13(3), 413-425. 4. eren, b. 2017: factors affecting reserve demand and reserve adequacy in developing countries (expertise qualification thesis). ankara: central bank general directorate of banking and financial institutions. 5. imf. 2011a: "assessing reserve adequacy." retrieved on january 2022 from: https://www.imf.org/external/np/pp/eng/2011/021411b.pdf. 6. imf. 2000: annual report of the executive board. retrieved on april 2023 from: http://www.imf.org/external/pubs/ft/ar/2000/eng/index.htm. 7. imf. 20122022: appendix i. international reserves, 2012-2022. retrieved april 2023 from: https://www.imf.org/external/pubs/ft/ar/2022/downloads/appendix.pdf. 8. imf. 20192022: imf quotas and quota reviews fact sheet. retrieved april 2023 from: https://www.imf.org/-/media/files/factsheets/english/quotas.ashx. 9. imf. 2022: annual report of the executive board. january 2023: retrieved from https://www.imf.org/external/pubs/ft/ar/2022/downloads/imf-annualreport-2022-english.pdf 10. irefın, d., & yaaba, b. n. 2011: "determinants of foreign reserves in nigeria: an autoregressive distributed lag approach", cbn journal of applied statistics, 2(2), pp. 63-82. 11. jeanne, o., & rancière, r. 2011: "the optimal level of international reserves for emerging market countries: a new formula and some applications", the economic journal, 121(555): 905930. 12. kaya, v. 2012: the relationship between exchange rate volatility and foreign trade in developing countries and the case of turkey. phd thesis, istanbul university, istanbul. 13. kester, a. 2001: "international reserves and foreign currency liquidity guidelines for a data template." retrieved on april 2023 from: http://dsbb.imf.org/images/pdfs/opguide.pdf. 14. memiş, h., paksoy, s., & yöntem t. 2014: the relationship between central bank reserves and macroeconomic variables: an application on the period 1989-2013. journal of süleyman demirel university faculty of economics and administrative sciences, 19, 4, 93-108. 15. park, d., & estrada, g. 2014: "the emergence of sovereign wealth funds in asia", in d. lee and g.n. gregoriou (eds.), handbook of asian finance: financial markets and sovereign wealth funds, 299-313. 16. pınar, a., & b. erdal. 2011: money-bank financial institutions and international financial system (2bs). ankara: turhan kitabevi. reedy, y. v. 2003: reserve managment at the reserve bank of india, how countries manage reserve assets. the royal bank of scotland, 97-119. gunduz jamalzade, arif saldanli, elgiz jamalzade 97 17. sümmeoğlu, o. e. 2010: international reserves, reserve management in turkey and reserve management policies implemented by the central bank of the republic of turkey in the 1990-2009 period. master's thesis, gazi university, ankara. 18. cbrt. 2011a: reserve and risk management in central banks. retrieved on october 2022 from: http://www.tcmb.gov.tr/wps/wcm/connect/622a2955-8ab3-430ab01e-acc2fb087033/11 7.pdf?mod=ajperes&cacheid=622a29558ab3-430a b01e-acc2fb087033. 19. wıjnholds, j. o. d. b., & kapteyn, a. 2001: "reserve adequacy in emerging market economies", imf working paper, 2001, pp. 1-49. imf working paper, 143: retrieved from http://www.imf.org/external/pubs/ft/wp/2001/wp01143.pdf 20. yaman, b. 2003: international reserves, reserve adequacy and optimum reserve level application for turkey. (expertise qualification thesis). ankara: central bank general directorate of statistics. agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 17, no. 2 (2023), pp. 130-136 130 digitalization of education in azerbaijan n. a. hajiyeva, r. t. huseynov, m. r. huseynova, a. v. mammadova, s. j. mammadov nushaba aslan hajiyeva1, ragif tofig huseynov2, mehriban rovsen huseynova3, ayshan viladdin mammadova4, seymur jeyhun mammadov5 1, 2, 4, 5 azerbaijan university of technology, azerbaijan 3 azerbaijan state oil industry university, azerbaijan 1 orcid no https://orcid.org/0009-0003-0296-4727, e-mail: nushabahajiyeva@outlook.com 2 orcid no https://orcid.org/0000-0002-7880-6923 3 orcid no https://orcid.org/0009-0000-8885-9386 4 orcid no https://orcid.org/0009-0002-8844-314x 5 orcid no https://orcid.org/0000-0003-1444-6831 abstract: in the 21st century, in the conditions of information abundance, management, that is, management of education, which is the basis of the state, society, and all economic development, is the most important issue. in modern times, all educational institutions are exposed to digital globalization in one way or another. given the rapid development of information and the number of educational institutions due to high development and increase in student knowledge, technology increases the need for constant updating. accelerating the implementation of digitization in the field of education in azerbaijan is considered one of the urgent issues. in this situation, it is important to establish a mutual relationship in the field of globalization education, which has a mutual goal, to help the schools and universities of azerbaijan. in this process, it is necessary to apply information technologies related to the use of changes, modern information and communication technology tools, databases, and provision with modern telecommunication tools at all stages of the digitization process of education and in the training content. the article analyzes the main directions of the application of digitization in education in azerbaijan and shows the characteristics of the digital educational environment. keywords: information society, artificial intelligence, distance education, digital transformation, innovation. introduction the development of ict leads to faster and faster communication between people in the world, the deepening of globalization processes in the economic and socio-cultural fields, and the role of information in all spheres of society and economy. the new relations formed in the modern era have determined the transition of humanity to a new stage of development the information society. information and knowledge form the basis and purpose of the information society we mentioned, through which the digital world is formed. (knox, 2019). digitization of education means the use of various programs, applications and other digital resources for e-learning, both remotely and directly at school or university. in addition, digitalization applies not only to educational processes, but also to organizational processes. for example, the same https://orcid.org/0009-0003-0296-4727 mailto:nushabahajiyeva@outlook.com https://orcid.org/0000-0002-7880-6923 https://orcid.org/0009-0000-8885-9386 https://orcid.org/0009-0002-8844-314x https://orcid.org/0000-0003-1444-6831 nushaba aslan hajiyeva, ragif tofig huseynov, mehriban rovsen huseynova, ayshan viladdin mammadova, seymur jeyhun mammadov 131 electronic diaries and journals, as well as the ability to write an e-mail to the teacher instead of calling or coming to school in person, are also elements of digitization. it is no longer possible to imagine and talk about education without digitization. because the digital internet environment has become an integral part of our life. (humbatov, et al.,2020). therefore, it is necessary to use the development of information technologies more effectively in the field of education. those who do not keep up with what is happening will face many problems. this problem reveals the situation: today it is almost impossible to realize education without using new educational technologies. (sarsici & celik 2019) discussions 1. the process of digitization in education educational institutions in the world and in azerbaijan should build their presence on the basis of the above-mentioned changing innovations. the public goods produced by educational institutions must be desirable in the labor market. studies conducted in the field of education show that the purely theoretical education, which is not enriched with practical knowledge and skills as a result of scientific and technological progress, innovations, and modernization, is already losing its fundamental importance. the application of new information and educational technologies of the century requires the use of progressive forms of methodical materials corresponding to the modern world level along with the organization of the teaching process and active teaching methods. thus, digital technical skills transcend education, both academically and pedagogically. electronic textbooks incorporate the advancements of modern technology, subject matter, design and artistic qualities, while limiting the use of paper. graphical images are an attractive approach for students to learn better. by providing a visual representation of the subject, students grasp the concept better. the most difficult topics can be presented in a simplified way with the help of such images: appropriate programs help students to better understand new materials thanks to graphic images. (ivanova,2015). due to the start of the coronavirus pandemic, the trend of digitization of education has shown itself in our country as well as in the world. schools and universities everywhere have switched to distance learning, affecting almost all students, their parents and teachers. with the onset of the pandemic, the process of digitization in education has developed rapidly. the size of the educational technology (edtech) market proves this once again. the educational technology (edtech) market is growing rapidly and, according to the world economic forum, it will reach $342 billion by 2025. 2. the current state of digitization of education in azerbaijan important work is being done in azerbaijan in the field of digitalization of education, construction of new ict infrastructure, and application and modernization of modern technologies. as a result, educational institutions are provided with basic ict infrastructure. during the pandemic, the "virtual school" platform for distance education has been launched in our country. by the end of the 2020-2021 academic year, the number of students registered on the platform reached 1,426,721, the number of teachers reached 128,186, and the number of active users reached 1,123,126 (www.stat.gov.az). digitalization of education in azerbaijan 132 through the electronic services created in azerbaijan, the admission of students to schools, the recruitment of teachers and principals, the transfer of students from school to school, the organization of various competitions and olympiads, the electronic submission of applications, certificates, etc. are already done through online platforms. in addition, we can note that currently work is being done in the direction of the digitalization of the issuance of educational certificates and diplomas. currently, information about employees, pupils, and students working in general education and higher education institutions operating in our country is recorded centrally, and statistical analysis and electronic management are carried out through the educational information system. deployed systems generate data on about 2 million people every day. the portals www.e-derslik.edu.az and www.video.edu.az are regularly updated by the ministry of education to create innovative content in the azerbaijani language. new electronic textbooks, teaching aids, interactive exercises, television lessons on general and professional education, video lessons for teachers, 3d animation videos, video lessons of the steam project, khan academy lessons and video lessons with an evaluation system have been added to these portals (www.edu.gov.az), in addition, 96% of the country's educational institutions are connected to the azerbaijan education network and are provided with a single and secure network infrastructure. currently, the azerbaijan education network is working towards the transfer of educational institutions to high-speed fiber-optic communication. storage and analysis of information about students and teachers in educational institutions in a single database, electronic management, preparation of statistical and forecast reports based on collected data is carried out through the information system of higher and secondary education. accordingly, the registration of students in higher and secondary educational institutions in our country is carried out electronically through the single electronic services portal of the ministry of education (portal.edu.az). based on the conducted research, it was found that a number of higher education institutions joining the azerbaijan education network have access to the geant international academic network, the world's largest research and development network, so they can take advantage of the research potential of this resource. it should be noted that the geant network allows all participants to join together for scientific activities and joint research, as well as to develop joint educational programs. in our country, the service of reviewing citizens' applications by the ministry of education is gradually being carried out online, the reception of citizens in the format of video communication is widely used. the main goal of the ministry of education in implementing online admission of citizens is to provide timely and quality services to citizens and promptly respond to citizens' questions about education. therefore, the system of citizen appeals has been improved in order to increase accessibility and convenience for citizens. "citizens' applications" service has been created on the portal.edu.az portal, which combines electronic services in the field of education in a single window, where everyone can submit and track their application to the ministry of education and its subordinate institutions. as a result, compared to the submission of written applications, the time required for filling out the application and responding to the citizen's application has been reduced by more than half. starting from 2021, the registration of students in higher and secondary educational institutions and the issuance of certificates of study will be carried out electronically through the single electronic services portal of the ministry of education (portal.edu.az). in addition, transfer of students by higher http://www.edu.gov.az/ nushaba aslan hajiyeva, ragif tofig huseynov, mehriban rovsen huseynova, ayshan viladdin mammadova, seymur jeyhun mammadov 133 education level, recognition of qualifications of foreign countries in the field of higher education, and online verification of the authenticity of educational documents are carried out electronically. the virtual school platform implemented in our country in 2020-2021 due to the spread of the pandemic period has succeeded in collecting enough information about the educational process of pupils and students. thus, the national evaluations held twice on the platform in that period enabled the creation of a database of students' exam results. the algorithm was developed depending on the time students spend on the "virtual school" platform, the tools they use on the platform during distance education, and the exam results of these students. this algorithm allows you to digitally monitor and analyze the educational performance of students and predict their future education. therefore, the use of artificial intelligence and machine learning technologies can serve to make immediate and longterm decisions in the field of education. in this direction, relevant studies in the field of education continue in our country. (digitalisation webinar, 2020) digitization in education affects not only the direct training process, but also the system of certification of students' knowledge level. this is currently used as an electronic record of student activity in many schools and higher education institutions. thus, as a result of digitalization in education, it is possible to follow the daily page of the higher education institution on the internet, to view the subjects and the student's class schedule for a semester, to view the attendance data and summary data of students in weeks, missed classes, registration of students' grades in educational semesters, total scores for the current year and previous academic years can be calculated. 3. effectiveness of digitization of education in azerbaijan digitization of education in azerbaijan and the effectiveness of digital technologies have shown themselves as follows: digitization in education facilitates organizational tasks. digitization makes education more convenient for schoolchildren and students. the online mode provides access to a wider variety of educational content than the traditional format. the virtual environment allows you to practice real-life skills in a safe environment. learning in a digital environment provides an opportunity to collect and analyze data to further improve the educational process. (hajiyeva et al.,2021) 4. problems arising from the application of digitization in education as we mentioned above, there are high results related to the application of digitalization in education, but there are also problems in our country. they are mainly the following: people who have no experience of using the internet and digital resources find it difficult to study online. some people are not aware of the useful possibilities of digitization and use the smartphone only for entertainment, while others, although they are aware of such possibilities, cannot learn to work with applications without outside help. some part of the population does not have computers or other devices necessary for online education and high-quality internet connection. thus, taking into account the dynamism of the era, such as the knowledge economy, or rather, the commercialization of knowledge, artificial intelligence, the emergence of new professions, some digitalization of education in azerbaijan 134 of them joining history, and taking into account the research-oriented character of the development of education and teaching, it is necessary to meet the demands of great responsibility, accountability, and result orientation on educational institutions. falls. (valentina et al., vi international forum on teacher education) like all countries of the world, azerbaijan has been affected by global trends related to the development of digital technologies. today, the application of digitalization, which changes the economic and social development models of developed countries, has put serious issues before us. in addition to being the basis for the development of new fields, digitization also performs important social functions and makes significant contributions to the solution of existing problems in society. (armila et al., 2022) the main factors of the digitization process are the availability of relevant jobs, along with highly qualified specialists. this requires the cooperation of education and the digital economy, making it inevitable. according to the conducted research, we can say that science in the information society is being updated rapidly, to regulate the growing amount of information and to use it as a basic science and resource, the study and use of the aspects of informatics and its parts: elmmetrics, webometrics, cybermetrics and bibliometrics also stimulate the development of science and educational institutions. is one of the main factors. in addition to all this, one can also mention the contrasting features of the digital world. (hajiyeva,2018) 5. requirements for the development of education in the country diffusion of information, against the background of globalization of capital and the knowledge economy in which intellectual capital surpasses physical capital, further increases the commercialization of knowledge. improving the management system with information using the databases of higher education institutions increases the confidence that the public good will meet the desired requirements. the quick and flexible implementation of such an educational system, database and management brings the following requirements for the development of education: • improving the quality of the educational process, improving the structure of transferred knowledge and achieving high-level qualification of graduates with higher education; • development of modern teaching technologies and orientation of the education system to modern standards and innovative programs; • integration of educational environment, scientific research and business circles (especially in university complexes); • development and implementation of various forms and systems of continuous and additional education; • strengthening the potential of innovative scientific and technical research in educational institutions; • creation of wide opportunities for the business activity of higher education institutions (granting the status of an independent institution, a public person, etc.) (www.researchgate.net). • ensuring the necessary freedoms and using preferential capital funds, etc. nushaba aslan hajiyeva, ragif tofig huseynov, mehriban rovsen huseynova, ayshan viladdin mammadova, seymur jeyhun mammadov 135 objective factors for the management of educational institutions with information, existing information bases, at the same time, the use of evaluation and monitoring information bases can help and, as a result, help to improve pedagogical processes. 6. innovative educational projects implemented in azerbaijan currently, one of the important directions among the innovative educational projects that are being implemented in the country in the direction of modernization of education is the electronicization of state documents on education. in this regard, on february 5, the president of the republic of azerbaijan ilham aliyev signed a decree on the implementation of the law of the republic of azerbaijan dated december 18, 2020 "on amendments to the law of the republic of azerbaijan "on education". according to the law, persons who have completed any stage and level of education in an educational institution (except doctorate) are supposed to be given a state document on the relevant education created in the form of an electronic document in the "education centralized information system" in accordance with the legislation. also, persons who have not completed any stage and level of education due to various reasons will be given a certificate of relevant education created in the form of an electronic document in the "education centralized information system" in the manner determined by the relevant executive authority. (law of the republic of azerbaijan "on education", 2009). the aforementioned works will create wide opportunities such as the complete digitalization of the process of preparing and issuing educational documents in the country with the application of the latest technologies, verification of the authenticity of electronic documents from any place through a single verification portal, and permanent storage of educational documents in electronic resources. the digitalization of educational documents, which is the first in the world in our country, which advanced countries are in the preparation stage, is not only a great achievement in the field of education, but also an important contribution to the digitization of the country. application of such an innovative approach allows azerbaijan to take more leading positions in international rankings. in addition, it is planned to provide information in the electronic educational documents in azerbaijani and english languages. this will simplify the process of recognition and verification of educational documents in foreign countries, thereby enabling our country to participate more closely in the integration processes in the modern world. the digitization of education leads to the acquisition of knowledge, skills, and habits, especially in the field of lifelong learning. in this process, we can see a shift from technique, competition and currency to innovation, stimulation, empowerment and quality. (armila, et al., postdigit sci educ). conclusions the issue of digitalization of society, life, and education is increasing day by day. today, the field of education is actively developing and has created conditions for the creation of a digital environment. in the sphere of education, electronic instructions and educational platforms are applied. but to use modern digital technology, it is necessary to have durable and quality content. it is digitalization of education in azerbaijan 136 important to be aware of the positive or negative effects of other countries when a country is starting to use digital technologies. (digitalisation webinar,2020) the main direction of the implementation of the digitalization of education project is the introduction of digital technologies and platforms, education, as well as the creation of a motivation system for the necessary development. digitization of education allows access to the best data processing system for schools, universities, colleges. as a result of the conducted research, we should note that digitalization is changing the education system in azerbaijan as well as in the whole world. but that doesn't diminish the value of what we teach in the classroom. the process of digitization in education requires the integrated use of visual learning and online learning methods. so we have to do both learning methods in parallel. in addition, the digitization of education is the most reliable and correct step towards the future, so it directly serves the content of education, as well as improving its quality. therefore, it is necessary to more intensively implement the process of promoting the use of modern technologies in the field of education in the country. references 1. armila, p., sivenius, a., & stankovic, b. (2022). digitalization of education: commodification hidden in terms of empowerment? *postdigit sci educ.* 2. digitalisation today: benefits and risks for teaching and learning. (2020, october 29). *digitalisation webinar one.* doi: https://doi.org/10.36719/2706-6185/21/19-23 3. hajiyeva, n. a., mammadov, s. c., gojayeva, z. b., mammadli, z. t., shikhiyeva, x. kh. (2021). *digital economy.* ganja: lambert academic publishing. 4. hajiyeva, n. a. (2018). *marketing: features of marketing in azerbaijan.* lambert academic publishing. 5. humbatov, y., ismayilov, v., karimov, f., & mammadov, s. (2020). *introduction to economics.* baku. 6. ivanova, e. (2015). elektronny uchebnik-predmetnaya informationno-obrazovaniya sreda samostoyatelnoy raboti uchashikhsya. *obrazovany i nauka, 5,* 118-128. 7. knox, j. (2019). what does the postdigital mean for education? three critical perspectives on the digital, with implications for educational research and practice. *postdigital science and education, 1(2),* 357-370. 8. law of the republic of azerbaijan "on education" no. 833-iiiq of the president of the republic of azerbaijan dated june 19, 2009. 9. sarsici, e., & celik, a. (2019). a model proposal for digital transformation in education. in *proceedings of the international virtual symposium on innovations in education and social sciences.* gaziantep: hasan kalyoncu university. adiyaman: adiyaman university. 10. kuznetsova, v. y., & azhmukhamedov, i. m. (year). advantages and risks of using the digital educational environment. *vi international forum on teacher education.* 11. ministry of education of the republic of azerbaijan. (https://www.edu.gov.az) 12. state statistical committee of the republic of azerbaijan. (https://www.stat.gov.az) agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 17, no. 2 (2023), pp. 121-129 121 modern trends in business in the function of business success g. nikčević gordana nikčević university adriatic bar, faculty of business economics and law, montenegro orcid id: orcid.org/0000-0002-9804-6917, e-mail: gogan@t-com.me abstract: the aim of this paper is to point out the importance of new trends in the business of modern organizations. emphasis is placed on the processes that characterize modern organizations, namely: globalization, sustainability, information technology and modern organizational structures. the paper analyzes the extent to which modern organizations fit into the trends of globalization and sustainability, and the extent to which they apply modern information technologies and organizational structures. in order to have a more successful analysis, the advantages and disadvantages of these trends have been identified. the paper shows that the successful operation of modern organizations depends on the degree to which they have managed to master these trends and implement them in their business strategies. all these processes result in connecting and networking organizations, developing democratic relations in management and decision -making, which has a positive impact to greater employee motivation and more efficient business. keywords: modern trends, globalization, information technologies, sustainability, organizational structure introduction a modern and dynamic market requires constant changes in the way organizations operate and their adaptation to these changes. many organizations find the answer to the dynamic environment by introducing and applying some of the modern trends or even applying more of them. organizations apply a certain trend depending on their wishes and needs. timely introduction of a trend is one of the main keys to success, because trends can only be successful if they are applied in the given circumstances. otherwise it will not have the desired effect within the organization. for this reason, organizations need to be very careful when introducing them, because it can have greater consequences than benefits. in the sense of the above, the paper first analyzes competitiveness, as a feature of modern organizations. through the implementation of trends in their business strategies, organizations will be competitive in the modern market. the paper identifies strategies that organizations can use to acquire and maintain competitiveness. furthermore, the important characteristics of modern trends are presented, namely globalization, sustainable development and information technologies and their impact on the business of organizations. in this context, the importance of modern organizational structures in shaping organizations was especially emphasized. this is because new trends require newer organizational structures. the paper presents some of the newer forms of organizational structures, namely: team organizational structure, network organizational structure and externalization of activities. at the end of the paper, concluding remarks are given that refer to the treated issues. mailto:gogan@t-com.me modern trends in business in the function of business success 122 1. competitiveness as a feature of modern business competitive advantage is a characteristic that distinguishes one organization from another, i.e. striving to gain an advantage over others. this is a characteristic that makes an organization better and more successful than others, because it can better meet its own needs and the needs of others. today, competitive advantage is increasingly difficult to achieve, and even more difficult to maintain because we live in a turbulent time in which changes are happening every day. achieving and maintaining a competitive advantage means that companies adapt to global trends in doing business on the global market, which means: high quality goods and services, diversity of the workforce, entrepreneurship, etc. given that the main purpose of the business strategy of the company gaining and maintaining an advantage over the competition, it is clear that with the change of business conditions, the strategies with which companies appeared on the market must be reconsidered. therefore, organizations can take some of the strategies to gain a competitive advantage (robbins et al., 2014).  strategy of industrial organization involves the analysis of the impact of external factors and making strategic decisions based on them. according to porter, the factors that affect the organization are: the bargaining power of customers, the bargaining power of suppliers, the existing rivalry, the danger of the existence of substitute products.  resource based strategy involves the analysis of resources and starts from the fact that the company's resources are crucial for gaining and maintaining a competitive advantage. this strategy involves developing and using unique organizational resources and capabilities. resources include all financial, physical, human, intangible and structuralcultural assets that an organization uses to produce and deliver products and services to its customers. also, resources need to be scarce, difficult to imitate and copy. however, the weakness of this strategy is that resources change their properties over time. in that sense, what is valuable today may not be tomorrow. also, new technologies make it easy to copy what is not possible today, so it can happen that the organization cannot use its resources in the best way.  guerrilla strategy, means that the competitive advantage of an organization is current, because the environment is characterized by change. according to this strategy, in order for an organization to be successful, it must be ready to quickly and constantly surprise competitors with strategic actions in order to throw them off balance. each of these strategies indicates the need to gain and maintain a competitive advantage in its own way. however, all together they say that it is necessary to constantly analyze both the external and internal environment of the organization, then use unique resources and capabilities to take advantage of all the positive changes and protect yourself from negative changes. maintaining a competitive advantage is even harder than gaining it. this means that other organizations have failed to reach that business level by applying strategic analysis and business strategies in order to jeopardize the acquired competitive advantage (porter, 2001; huggins & izushi, 2015; drobyazko et.al., 2019). 2. contemporary trends in the business environment gordana nikčević 123 2.1. globalization globalization can be defined in different ways, but simply put, globalization is connecting people and their cultures in different areas: economic, technological, informational, political and cultural. globalization means connecting world markets, creating a global market and facilitating the flow of people, ideas, goods, capital and technology. it is believed that there are various factors that encourage the process of globalization, primarily the accelerated growth and development of science and technology, the emergence of multinational companies, global problems and the liberalization of relations (cingula et al., 2016). globalization has intensified the intensity of relations and established a global way of thinking. today’s global lifestyle requires constant investment in knowledge, advances in technology, research and development. companies that do not get involved in the globalization process in time lag behind in development. therefore, it is rightly said that the world has become one big "global village" because through the process of globalization it opens more and more, but in that way it decreases accordingly. the explanation lies in the fact that, as an idea, globalization refers to the "reduction of the world" with the strengthening of awareness of the world as a whole (rizescu & tileagă, 2017). the goal of globalization is to improve all aspects of life through its actions, so it is important to emphasize its positive aspects. the positive aspects of globalization have an impact on economic, technological, political and cultural aspect of society. in economic terms, globalization is through free trade, increased exports, increased revenues, reducing production costs, accessing new and cheaper resources, enabling economic growth and development for many countries. it enabled the penetration of new products and services on the market, removed barriers between the markets of different countries, increased competitiveness and thus innovation. politically encouraged cooperation between different countries as a joint work on the same goals similar values. in terms of technology and culture, thanks to fast access and flow of information, organizations achieve more efficiency communication with customers and partners. the progress of the countries, the greater the inflow of money, the living standard of the people and their purchasing power also increased. however, globalization also has negative sides: the departure of labor from certain countries, excessive profits and power are enabled for companies that have a large amount of capital, pronounced inequality between underdeveloped and developed countries, etc. (deardorff, a & stern, 2002). the biggest advantage, but also the disadvantage of globalization is the great competition on the market. since organizations no longer trade on the national but on the world market, there is also a lot of competition. with so much competition, it is very difficult to break through and stay competitive. if an organization takes advantage of all the positive aspects of globalization, globalization can be a very positive thing for it (bresser pereira, 2010). therefore, theoretically, globalization is a complex phenomenon that has two sides, but provides equal opportunities for all. however, the question is to what extent and in what way individual countries will take advantage of the positive and avoid the negative sides of the globalization process. 2.2. sustainability modern trends in business in the function of business success 124 sustainability is a trend that has been constantly present, especially in recent times. the concept of sustainability arose based on the need to change attitudes towards the environment and less and less available renewable and non-renewable resources. its essence is to achieve not only economic, but also social and cultural development that does not endanger the environment . all this is aimed at meeting the needs of the current generation, without compromising the ability of future generations to meet their own needs. companies are generally facing the same challenge as finding a business opportunity to develop sustainable solutions. achieving sustainable development at the global level requires systemic changes that support sustainable development. companies should incorporate the concept of sustainability into their business practices in order to survive in the market. however, many do not understand what this involves and how to initiate the systemic changes that are needed. therefore, public administrations have a key role to play here as they need to steer the markets towards sustainable development and encourage companies to transition towards sustainable development. it is necessary to develop regulations that encourage companies to be efficient and respect natural resources (lubin & esty, 2010). 2.3. information technology it is known that the success of a company depends on a well-organized information sector. in the broadest context, information technology means" use of computers for storage, calling, transmission i manipulation of data and information" (varian, 2003). the business value of information technology is based on automation of business processes, providing information for decision making, and connecting companies with customers and providing productivity tools efficiency (proctor, 2011). a well-organized and well-built information system enables easier management. the internet, as a modern technology, improves the coordination of all functions in companies. modern information technologies enable easier and faster access to information in all areas (production, health care, science, culture). in this sense, the introduction of information technology provides greater transparency, speed and simplicity and flexibility. the basic issues that inevitably arise in this context are the provision of security and the timely provision of information about the user. however, a large number of companies have an unmatched system of needs with the number of computers, which certainly leads to increased costs and reduced quality of work. this shows that network management and end-user service are underestimated in some organizations and that more attention needs to be paid to this issue ( o'neill & salas, 2018; dickson, g.w., & desanctis, 2000). given the above, companies should proactively respond to all challenges. in that sense, there are different methods and all of them are aimed at economic growth, investment in human resources, increased use of information technologies, especially the internet, etc. the management of companies in developed economies will respond differently to these challenges compared to the management of developing countries. experience shows that in developing countries, it is necessary to ensure greater state participation through the creation of a favourable legal environment as well as financial resources (haag, cummings & dawkins, 1998). gordana nikčević 125 3. new tendencies of organization design and their implementation successful business operations are not possible if managers do not follow the latest business trends. traditional organizational forms functioned well within an environment that was stable and predictable. however, in a dynamic environment such as today, they can jeopardize a company's business. in order to overcome the uncertainty, the change of traditional organizational structures and the creation of new organizational structures will significantly improve the existing business. in the continuation of the paper, we will present new organizational structures that have proven to be good forms of lending to modern companies. 3.1. team organizational structure team organization is a newer form of organizational structure in which teams have the main place. this organizational structure aims to break down centralized and hierarchical structures and, through team development, create flexible and dynamic structures. therefore, the basic characteristic of a team organizational structure is dynamism. team organization removes the boundaries of division of labour and makes the organization much more flexible. in order for an individual to be part of a team, it is necessary to have the following characteristics: ability to cooperate and communicate, ability to resolve conflicts, ability to set goals and manage change, ability to plan and coordinate (stevens & campion, 1994). given that the team is a small group of people who have common goals and who work together to achieve them, teamwork brings a number of possible solutions, successful coping and increased availability of relevant information ( cirella, 2021; daft, 2000). teamwork is a professional orientation for many companies. today, companies feel the need to perform their tasks with several employees and thus increase the speed and quality of their products and services. these requirements for companies create a need for teamwork. a team can also be described as a product of goal, establishment, development and results. therefore, in order for teams to exist, two conditions need to be met, namely: there should be as many members in the team as possible to maintain interconnectedness, while the second condition refers to the joint responsibility of all members in achieving goals (senge, 2000). like any other organizational structure, team organization has its advantages and disadvantages. some of the advantages are: fast decision making, improved exchange of information between team members, willingness to compromise, easier development of level ideas, better morale of employees and enthusiasm for their involvement, improved exchange of information between team members, easier development of new ideas and solutions to existing problems. the disadvantages of the team organizational structure are: the possibility of conflict, a lot of time and resources spent on agreements and meetings, unplanned decentralization (nancarrow, 2013). 3.2. network organization a network organization is a form of organization that is most closely related to a virtual organization. namely, it is a network through which a virtual organization is built. networking is emerging in response to increasingly complex business conditions and increasing changes in the way we do business. modern trends in business in the function of business success 126 unlike modern forms of organization that open the organization inwards, the network organization breaks all boundaries between organizations by opening them outwards. there is no structure in a network organization, and members of the organization may have mild hierarchical relationships. the network is dominated by relationships of cooperation, exchange of knowledge, skills, information, technology, human resources, etc. that is understandable because the most common reasons for joining the network are: exchange of resources, cost reduction, risk sharing, access to markets, protection of innovations, etc. starting from the degree of dislocation of activities and management methods, miles and snow distinguish three types of networks, namely: internal, stable, and dynamic networks. porter's value chain concept, which groups all activities in the company into primary (incoming logistics, production, outgoing logistics, marketing, and service) and support activities (procurement, development technologies, resource management, and enterprise infrastructure), served as the basis for building a network organization. (porter, 2001) namely, managers can use the value chain to look at all the activities they perform and keep those in which they can achieve competence and dislocate other activities to other organizations. so, organizations are oriented to their core program and release less effective and inefficient functions. the bottom line is that every member of the network produces what is better than others that is the competition. at the same time, by involving external collaborators, border organizations become open. according to this concept, they distinguish are modular, virtual, and open organizations. network organizations have certain advantages, which are:  efficient production, ie. the network allows production to be carried out at lower operating costs.  efficient organization, ie. the network form reduces the middle layer of managers and employs a smaller number of workers.  flexibility an important advantage of networks is the possibility of fast responding to changing environmental demands.  market and resources the network provides access to markets, and that as for the supply of cheaper raw materials and labour, as well as in terms of marketing products and services. the disadvantages of network organization are: the problem of coordination of activities, lack of equal control of all employees, difficulties in motivating employees, and difficulties in building employee loyalty. however, as long as the company is sufficiently independent and strong, there is no need to invest in a network organization (miles & snow, 1995; moliterno & mahony, 2011). 3.3. externalization of activities externalization of activities is the transfer of activities that were performed within the company to external partners, who will now perform them instead of the parent organization. which activities will be outsourced depends on the company's strategic commitment. companies can outsource basic activities, such as information technology, human resource management, etc. they can also externalize ancillary activities, such as cleaning, nutrition, and so. which of these activities will be considered important depends on the activity of the gordana nikčević 127 company. having in mind the above, we distinguish two types of externalization of activities: separation of basic activities and separation of secondary activities (sarwat & abbas, 2021). the most important reason why several companies decide to outsource certain activities is the advantages of externalization. this process allows companies to concentrate on those activities that work best, while all other activities can be transferred to external partners. in that case, the company will externalize all those activities that do not achieve satisfactory results in the long run and thus get rid of operational problems. since external operators can often do business at a lower cost than the company itself, companies can significantly reduce their costs. since interpersonal relationships are very often the cause of poor results in companies, in this way problematic situations among employees are avoided. outsourcing improves quality, improves company focus, increases flexibility, and reduces risk (kalleberg & marsden, 2005). externalization of activities has recently become one of the most used business structures, precisely because of the transfer of activities to external partners and the automatic reduction of workload within the organization (pellicelli, 2018). conclusions the development of technology, but also the growth and development of human knowledge, encourages changes to which organizations need to adapt. this can result in a change of mindset within organizations, the introduction of new technologies, changes in organizational structure, and many other changes. with the advent of globalization, the world market is expanding, and with it, more and more competition is emerging. in an environment where there are a large number of competing organizations, the organization must stand out from others in some of its characteristics. in that sense, organizations should apply certain business strategies to remain competitive. monitoring modern trends in the organization, if they are adequately implemented in business strategies, can have very great advantages and positive effects on the overall business of the organization. thus, by taking advantage of these trends, which are highlighted in the paper, organizations can achieve better business results, a better quality of final products or services, and reduce operating costs. for an organization to successfully implement trends, it is first necessary to identify its needs and priorities. after that, the positive effects of these trends should be used. careful selection of the trend opens up many positive opportunities for organizations, about what they need, given all the conditions that surround them. to implement new trends in modern business, it is necessary to have flexible organizational structures as well as an environment that will be suitable for their implementation. in that sense, the environment should be open to the environment. since companies operate in a dynamic environment, it needs to be open to environmental influences. only as an open system, the company can accept new knowledge from the environment and turn it into useful knowledge. furthermore, the company must be valueoriented. these are values related to employees, shareholders, and consumers. in this modern trends in business in the function of business success 128 way, employees will be motivated to learn and acquire new knowledge that they will apply in the companies in which they work. since the acquisition of new knowledge implies the application of new methods of work, new ideas, and new products, it is necessary to accept the risk of the unknown. therefore, it is necessary to develop employees' feelings and attitudes about accepting the possible mistakes and risks, and thus a positive attitude of employees towards change. certainly, since employees are the most valuable resource in a company, investing in human resources should be their focus. this is because modern society is a knowledge society that is the most suitable environment for the development of new trends in modern companies. references 1. bresser pereira, l. c. (2010). globalization and competition. cambridge books. 2. cingula, m., galetić, l., rašić, s., aleksić, a., filipović, d., hernaus, t., & potočan, v. (2016). organizacija. sinergija. 3. cirella, s. (2021). managing collective creativity: organizational variables to support creative teamwork. european management review, 18(4), 404-417. 4. daft, r. l. (2000). organization theory and design. south. 5. deardorff, a. v., & stern, r. m. (2002). what you should know about globalization and the world trade organization. review of international economics, 10(3), 404423. 6. dickson, g. w., & desanctis, g. (2000). information technology and the future enterprise: new models for managers. prentice hall ptr. 7. drobyazko, s., barwińska-małajowicz, a., ślusarczyk, b., zavidna, l., & danylovych-kropyvnytska, m. (2019). innovative entrepreneurship models in the management system of enterprise competitiveness. journal of entrepreneurship education, 22(4), 1-6. 8. haag, s., cummings, m., & dawkins, j. (1998). management information systems. multimedia systems, 279, 280-297. 9. huggins, r., & izushi, h. (2015). the competitive advantage of nations: origins and journey. competitiveness review. 10. kalleberg, a. l., & marsden, p. v. (2005). externalizing organizational activities: where and how us establishments use employment intermediaries. socio-economic review, 3(3), 389-416. 11. lubin, d. a., & esty, d. c. (2010). the sustainability imperative. harvard business review, 88(5), 42-50. 12. mbembe, a., rekacewicz, p., & huyssen, a. (2001). globalization (vol. 2). duke university press. 13. miles, r. e., & snow, c. c. (1995). the new network firm: a spherical structure built on a human investment philosophy. organizational dynamics, 23(4), 5-18. 14. moliterno, t. p., & mahony, d. m. (2011). network theory of organization: a multilevel approach. journal of management, 37(2), 443-467. gordana nikčević 129 15. nancarrow, s. a., booth, a., ariss, s., smith, t., enderby, p., & roots, a. (2013). ten principles of good interdisciplinary team work. human resources for health, 11(1), 1-11. 16. o'neill, t. a., & salas, e. (2018). creating high performance teamwork in organizations. human resource management review, 28(4), 325-331.. 17. pellicelli, m. (2018). gaining flexibility and innovation through offshore outsourcing. sustainability, 10(5), 1672. 18. porter, r. (2001). what was the enlightenment?. in the enlightenment (pp. 1-10). palgrave, london. 19. proctor, k. s. (2011). optimizing and assessing information technology: improving business project execution (vol. 655). john wiley & sons. 20. rizescu, a.& tileagă, c. (2017), “the effects of globalization on the transformation of organizational management”, journal of defense resources management, 8(1), 135141. 21. robbins, s. p., bergman, r., stagg, i., & coulter, m. (2014). management. pearson australia. 22. sarwat, n., & abbas, m. (2021). individual knowledge creation ability: dispositional antecedents and relationship to innovative performance. european journal of innovation management, 24(5), 1763-1781. 23. senge, p. (2000). the leadership of profound change. spc ink, 1-3. 24. stevens, m. j., & campion, m. a. (1994). the knowledge, skill, and ability requirements for teamwork: implications for human resource management. journal of management, 20(2), 503-530. 25. varian, h. r. (2003). economics of information technology. raffaele mattioli lecture, bocconi university, milano, italy, revised march, 23. agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 18, no. 2 (2024), pp. 28-34 28 how important is sustainability for visitors of rock and pop festivals? insights from a broad audience analysis in germany m. j. bauer, t. naber, l. s. michel matthias johannes bauer1, tom naber2, lea sophie michel3 1 2 3ist university of applied sciences, germany, 1 https://orcid.org/0000-0002-6050-5612, e-mail: mjbauer@ist-hochschule.de 2 https://orcid.org/0009-0001-8954-2695, e-mail: tnaber@ist-hochschule.de 3 e-mail: lsm0312@aol.com abstract: the study examines the significance of sustainability among festival attendees (n = 3,503), revealing that a substantial majority of 90.4% do not consider it a primary factor in their festival experience. the analysis highlights demographic influences, indicating that factors such as age, gender, and educational background have minimal impact on the perceived importance of sustainability. the paper synthesizes these findings, concluding that sustainability is not a central aspect of the festival experience for most visitors. why is this the case? the answer lies in a key aspect of the experience that guests seek at festivals: escapism. the study suggests that traditional approaches, such as strict regulations on non-sustainable practices, may be counterproductive. instead, it advocates for the development of innovative nudging strategies that promote sustainable behaviors while preserving the escapist nature of festivals. by fostering a culture of engagement rather than prohibition, event organizers can enhance the integration of sustainability into the festival experience, ultimately encouraging more responsible participation among attendees. keywords: festivals, sustainability, escapism, nudging strategies 1. introduction according to a 2010 study, large music festivals leave a co2 footprint on a single weekend that is equivalent to that of a small town for the whole year. (bottrill et al., 2010) depending on the type of festival and its organization, the main factors responsible for this high environmental impact are transport (including logistics), food and high-emission energy production. (aßmann, 2022) festivals therefore have a special role to play when it comes to environmental sustainability within the event industry. however, the interplay between the individual protagonists influencing the sustainability of a festival is complex. legislation has already intervened in individual areas: one example is the so-called 'plastic ban', which has been in force throughout the eu since 2021 and prohibits single-use plastic products such as disposable cutlery, tableware and plastic drinking straws. (aßmann, 2022). however, the main responsibility for sustainability lies in the hands of festival organizers and festival visitors. while the former—supported by associations, agencies and non-profit organizations—are already taking more and more measures, festival guests remain https://orcid.org/0000-0002-6050-5612 mailto:mjbauer@ist-hochschule.de https://orcid.org/0009-0001-8954-2695 mailto:tnaber@ist-hochschule.de mailto:lsm0312@aol.com matthias johannes bauer, tom naber, lea sophie michel 29 an uncontrollable factor in this equation. why is this the case? the answer lies in a key aspect of the experience that guests seek at festivals: escapism. (kirchner, 2011; taylor, 2016). the term refers to the perceived escape from reality—or to put it simply: an escape from everyday life. escapism manifests as actions of avoidance tactics, unconscious or conscious, through which societal objectives and accepted norms are rejected. (stangl, 2024) this phenomenon suggests that even people who are strongly sustainability-oriented in their everyday lives do not place any increased value on sustainability when attending a festival. the following explanations examine this hypothesis on the basis of a survey of festival visitors in germany. 2. quantitative survey 2.1 survey procedure for this study, data was subjected to a secondary analysis. the data was collected in 2023 as part of a study on the determinants of festival loyalty based on a quantitative investigation of visitor satisfaction and loyalty and the derivation of recommendations for action for rock and pop festivals in germany. (michel, 2024; bauer et al., in print) the survey was conducted using an online questionnaire. the data collection took place from january 2, 2023 to february 24, 2023. the quantitative data analysis was carried out using spss. (michel, 2024). a total of 6,411 people took part in the survey for this study. of these, 2,514 people (39.21%) dropped out of the survey, therefore their responses could not be included in the data analysis. of the remaining 3,897 participants, 394 people (10.11%) answered “never” to the introductory question “how often have you been to music festivals of the pop or rock genre in germany?”. these 394 people therefore did not belong to the population described and defined above and were therefore not included in the data analysis. the evaluable sample size after adjustment therefore ultimately comprised n = 3503. (michel, 2024). 35.5 % of respondents were male, 63.3 % female, 0.8 % identified as diverse and 0.4 % did not specify their gender. (michel, 2024) 2.2 survey instrument the questionnaire, which was created for the original study, was in german only an consisted of a total of 58 items in a largely closed format. in order to answer the secondary analysis carried out here, item 5 (“which aspects are particularly important to you at a festival?”, 26 predefined aspects and one free field) and the demographic questions of items 6 to 9 (gender, age, relationship status and highest level of education) are of particular interest. (michel, 2024) in addition, items 19 (agreement with the statement “the festival site was clean [there was no garbage lying around on the site]”), 31 (“public transport to the festival site was sufficient”), 47 (“waste disposal on the festival site was well organized”) and 48 (“at the festival, attention was visibly paid to sustainability [e.g. deposit system for cups, no single-use plastic]”) were also considered. (michel, 2024) from question 12 onwards, the items of the questionnaire were to be rated on a fivepoint likert scale (1 = strongly disagree, 2 = disagree, 3 = neutral, 4 = agree, 5 = strongly agree). when designing the questionnaire, the items were formulated exclusively positively in terms of language and content (porst, 2014, pp. 106-107). (michel, 2024) how important is sustainability for visitors of rock and pop festivals? insights from a broad audience analysis in germany 30 2.3 method of secondary analysis of the survey for this secondary analysis, only descriptive statistical methods were used to describe the data in terms of its frequency distributions and to gain a comprehensive understanding of the relevant characteristics examined. the methods used include, in particular, the calculation of mean values and the presentation of cross-tabulations. as this is a secondary analysis, inferential statistical methods were deliberately avoided. (gisske, 2021) 3. results 3.1 sustainability as an (un)important aspect this analysis (item 5, see above) sheds light on the importance festival fans attach to the aspect of sustainability when attending a festival. it also examines whether demographic differences such as age, gender, relationship status and level of education have an influence on the relevance of sustainability to the participants 3.1.1 results on sustainability and gender distribution only 9.6% of respondents stated that sustainability is important to them at a festival, while 90.4% did not consider this to be a priority. however, this does not necessarily mean that sustainability is completely irrelevant to the majority—nevertheless, the topic of sustainability was not important enough to mark it as one of the maximum six most important aspects of a festival in the survey. the gender distribution shows that sustainability is considered important to 10.14% of women compared to 8.69% of men. despite the slight difference between the genders, however, this result was not statistically significant. respondents who indicated their gender as diverse and those who did not indicate their gender tended to find sustainability even less important, but these groups are so small overall that they are not meaningful here. 3.1.2 differences between age groups a comparison of the age groups shows that generation y (millennials) and generation z in particular rated the aspect of sustainability as less important (92.24% and 89.42% respectively). surprisingly, this proportion is lowest among baby boomers, although 83.33% of them also stated that they considered sustainability to be less important. at 86.26%, generation x occupies a middle position within the groups. overall, it can be observed that younger generations such as gen z, contrary to common assumptions about their higher environmental awareness, do not consider sustainability to be significantly more important than older generations. 3.1.3 marital status and the importance of sustainability marital status also has little influence on the prioritization of sustainability. 100% of widowed respondents, whose share of the total is extremely low (less than 1%), did not cite sustainability as an important factor. the relevance of this aspect is equally low for divorced people (94.47%; also less than 1% overall) and for participants in a relationship (91.45%). married respondents (91.06%) and single respondents (89.3%) follow this trend, albeit to a lesser extent. matthias johannes bauer, tom naber, lea sophie michel 31 3.1.4 educational background and importance of sustainability an analysis of the respondents’ level of education shows that the proportion of those who rate sustainability as important varies depending on their level of education, albeit only slightly. for example, 87.1% of participants with a bachelor’s degree stated that sustainability was not particularly important to them, while this proportion was 95.45% for people with a doctorate and even 100% for people with a professorship. in contrast, the figures for the groups with secondary school and lower secondary school qualifications were 93.19% and 92.98% respectively, indicating that higher academic degrees do not necessarily contribute to greater environmental awareness. 3.1.5 discussion the results indicate that sustainability does not play a primary role for the majority of festival visitors. interestingly, the data does not indicate a systematic increase in the importance of sustainability with younger generations or higher levels of education, which calls into question the assumption of a generally higher level of environmental awareness in these groups. these findings may suggest that a targeted nudging (aßmann, 2022; bär & korrmann, 2020; bär et al., 2022) is needed from event organizers to make sustainability a more attractive and central aspect of the festival experience. initiatives that communicate more conscious sustainability measures and actively involve the commitment of visitors could be effective approaches here. 3.2 other aspects of sustainability and their significance for visitors in order to understand the priorities and preferences of festival visitors in more detail, they were asked in the survey (also item 5, see above) to rate various aspects of the festival experience according to their importance. the results show clear differences in the weighting of the factors of cleanliness and waste or transportation options. this provides information about which features are important for the positive experience of a festival and how important these aspects of sustainability are for visitors. 3.2.1 cleanliness of the premises the aspect of “cleanliness of the site”, which includes the presence of garbage cans and the absence of litter lying around, was named as an important factor by 27.4% of respondents. this indicates that a certain group of festival-goers certainly value a well-kept and tidy environment, which is perceived as a pleasant part of the overall experience. however, 72.6% of respondents rated the cleanliness of the site as less important, suggesting that this factor is not a priority for the majority of participants. 3.2.2 transportation to the festival site the vast majority of respondents (94.2%) rated transportation to the festival site as unimportant and did not select it as a relevant factor. only 5.8% of respondents stated that this aspect was important to them. this low priority could indicate that most visitors either do not see any problems with their journey as such—or they prefer alternative means of transportation. it is also possible that the accessibility aspect takes a back seat if the festival content and the on-site experience are the main motivation for attending the festival. how important is sustainability for visitors of rock and pop festivals? insights from a broad audience analysis in germany 32 3.2.3 importance of cleanliness and transportation options the evaluation shows that the preferences of festival visitors vary greatly with regard to the two sustainability factors of site cleanliness and transportation options. overall, cleanliness and transportation options appear to be less important or at least less important than other factors. 3.3 visitors’ perception of sustainability measures although aspects of sustainability are an increasingly discussed topic in event planning, the previous results indicate that this aspect does not play a primary role for the majority of festival visitors. the analysis of the perception of sustainability measures, cleanliness and transportation options by the visitors themselves (items 19, 31, 47 and 48, see above) can be contrasted with this. 3.3.1 perception of sustainability measures overall, 56.9% of respondents agreed or completely agreed with the statement that the festival they attended “visibly paid attention to sustainability”, while 26% were neutral and 17.1% disagreed (item 48). although this indicates that sustainability measures such as a deposit system or the avoidance of single-use plastic are definitely perceived, the other results show that this is not a decisive factor for the majority of visitors (see above). 3.3.2 cleanliness of the festival site the answers to the question on the perception of the actual cleanliness of the site (item 19) show a mixed picture: 28.8% agreed with the statement that the site was clean and only 8.1% completely agreed. a considerable 31.6% took a neutral stance, with 23.9% disagreeing and 7.7% strongly disagreeing. this indicates that although cleanliness is perceived, it is less important for the satisfaction and experience of many visitors than other quality features. 3.3.3 availability of public transportation the perception of transportation availability (item 31) is mixed: 15.4% disagreed and 7.9% strongly disagreed on whether public transportation options to the festival were sufficient. a neutral position was taken by 43.9% of respondents. 19.5% agreed and 13.4% completely agreed. transportation options and accessibility of the festival site were not a decisive factor for 94.2% of respondents. only 5.8% of visitors rated this aspect as important (see above). this also shows that although many visitors are aware of this aspect, they consider it to be relatively irrelevant. 3.3.4 evaluation of waste disposal the statement that waste disposal at the festival site was well organized (item 47) was completely disagreed with by 5.8% and disagreed with by 17.7%. 33.0% were neutral. 30.9% agreed with the statement and 12.6% completely agreed. this also shows that although waste disposal is perceived, its importance is not the focus of visitor interest (see above). matthias johannes bauer, tom naber, lea sophie michel 33 4. conclusions on the need for nudging strategies this study leads to the conclusion that sustainability is not a central aspect of the experience for the majority of festival visitors. regardless of socio-demographic factors such as gender, age or level of education, it is clear that ecological considerations at festivals are of little to no importance to many participants. these results reflect the hypothesis mentioned in the introduction that festivals offer many people an opportunity to escape from everyday life, in which normative ideas and obligations—including the sustainability principles often internalized in everyday life—are consciously or unconsciously disregarded. the phenomenon of escapism therefore seems to play a central role in this context. (bennett et al., 2016; kirchner, 2011) thus, festival organizers need a special approach to promote ecological behavior. as the relevance of sustainability for festival visitors is limited, a strategy based on restrictive measures, such as a comprehensive ban on non-sustainable products and practices, appears to have only limited success. a culture of prohibition aimed at strict adherence to sustainability measures would surely meet with resistance and reduce the willingness of visitors to comply with such regulations. (aßmann, 2022) instead, alternative strategies are needed to promote sustainable behavior at festivals without compromising the experience-oriented and escapist motivation of participants. one approach that can be used in this context is nudging. nudging (aßmann, 2022; bär & korrmann, 2020; bär et al., 2022) refers to subtle incentives that aim to steer people’s behavior in a certain direction without explicitly forcing them to change their behavior. (stangl, 2024) this approach stems from behavioral economics and could make it possible to integrate environmental measures without compromising the event experience. by gently ‘nudging’ visitors towards more sustainable choices, it could be possible to promote pro-ecological behaviors without visitors feeling coerced. (aßmann, 2022) the use of nudging methods is now well researched and has already shown positive results at many festivals. (aßmann, 2022; bär & korrmann, 2020; bär et al., 2022) even though this study does not focus on specific nudging strategies, the results nevertheless underline the relevance of such measures, as they could offer an effective way of influencing visitors’ behavior in the long term without restricting their escapism. the results of this study make it clear that the sustainable design of festivals requires not only technical or organizational solutions, but also a deeper understanding of the motivations and needs of festival visitors. the central challenge is to promote sustainable behavior in such a way that it contributes to the value of the experience and does not contradict the intention of escaping everyday life. research such as that by aßmann (2022) and bär (2022, 2020) investigated which nudging measures are particularly suitable for festival settings and how they can be used effectively to support environmental behavior change. for example, if vegan food is cheaper than non-vegan food, visitors may choose this more sustainable option. if a free train ticket is included in the festival ticket, more people may travel by public transport. (aßmann, 2022) in summary, the way to more sustainable festivals is not through restrictive measures, but rather through the targeted steering of behavior through positive incentives and subtle changes in event design. by integrating innovative nudging approaches, festival organizers could not only reduce their environmental impact, but also increase the long-term value of their events and thus create a broader awareness of sustainable action in the event industry. or to put it in a nutshell: no sustainable festival without nudging. how important is sustainability for visitors of rock and pop festivals? insights from a broad audience analysis in germany 34 references 1. aßmann, k. (2022). zwischen verbotskultur und freiwilligkeit: analyse von nudging als strategie zur verhaltensänderung für ökologisch nachhaltigere musikfestivals in deutschland. in m. j. bauer & t. naber (hrsg.), studien zum festivalmanagement: band 1. musikfestivals und open-air-veranstaltungen: wirtschaftsfaktor – krisenkommunikation – nachhaltigkeit (s. 153–228). utzverlag. 2. bär, s. & korrmann, l. (2020). nudging im eventkontext: eine vergleichende analyse von musikfestivals. in c. zanger (hrsg.), springer ebook collection. events und messen im digitalen zeitalter: aktueller stand und perspektiven (s. 129–156). springer gabler. https://doi.org/10.1007/978-3-658-31775-1_7 3. bär, s., korrmann, l. & kurscheidt, m. (2022). how nudging inspires sustainable behavior among event attendees: a qualitative analysis of selected music festivals. sustainability, 14(10), 6321. https://doi.org/10.3390/su14106321 4. bauer, m. j., naber, t. & michel, l. s. (in print). customer centricity im festivalmarketing: empirische erkenntnisse und handlungsempfehlungen für die steigerung von besucherloyalität auf rockund pop-festivals in deutschland. praxiswissen marketing. 5. bennett, a., taylor, j. & woodward, i. s. (hrsg.). (2016). the festivalization of culture. routledge. https://www.taylorfrancis.com/books/9781315558189 https://doi.org/10.4324/9781315558189 6. bottrill, c., liverman, d. & boykoff, m. (2010). carbon soundings: greenhouse gas emissions of the uk music industry. environmental research letters, 5(1), 14019. https://doi.org/10.1088/1748-9326/5/1/014019 7. gisske, a. (2021). gütekriterien qualitativer sekundäranalysen: eine transferabilitystrategie zum nachweis schulischer reorganisationsmuster. springer fachmedien wiesbaden gmbh. https://ebookcentral.proquest.com/lib/kxp/detail.action?docid=6676048 8. kirchner, b. (2011). eventgemeinschaften: das fusion festival und seine besucher. erlebniswelten. vs verlag für sozialwissenschaften. 9. michel, l. s. (2024). determinanten von "festival loyalty": eine quantitative untersuchung von besucherzufriedenheit und -loyalität sowie ableitung von handlungsempfehlungen für rockund popfestivals in deutschland. in m. j. bauer & t. naber (hrsg.), studien zum festivalmanagement: bd. 3. sicherheit und vertrauen aspekte von risikomanagement, markenloyalität, awareness und der gefahr rechtsextremer ideologien auf festivals und open-air-veranstaltungen (s. 11–138). utzverlag gmbh. 10. stangl, w. (2024, 25. oktober). eskapismus. online lexikon für psychologie & pädagogik. https://lexikon.stangl.eu/12053/eskapismus 11. taylor, j. (2016). the festivalization of culture. routledge. agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 18, no. 1 (2024), pp. 74-81 74 transformation of managerial leadership qualities under the influence of business digitalization a. ishchuk andrii ishchuk vasyl' stus donetsk national university, vinnytsia, ukraine https://orcid.org/0000-0002-2557-3265, e-mail: a.ishchuk@donnu.edu.ua abstract: the paper deals with identifying the directions and content of transformational changes in the leadership qualities of a manager under the influence of business digitalization. the paper aims to formulate and disclose scientific, theoretical, and methodological provisions for changing the qualities of a leader in the era of business digitalization. this study is based on observing how managers' leadership qualities are formed and developed in the context of digitalization at both global and micro levels. identified are the differences between the characteristics of "traditional" and "digital" leaders based on historical and comparative analysis. a set of "traditional" leadership qualities allows for operational guidance and management of the company's future development based on the extrapolation of existing trends. moreover, possession of the qualities of digital leaders enables multidimensional strategic management. the findings emphasize the importance of digital leadership at both macro and micro levels. the study shows the transformation of leadership and leadership qualities at different levels of economic management, which complements the existing scientific theories of leadership. to promote digital leadership at the macro level, the government is responsible for introducing digital technologies in administration, providing citizens with convenient tools for accessing administrative services. it was established that ukraine is among the leading countries introducing digital technologies at the macro level. at the level of business management within companies, leadership in the digital era acquires specific characteristics compared to its traditional forms. in particular, the transition from individual to shared leadership leads to changes in organizational structures and management styles. keywords: digitalization, digital transformation, traditional leadership, digital leadership, leader, leadership qualities introduction current digitalization processes encompass all business activities, including company management. the digitization technologies that facilitate digital transformation are driving organizations towards new ways of working. (gorensek & kohont, 2019). digitalization increases the individual productivity of company employees, improves the speed and quality of work performance, and has a positive impact on work motivation (benitez et al., 2022). the process of digitalization demands managers at various levels of management to exhibit a distinct level of thinking, expertise, and competence. on the one hand, managers are implementing digital technologies across all areas of the organization, transforming the three basic components of business: customer experience, operational processes, and business https://orcid.org/0000-0002-2557-3265 mailto:a.ishchuk@donnu.edu.ua andrii ishchuk 75 models (westerman et al., 2011). on the other hand, business digitalization demands strong leadership capable of implementing changes, possessing a vision of goals and various possible paths to achieve them – digital leadership. in the context of digitalization and digital transformation, digital leadership means the strategic use of a company's digital assets to achieve its business goals (kubaraieva, 2022). the essence of digital leadership is multifaceted and is considered by various researchers from different perspectives. thus, from the perspective of its impact on organisational innovation, digital leadership is defined as the process required to develop and sustain an innovative culture by rapidly bringing ideas to life through flexible it and business architectures (tanniru, 2018). in addition, the concept of digital leadership is explained as a management model to successfully and sustainably manage digital transformations (troilo, 2021). in this study, it is pertinent to emphasize the distinctive nature of defining digital leadership as a combination of leadership qualities and the need to apply them: digital leadership is a concept that combines three blocks that digital leaders must fulfill – they must have (or learn) digital thinking and digital skills and combine these two elements for digital implementation to realize a common digital vision (henselle, 2020). the leadership qualities inherent in digital leaders themselves are characterized as a set of personal, professional, social, and communicative traits and abilities that ensure effective management and stable relationships between the leader and the personnel (prochan, 2022). furthermore, it is noted that the individual-personal and sociopsychological characteristics of a leader as a personality influence the group and lead to the achievement of goals (yahodnikova, 2009, romanovsky, 2017), as well as affect the organizational resilience of companies (üstgörül & akkaya, 2023). the article is dedicated to identifying the directions and content of transformational changes in managerial leadership qualities under the influence of business digitalization. the purpose of the article is to formulate and disclose scientific-theoretical and methodological provisions regarding the change of leader qualities in the era of business digitalization. the implementation of the research goal is carried out based on the classification and comparison of leadership qualities of managers in the conditions of traditional and digital leadership. the advantage of this study is that the identification of transformations in the forms of leadership and leadership qualities of managers under the influence of digitalization helps to understand what competencies, skills, and attributes are inherent in modern managers and are currently important for the implementation of their powers, as well as in what ways they should be acquired and developed. since digitalization is a complex phenomenon that is observed in all fields of social activity, it is appropriate to consider the specified transformational processes at the macroand micro-levels separately and in relationship, which, in our opinion, is lacking in previous scientific works. method the scientific method of classification was used as the basis for solving any scientific problem and is used to generalize knowledge. the classification of managerial leadership qualities as the subject of this research involves their arrangement and sorting according to certain characteristics. a review of literary sources revealed various approaches to studying the qualities of traditional and digital leaders. some authors list leadership qualities without focusing on their classification. other authors group leadership qualities into certain categories transformation of managerial leadership qualities under the influence of business digitalization 76 based on classification criteria. in our study, it is necessary to group the qualities of leaders so that we can further investigate the differences in the process of their transformation under the influence of digitalization, namely, to highlight the qualities of "traditional" and "digital" leaders. by using historical analysis, the changes in styles and qualities of leaders during the implementation of digital technologies were observed. comparative analysis was used to identify differences between the characteristics of "traditional" and "digital" leaders. results digitalization provides opportunities for society and businesses to reach a higher level of socio-economic development. ukraine is one of the leading countries in terms of the fastest implementation of digital technologies in state and local administration. since 2015, transparency in fiscal policy has been ensured through the prozorro electronic procurement system and the e-data web portal for the use of public funds. to increase government transparency and streamline administration, the ministry of digital transformation was established in ukraine in 2019. when implementing the presidential program "state in a smartphone," the ministry launched and continuously expanded the digital application diia, which allows ukrainians to receive administrative services and documents from the government online. since 2020, there has been the position of chief digital transformation officer (cdto) in state and regional authorities in ukraine. digital leaders in the regions are involved in implementing national digitalization projects (digital education, digital services, internet development) and initiating and shaping regional digitalization policies, the main task of which is to create a community among digitizers in territorial communities. in the absence of administrative levers of influence, a digital leader must possess certain qualities to set a good example for territorial communities, coordinate them, set the pace, and encourage change. this position should be held by a person with an analytical mindset, legal competencies (as the implementation of the regulatory framework at the local level is part of their duties), and managerial skills (ability to build a strong team, manage business processes, personnel, etc.) (gurska, 2022). for businesses, ukraine has introduced the diia.city platform, which, based on favorable legal and tax conditions such as a single 5% corporate income tax rate, simplified reporting requirements, and easier access for foreign employees, attracts it companies to the country. in the future, the state plans to expand digital leadership through the implementation of company development programs in such areas as:  training it specialists and encouraging investment in educational programs for digital transformation;  stimulating the creation of data accumulation and processing centres;  creating conditions for the post-war return of companies to ukraine and the restoration of digitally destroyed infrastructure;  legal, financial, and market support for start-ups. andrii ishchuk 77 the level of technological advancement in ukraine compared to other countries across the globe is characterized by its position in international rankings. over the past 5 years, the following dynamics of digital development indicators have been observed (table 1). table 1 indicators of ukraine's digital development according to international rankings (2019-2023) international index 2019 2020 2021 2022 2023 network readiness index 67 (121)* 64 (134) 53 (130) 50 (131) 43 (134) ict development index (%) 22.9** not calculated not calculated not calculated 80.8 world digital competitiveness ranking 60 58 54 n/a n/a global innovation index 47 (129) 45 (131) 49 (132) 57 (132) 55 (132) * in parentheses is the total number of ranked countries **data for the year 2017 source: portulans institute the network readiness index characterizes the level of development of information and communication technologies (ict) in countries worldwide and reflects how digitalization penetrates the economic and social spheres of life. ukraine's ranking in this indicator improves annually. the ict development index reflects the accessibility of ict for population use. the percentage value of this indicator in ukraine in 2023 increased almost fourfold compared to 2017 (during the period from 2018 to 2022, this index was not calculated). the value of the world digital competitiveness ranking indicator for ukraine also improved until 2021 (later, due to the russian-ukrainian war, ukraine was temporarily excluded from the ranking due to lack of information). the strengthening of ukraine's position in this ranking occurred primarily due to indicators characterizing the level of technological education in the country. expert analysts from mckinsey consulting company (smet et al., 2023), speaking about leadership in the digital age, primarily note that its characteristics depend on the transformation of the organizational philosophy of modern companies. management structures designed to satisfy the financial interests of a limited group of owners are becoming less relevant. new organizational architectures are emerging that are focused on creating value for multiple stakeholders and include networks of self-directed teams. such models of organizational culture anticipate more open and collaborative work and require a change in leadership styles and ways, as well as leadership qualities. there is a shift from individual leaders to leadership teams in organizational management. as a result, leaders need to rethink their purpose and the way they work. the authors provide five vectors of change in leadership qualities:  the leader should go beyond the confines of managerial functions, acquire a forwardlooking vision for the company, and develop it in this direction.  the leader should fully unleash the human potential in the organization by working to create an environment of belonging and psychological security. transformation of managerial leadership qualities under the influence of business digitalization 78  the leader should abandon administrative-command leadership using hierarchical structures to communicate and receive management information in favor of creating a network of self-managed teams based on dialogue and cooperation.  the leader should discontinue the practice of strict adherence to plans, thus creating a favorable environment for experimentation, research, learning, and creativity.  the leader should refrain from constantly seeking to increase competitive advantages and market share, instead focusing on creating additional value for customers and other stakeholders, constantly improving their business models and ecosystems (smet et al., 2023). the importance of collaborating in running a business is demonstrated by a survey of top executives conducted by harvard business review analytic services (2017). it was found that organizations whose leadership implemented the practice of collective leadership were more successful than those whose leaders did not support this idea. such a form of leadership is directly associated with the digital revolution. the advantages of collective leadership include greater productivity and increased employee motivation through involvement in a common cause, and in many cases, it is a way for companies to survive in dynamic environments. the research also points out limitations and obstacles to the implementation of collective leadership: reluctance of managers, lack of strategic vision, risk aversion, fear of losing total control over processes, and lack of cooperation between departments. the example of the ukrainian it company railsware demonstrates how collective leadership is practically implemented within an organization (lazor, 2023). team leadership means that decisions are not made by a single manager, but the entire team is involved and motivated to achieve high-quality results. the company moves away from hierarchical structures of subordination; instead of functional departments, project-based mini-teams are created, consisting of necessary experts, allowing for comprehensive problem-solving based on continuous exchange of information, activity, creativity, and initiative of participants. the advantages of collective leadership in the company include:  openness and transparency of leadership to receive feedback when discussing issues;  communication between departments, availability of work information on internal information resources;  clear goal setting, task allocation, and role distribution;  maximum automation of document flow, communication, and other secondary processes;  discussion of ideas and proposals beyond the main project tasks (lazor, 2023). since leadership can be divided into "traditional" and "digital", the qualities of a modern business leader can be classified accordingly to have a better understanding of how to increase management efficiency. the differences between the qualities of a digital and traditional leader are as follows. andrii ishchuk 79 table 2 transformation of leadership qualities from a traditional to a digital leader traditional leader digital leader performance-oriented (product quality, profit, competitiveness, etc.) creates value for all stakeholders and develops organizational culture adheres to the business plan builds a business model supervises employees develops talent uses digital technologies as an auxiliary tool in management digital technologies are an integral part of the management process focuses on goals analyses interim results limited to achieving a specific planned result has a strategic vision of the company's development focused on overall management, functional management delegates down the hierarchy a multidisciplinary, flexible leader applies individual leadership participates in shared leadership source: westerman g. et.al. (2014), yucebalkan b. (2018), smet et.al.(2023) along with the differences shown in table 2, it should be noted that digital leadership emerged from traditional leadership and is its logical and historical continuation. therefore, there are also common qualities of traditional and digital leadership. in particular, it concerns the psychological properties of the individual (volitional qualities, responsibility, determination, flexibility of thinking), communication and professional competence, and group interaction skills that are developed and improved in the course of professional activity (kozak, 2019). conclusions the findings demonstrate that leadership in the digital age is important at both macro and micro levels. thus, this study shows the transformation of leadership and leadership qualities at different levels of economic management, which complemented the existing scientific leadership theories. it is established that in order to promote digital leadership at the macro level, the government is responsible for introducing digital technologies in administration, providing citizens with convenient tools for accessing administrative services. it was established that ukraine is one of the leading countries introducing digital technologies at the macro level. consequently, the state can avoid difficulties during the pandemic and quickly set up public administration systems to work under quarantine restrictions, as well as to prevent the collapse of public administration during the ongoing full-scale war when regular missile and cyber attacks are jeopardizing the ukrainian state and local institutions. at the micro level, the government is demonstrating digital leadership by implementing programs to attract companies and stimulate the development of the it sector. reasonable state policy in the field of digital environment regulation can bring the country to a significantly higher level of socio-economic development. the current trends in digital transformation are positive, as evidenced by the growing penetration of information and communication technologies in transformation of managerial leadership qualities under the influence of business digitalization 80 public life. the main task is to attract investment to the country and create conditions for the digital transformation of companies, including their business processes and management. the study evidences that at the level of business management within companies, leadership in the context of digitalisation acquires specific characteristics compared to its traditional forms. the transition from individual to shared leadership provides benefits to all internal and external stakeholders of companies. at the same time, digital leaders have certain personal qualities who, unlike traditional leaders, have a strategic vision of the company, focus on the interests of business process participants and the environment, create an organizational culture, and develop talent. at the same time, leaders in the digital era still possess a set of traditional personal social and psychological qualities and professional competencies that allow them to communicate freely in a group, delegate authority, take responsibility and risks, and make final management decisions. the question of the degree of transformation of personal-psychological and professional-competent qualities of a manager under the influence of the digitalization process remains debatable. the set of modern leadership qualities requires a more detailed classification, as well as an empirical analysis of the manifestation of their individual groups in the management of organisations, which forms the subject of further scientific research. references 1. benitez, j., arenas, a., castillo, a., & esteves, j. (2022). impact of digital leadership capability on innovation performance. the role of platform digitization capability. information & management, 59(2), 103-590. https://doi.org/10.1016/j.im.2022.103590 2. gorenṧek, t., & kohont, a. (2019). conceptualization of digitalization: opportunities and challenges for organizations in the euro-mediterranean area. international journal of euromediterranean studies, 12, 93-115. https://emuni.si/wp-content/uploads/2020/01/ijems-22019_93%e2%80%93115.pdf 3. gurska, m. (2022, october 5). cdto v ukraini. chym zaimaiutsia kerivnyky tsyfrovoi transformatsii ta yak nymy staiut. dou. https://dou.ua/lenta/articles/cdto-in-ukraine/ 4. harvard business review analytic services (2017). how collaboration wins: leadership, benefits, and best practices. https://hbr.org/resources/pdfs/ comm/citrix/howcollaborationwins.pdf 5. henselle, s. (2020). digital leadership: a framework for successful leadership in the digital age. journal of media management and entrepreneurship, 2, 55-69. https://doi.org/10.4018/jmme.2020010104 6. kozak, o. (2019). osobystist lidera v suchasnomu psykholohichnomu dyskursi. naukovyi visnyk khersonskoho derzhavnoho universytetu. seriia psykholohichni nauky, 1, 136-141. https://pj.journal.kspu.edu/index.php/pj/article/download/22/22/ 7. kubarieva, i., & tarlaiev, v. (2022). tsyfrove liderstvo yak instrument posylennia rynkovykh pozytsii pidpryiemstva: korporatyvnyi ta osobystisnyi konteksty. stratehiia ekonomichnoho rozvytku ukrainy, 51, 122-138. http://sedu.kneu.edu.ua/ article/view/274193 8. lazor, ya. (2023). dolaiemo vnutrishnoho «sovka»: yak buduvaty spilne liderstvo v kompanii. https://speka.media/dolajemo-vnutrisnyogo-sovka-yak-buduvati-spilne-liderstvov-kompaniyi-9885z9 https://doi.org/10.1016/j.im.2022.103590 https://emuni.si/wp-content/uploads/2020/01/ijems-2-2019_93%e2%80%93115.pdf https://emuni.si/wp-content/uploads/2020/01/ijems-2-2019_93%e2%80%93115.pdf https://dou.ua/lenta/articles/cdto-in-ukraine/ https://hbr.org/resources/pdfs/%20comm/citrix/howcollaborationwins.pdf https://hbr.org/resources/pdfs/%20comm/citrix/howcollaborationwins.pdf https://doi.org/10.4018/jmme.2020010104 https://pj.journal.kspu.edu/index.php/pj/article/download/22/22/ http://sedu.kneu.edu.ua/%20article/view/274193 https://speka.media/dolajemo-vnutrisnyogo-sovka-yak-buduvati-spilne-liderstvo-v-kompaniyi-9885z9 https://speka.media/dolajemo-vnutrisnyogo-sovka-yak-buduvati-spilne-liderstvo-v-kompaniyi-9885z9 andrii ishchuk 81 9. prochan, a. (2022). znachushchist liderskykh yakostei menedzhera yak zaporuka pozytyvnykh zmin na pidpryiemstvi. naukovi zapysky lvivskoho universytetu biznesu ta prava. seriia ekonomichna. seriia yurydychna, 32, 31-36. http://dx.doi.org/10.5281/zenodo.6366548 10. romanovskyi, o. h., reznik, s. m., hura, t.v., panfilov, yu. i., holoveshko, b.r., & bondarenko, v.v. (2017). liderski yakosti v profesiinii diialnosti. ntu “khpi”. 11. smet, a.d., gast a., lavoie j., & lurie m. (2023). five leadership shifts can unleash an era of sustainable, inclusive growth for companies looking to outperform in this era of disruption. mckinsey & company. https://www.mckinsey.com/capabilities/people-and-organizationalperformance/our-insights/new-leadership-for-a-new-era-of-thriving-organizations 12. tanniru, m. r. (2018). digital leadership. intech. https://doi.org/10.5772/ intechopen.76045 13. troilo, f. (2021). un modelo de liderazgo digital. palermo business review, 24, 125-141. https://www.palermo.edu/negocios/cbrs/pdf/pbr24/pbr_24_05.pdf 14. üstgörül, s. & akkaya, b. (2023). the digital leadership behaviors of x, y, z generation nurses in the delivery of health services. agora international journal of economical sciences, 1, 115-125. https://doi.org/10.15837/aijes.v17i1.5769 15. westerman, g., calméjane, c., bonnet, d., & ferraris, p. (2011). digital transformation: a roadmap for billion-dolllar organization. mitsloan management review. https://www.capgemini.com/wp-content/uploads/2017/07/digital_ transformation__a_roadmap_for_billion-dollar_organizations.pdf 16. westerman, g. et.al. (2014). leading digital: turning technology into business transformation. harvard business review press. 17. yahodnikova, v. (2009). vykhovannia lideriv. vykhovna robota v shkoli, 10, 2-36. 18. yak ukraina pid chas viiny stala svitovym liderom iz tsyfrovizatsii derzhupravlinnia. (2023, october 1). kyiv post. https://www.kyivpost.com/uk/post/22145 19. yucebalkan, b. (2018). digital leadership in the context of digitalization and digital transformations. current academic studies in social science, gece kitaplığı, 1. https://www.academia.edu/38309825/digital_leadership_in_the_context_of_digitalization_ and_digital_transformations http://dx.doi.org/10.5281/zenodo.6366548 https://www.mckinsey.com/capabilities/people-and-organizational-performance/our-insights/new-leadership-for-a-new-era-of-thriving-organizations https://www.mckinsey.com/capabilities/people-and-organizational-performance/our-insights/new-leadership-for-a-new-era-of-thriving-organizations https://doi.org/10.5772/%20intechopen.76045 https://www.palermo.edu/negocios/cbrs/pdf/pbr24/pbr_24_05.pdf https://doi.org/10.15837/aijes.v17i1.5769 https://www.capgemini.com/wp-content/uploads/2017/07/digital_%20transformation__a_road-map_for_billion-dollar_organizations.pdf https://www.capgemini.com/wp-content/uploads/2017/07/digital_%20transformation__a_road-map_for_billion-dollar_organizations.pdf https://www.kyivpost.com/uk/post/22145 https://www.academia.edu/38309825/digital_leadership_in_the_context_of_digitalization_and_digital_transformations https://www.academia.edu/38309825/digital_leadership_in_the_context_of_digitalization_and_digital_transformations agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 18, no. 1 (2024), pp. 270-274 270 considerations about volunteering and its importance s.o. david sergiu octavian david faculty of juridical and administrative sciences, agora university of oradea, romania e-mail: sergiudavid93@yahoo.com abstract: volunteering, as defined, is an activity carried out voluntarily by an individual, without expecting directly or implicitly a financial reward or goods. it plays an important role in democratic societies, often being a form of social inclusion and integration, contributing to the development and implementation of state policies, and being an instrument for promoting social cohesion. “volunteering is the best example of democracy. we vote in elections, but when you volunteer, you vote every day for the community in which you want to live.” marjorie moore. keywords: volunteerism, involvement, organizations, international law, war, society, democracy. introduction the concept of volunteerism, in the modern form as we know it today, developed mainly in the 19th century. its emergence was based on the social and economic changes of that period, as well as philanthropic and humanitarian movements. essentially, volunteering has always existed because people all over the world have offered to help their fellow human beings. in other words, with the appearance of human communities, that altruistic spirit that exists within each of us also appeared and manifested itself, urging us to help our fellow human beings, selflessly, without expecting anything in return. the term volunteering was first used in the 17th century in the military sphere. more precisely, it referred to individuals who were enlisted in emergency military service and were not paid for their services, these individuals were called volunteers. volunteering in its modern form emerged in the 20th century, when the first international volunteer organizations appeared, such as the peace corps in the usa (established in 1960) and voluntary services overseas (established in 1958) in the uk. the role of these international organizations was to train members of national organizations on various issues related to organizational management, providing them with consultancy and advice. relying on the support of these organizations, volunteer centers began to progress and develop. since then and to this day, the peace corps plays a crucial role in the development of volunteering at a global level, being the largest provider of volunteers in the world. today, volunteering and international volunteer organizations play an essential role in achieving sustainable development goals, addressing issues such as poverty, education, and climate change. in terms of regulations, international law recognizes volunteering through various instruments that emphasize its importance for social, economic, and cultural development. mailto:sergiudavid93@yahoo.com sergiu octavian david 271 these instruments include numerous documents and initiatives, conventions, resolutions, and declarations adopted by international organizations such as the united nations or the european union, promoting cooperation between states and international organizations to support and encourage volunteer activities. whether we are talking about interpersonal relationships or international cooperation between states, volunteer work helps strengthen social ties and build a more united and resilient community. considerations about volunteering and its importance volunteering has significant importance in a democratic society. it plays a decisive role in supporting and promoting democracy and in strengthening it. starting from the statement of the american writer marjorie moore who said: "volunteering is the best example of democracy.", we can say that volunteering breathes life into the noblest principles of democracy freedom, peace, justice, security, advocating for their respect and enforcement. considering the social and economic aspects that the world is facing, volunteering represents an essential element of all societies, a status attributed also by the declaration of the united nations adopted on december 10, 1948, which states that: "we, the people, have the power to change the world.".to bring about change, one must take action, and volunteering is the best way to act and get involved, so that you can put your ideas into practice and produce change. additionally, volunteering is the simplest way to offer your energy and knowledge for the benefit of others and the community to which you belong. today, volunteering has become an important element in democratic societies, and the famous statement from the united nations (un) declaration has transformed into concrete actions of volunteer associations, thus gaining a global character, an example in this sense being the international organization greenpeace, present with volunteers in over 55 countries, advocating for resolving environmental issues and adopting policies that combat pollution, abuse of water, land, and at the center of their actions a message of peace. every year, on december 5th, international volunteer day is celebrated, a day that honors volunteers and their work; it was adopted by the united nations general assembly on december 17, 1985. this day is a recognition of the contribution volunteers make to achieving numerous development projects at the local, national, and international levels, and an opportunity to encourage more people to get involved in volunteering activities in a global effort to make the world a little better. according to the united nations volunteers (unv) report from 2018, approximately 1 billion people worldwide were involved in volunteer activities, making volunteering one of the most widespread social activities. volunteer activities contribute 2.4% to the global gdp, according to estimates from the international labour organization (ilo), and also contribute to developing skills and increasing the employability of those involved, providing them with practical experience and networking opportunities. another role that volunteer organizations play is providing social and economic services, often filling the gap left by government resources, especially in underdeveloped countries. promoting and supporting volunteering have been and remain important objectives for national governments, international organizations, and communities around the world. one such initiative is the european solidarity corps, supported by the european union since 2016, considerations about volunteering and its importance 272 when it was announced by the then president of the european commission, jean-claude juncker (president of the european commission from 2014 to 2019), in his state of the european union speech. officially launched in 2018, the european solidarity corps has become a strategic instrument for the european union in engaging with the young generation. in 2021, it was allocated a budget of over 1 billion euros, available for the period 2021-2027. this budget is dedicated to volunteer projects aimed at young people aged between 18 and 30, providing opportunities for at least 270,000 volunteers. regarding romania, in a study published by the european solidarity corps in 2019, it ranked 3rd, after france and the united kingdom, old democracies, in terms of the number of participants in volunteer projects and it ranks 7th in terms of solidarity projects. from a financial allocation perspective, in the period 2018-2020, over 11.5 million euros were allocated and nearly 300 volunteer, solidarity and professional experience projects were funded, involving over 3500 romanian young people. in an increasingly tense international context against the backdrop of the war in ukraine or the israeli-palestinian conflict, volunteering and volunteers play an important role in refugee camps and post-conflict reconstruction, contributing to the defense of human rights, international stability and security, as well as to reducing the effects caused by war. with the support of the united nations (un), which carries out the united nations volunteers (unv) program, thousands of volunteers are currently on humanitarian missions and in war camps around the world. even if there is war in these regions, there are agreements and conventions that support the access of volunteers, these agreements and conventions make up international humanitarian law, an important part of public international law. international humanitarian law encompasses rules that, during times of war, are intended to protect volunteers and individuals who are not taking part in the conflict, and to limit the means and methods of war used. the foundations of this branch of public international law are constituted by the geneva conventions of august 12, 1949, and the additional protocols of 1977, to which a third additional protocol was added in 2005. an explicit provision of international humanitarian law is that its norms apply to all types of conflicts and must be respected by all parties involved. additionally, states have an obligation to sanction the violation of these norms and to criminally prosecute those who have violated them by committing serious violations, such as war crimes, and must also collaborate with other states for this purpose. one of the bloodiest conflicts of the last century, the battle of solferino (june 24, 1859) in northern italy, where the armies of france and austria clashed, was an intense battle that lasted 16 hours and resulted in over 40,000 dead and wounded. this battle gave rise to one of the most important international volunteer organizations the international red cross and red crescent movement. the initiator of this movement was the swiss businessman henry dunant (1828-1910), who drew international public attention to the necessity of establishing a society that would provide assistance and promote an international agreement regarding the care of the wounded and those who care for them. several decades have passed during which the movement has expanded to several states, and on may 5, 1919, the league of red cross societies was formally established, headquartered in paris, france, by the red cross societies of france, great britain, italy, sergiu octavian david 273 japan, and the united states. starting in 1939, it has had its permanent headquarters in geneva, switzerland, and has become the leading humanitarian organization providing humanitarian protection and assistance to victims of armed conflicts and other situations of violence. additionally, in the field of international humanitarian law, the red cross or the international committee of the red cross (icrc) has become its main advocate, working for its strengthening and development. in romania, the red cross society was established on july 4, 1874, being one of the oldest societies. it is the largest humanitarian organization in the country and also, the international red cross federation is the largest humanitarian organization in the world, offering assistance to vulnerable people by mobilizing the power of humanity. volunteering has been and will remain a fundamental pillar of social and economic development at the international level, recognized through various legal and institutional frameworks. the rights of volunteers and the encouragement of active participation are important components for a healthy and functioning democratic society, and their recognition plays an essential role in supporting democracy and promoting human rights. conclusions volunteering has played a significant role both in history and in the present, contributing to the development of communities and addressing important social problems. over time, volunteering has adapted to the needs of society, responding promptly and efficiently to contemporary challenges. through volunteering, people build strong connections within their communities, promoting solidarity, collaboration and respect for human rights. today, volunteering not only supports local communities, but also has a global impact, contributing to solving global issues such as climate change, poverty, and global health. the role of volunteering remains vital in modern, democratic society, continuing to promote positive change and support sustainable development, bringing together people from diverse backgrounds and perspectives. in this way, it promotes mutual understanding, tolerance, and respect for diversity essential values in a democracy. thus, through voluntary involvement, citizens exercise their democratic rights and responsibilities, contributing to building a fairer, more equitable and resilient society. references 1. peace corps (n.d.). through the decades: 1960s. https://www.peacecorps.gov. retrieved mai 24,2024, from https://www.peacecorps.gov/about/history/decades/1960s/ 2. vso (n.d.). vso: history. https://www.vsointernational.org. retrieved mai 24, 2024, from https://www.vsointernational.org/about/our-history 3. (n.d.). marjorie moore. http://www.citatepedia.ro. retrieved mai 24, 2024, from http://autori.citatepedia.ro/de.php?a=marjorie+moore 4. un human rights office (n.d.). the universal declaration of human rights. https://www.ohchr.org. retrieved mai 24, 2024, from https://www.ohchr.org/sites/default/files/udhr/documents/udhr_translations/rum.pdf 5.greenpace (n.d.). https://www.greenpeace.org/. retrieved mai 24, 2024, from https://www.greenpeace.org/romania/?_ https://www.peacecorps.gov/about/history/decades/1960s/ https://www.vsointernational.org/about/our-history http://autori.citatepedia.ro/de.php?a=marjorie+moore https://www.ohchr.org/sites/default/files/udhr/documents/udhr_translations/rum.pdf https://www.greenpeace.org/romania/?_ considerations about volunteering and its importance 274 6. un volunteers (n.d.). annual-report-2018. https://www.unv.org/. retrieved mai 24, 2024, from https://www.unv.org/annual-report/annual-report-2018 7. international labour organization (ilo) (n.d.). https://www.ilo.org. retrieved mai 24, 2024, from https://www.ilo.org/research-and-publications 8. european solidarity corps (n.d.). https://youth.europa.eu. retrieved mai 24, 2024, from https://youth.europa.eu/d8/node/31881_ro 9. european solidarity corps (n.d.). https://www.erasmusplus.ro. retrieved mai 24, 2024, from https://www.erasmusplus.ro/library/media/comunicate%202016/comunicat%20de %20presa%20-%20lansare%20corpul%20european%20de%20solidaritate.pdf 10. european solidarity corps (n.d.). european solidarity corps report 2018-2019. https://www.suntsolidar.eu/. retrieved mai 24, 2024, from https://www.suntsolidar.eu/library/corpul_european_de_solidaritate/cercetare/esc_ar_20 18-2019.pdf 11. (n.d.). international humanitarian law . https://www.mae.ro/. retrieved mai 24, 2024, from https://www.mae.ro/node/55102 12. international red cross (n.d.). red cross. https://crucearosie.ro/. retrieved mai 24, 2024, from https://crucearosie.ro/cine-suntem/originea-si-istoria-miscarii-de-cruce-rosie-sisemiluna-rosie/ 13.romanian red cross (n.d.). romanian red cross. https://crucearosie.ro/. retrieved mai 24, 2024, from https://crucearosie.ro/cine-suntem/istoria-crucii-rosii-romane/istoria-cruciirosii-romane-1876-1915/ https://www.unv.org/annual-report/annual-report-2018 https://www.ilo.org/research-and-publications https://youth.europa.eu/d8/node/31881_ro https://www.erasmusplus.ro/library/media/comunicate%202016/comunicat%20de%20%20presa%20-%20lansare%20corpul%20european%20de%20solidaritate.pdf https://www.erasmusplus.ro/library/media/comunicate%202016/comunicat%20de%20%20presa%20-%20lansare%20corpul%20european%20de%20solidaritate.pdf https://www.suntsolidar.eu/library/corpul_european_de_solidaritate/cercetare/esc_ar_2018-2019.pdf https://www.suntsolidar.eu/library/corpul_european_de_solidaritate/cercetare/esc_ar_2018-2019.pdf https://www.mae.ro/node/55102 https://crucearosie.ro/cine-suntem/originea-si-istoria-miscarii-de-cruce-rosie-si-semiluna-rosie/ https://crucearosie.ro/cine-suntem/originea-si-istoria-miscarii-de-cruce-rosie-si-semiluna-rosie/ https://crucearosie.ro/cine-suntem/istoria-crucii-rosii-romane/istoria-crucii-rosii-romane-1876-1915/ https://crucearosie.ro/cine-suntem/istoria-crucii-rosii-romane/istoria-crucii-rosii-romane-1876-1915/ agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 18, no. 2 (2024), pp. 400-406 400 professional training of human resources in the context of sustainable development at the level of the sălaj county police inspectorate r. demian roxana demian faculty of economic sciences, agora university of oradea, romania e-mail: rxndemian9@gmail.com abstract: this study highlights the changes in human resource management, the shift from traditional paradigms to an individual-centered approach, and the importance of continuous learning and adaptability. it describes the sustainable development of human resources in the sălaj county police inspectorate, emphasizing the crucial role in maintaining public order and cooperation with various institutions, the activity of the structures of the human resources service and the professional training office within the unit, structures with essential activities in the management and development of police personnel. the culmination of the study is the analysis of the professional training within the inspectorate, which highlights the progress and adaptability in the training of the personnel within the sălaj county police inspectorate, but also the importance of effective communication and recognition of meritorious in achieving institutional performance. keywords: human resources management, sustainable development, sălaj county police inspectorate, professional training, institutional cooperation, professional training office, police tactics. introduction in a global context marked by emphasizing the importance of institutional transparency and accountability towards citizens and the sustainable development goals, this paper aims to examine the process of professional training of human resources at the level of the sălaj county police inspectorate. the chosen theme facilitates a deeper understanding of the ways of training human resources in a public institution. in the foreground, aspects regarding the evolution of human resources management are exposed, emphasizing the transition from traditional paradigms to an individual-centered approach, while highlighting the importance of continuous learning and adaptability in an everchanging environment, as well as the role of human resources management in formulating organizational policies and strategies. the paper also emphasizes the concern of the sălaj county police inspectorate for sustainable development and the involvement of specialists in training activities. reading the paper provides a detailed presentation of the sustainable development of human resources within the inspectorate, which focuses on analyzing the evolution and progress of the activities carried out over three years, emphasizing the essential role of mailto:rxndemian9@gmail.com roxana demian 401 professional training in the development of the organization and its adaptability to current needs and environmental changes. this paper aims to present a deep and detailed understanding of the importance of professional training of human resources within a police institution, but also of the efforts and commitments of the sălaj county police inspectorate, in order to ensure a quality service and adequate training of personnel for various interventions in the field. 1. considerations regarding human resources management in the police inspectorate 1.1. general human resources challenges in the police inspectorate human resources management has changed significantly over time, given the evolution of society and the needs of employees. from a traditional approach, centered on efficiency and discipline, a modern perspective has been reached, which emphasizes the balance between the professional and personal lives of employees. in the context of totalitarian regimes, initiatives to improve the workforce focused on efficiency and expansion of work capacity, considering the collective to the detriment of the individual, who was perceived as part of the mass of employees (mathis et al., 1997: 3). currently, human resource management involves a series of strategic, consulting, and operational activities, aimed at ensuring the achievement of organizational objectives and meeting the needs of employees, focusing on the planning, supervision, and control of human resources in an enterprise, with less emphasis on individual employee issues (manolescu, 2004: 29). thus, the human resources management must ensure that the recruitment, selection and classification of personnel are done in accordance with the organization's policies, but also develop programs and policies for managing stress and promoting a work-life balance of employees. it is essential for hr managers to provide access to psychological counseling and support services, identify the signs of employees' personal problems, and refer them to the appropriate support resources. by constantly monitoring and evaluating the effectiveness of these programs, hr management can continuously adapt and improve existing policies and practices, ensuring that they respond to employee needs and challenges effectively. thus, a healthy and supportive work environment can significantly contribute to managing stress and promoting the overall health and well-being of employees, positively impacting organizational performance as a whole. implementing a police evaluation and feedback system is crucial for improving employees' performance and career progression. it is important to have progressive staff planning and to reward and properly assess the results achieved. these strategies can strengthen the human resource base and ensure a quality public service (urziceanu, 2019: 25). human resources development is crucial for the long-term growth and performance of an organization, including the sălaj county police inspectorate. in recent years, strategies and programs have been implemented to improve the skills and abilities of police officers. the continuous training of personnel is a central aspect, and efforts have included the arrangement of shooting ranges and cars for practical training, the modernization of equipment and the purchase of simulators and advanced technologies for training. the involvement of specialists from various fields in training activities, evaluation and constant feedback provided to police officers for performance improvement and career professional training of human resources in the context of sustainable development at the level of the sălaj county police inspectorate 402 progression are essential for a sustainable development of human resources. progressive staff planning and using the results achieved to reward and appreciate employees are also necessary. these measures and strategies can strengthen the human resource base of the police unit and ensure a quality public service, adapted to the needs of contemporary society. 1.2. specific human resources development in the sălaj county police inspectorate the sălaj county police inspectorate was established in 1968 as part of the ministry of interior, subordinated to the security, the militia and the state archives. currently, i.p.j. sălaj is responsible for coordinating and managing the activities carried out in the county, ensuring public order and safety. the duties of the police unit cover a wide range of responsibilities, including investigating serious crime and combating organised, economic and banking crime. i.p.j. sălaj participates in patrolling and intervention for crime prevention, investigation and investigation activities, control of compliance with the legislation on weapons and other dangerous materials, providing support and protection to informants and victims, as well as in humanitarian and cooperation missions, etc. the unit collaborates with other institutions, participates in rescue actions in case of emergencies and ensures that the population is informed about the activities carried out. through their actions, i.p.j. sălaj plays a vital role in maintaining safety and justice in the county (https://sj.politiaromana.ro/ro/informatiigenerale/scurt-istoric). the sălaj county police inspectorate is structured on services, offices and compartments, as well as on city police. the unit is led by chief police commissioner mariusanton stupar and is subordinated to the zalău municipality police, the police of the cities of şimleu silvaniei, cehu silvaniei and jibou, as well as rural police stations to which communal police stations are assigned (https://sj.politiaromana.ro/ro/ipj-salaj/organigrama). the police unit carried out integrated actions together with the gendarmes between january 5-7, 2024, to maintain public order and safety. 21 preventive actions and 45 filters were organized, involving 225 policemen, 95 gendarmes and other law enforcement agents. 562 vehicles were checked and 395 people were tested for alcohol or drugs, 345 contravention sanctions were applied in a total amount of 101,605 lei, 32 driving licenses and 5 registration certificates were retained. the police officers carried out information activities on the new amendments to the criminal code regarding road accidents, drawing up criminal cases for driving under the influence of alcohol and robbery. they also informed about the legislation on penalties for drivers involved in fatal accidents under the influence of alcohol, drugs or without a license (https://sj.politiaromana.ro/ro/stiri-si-media/stiri/actiuni-preventiv-reactive-in-sistem-integratpentru-un-sfarsit-de-saptamana-in-siguranta1705317018). the human resources service is responsible for optimizing human resources within the police unit. it proposes measures for the selection and knowledge of candidates, the employment and promotion of personnel, but also for the promotion and dismissal from office, the transfer of police officers and agents on request (https://sj.politiaromana.ro/ro/ipjsalaj/servicii-si-birouri-judetene/serviciul-resurse-umane). https://sj.politiaromana.ro/ro/informatii-generale/scurt-istoric https://sj.politiaromana.ro/ro/informatii-generale/scurt-istoric https://sj.politiaromana.ro/ro/ipj-salaj/organigrama https://sj.politiaromana.ro/ro/stiri-si-media/stiri/actiuni-preventiv-reactive-in-sistem-integrat-pentru-un-sfarsit-de-saptamana-in-siguranta1705317018 https://sj.politiaromana.ro/ro/stiri-si-media/stiri/actiuni-preventiv-reactive-in-sistem-integrat-pentru-un-sfarsit-de-saptamana-in-siguranta1705317018 https://sj.politiaromana.ro/ro/ipj-salaj/servicii-si-birouri-judetene/serviciul-resurse-umane https://sj.politiaromana.ro/ro/ipj-salaj/servicii-si-birouri-judetene/serviciul-resurse-umane roxana demian 403 2. the establishment of the professional training directorate, as a solution to integrated human resources development in order to respond effectively to current crime and ensure a quality police service, the general inspectorate of the romanian police (i.g.p.r.) has established, starting with 02.08.2021, the professional training directorate. it is directly subordinated to the higher police unit and manages professional training in the romanian police. at the territorial level, within the county police inspectorates and the general police directorate of the municipality of bucharest, professional training structures have been created sized according to the number of police officers, respectively professional training offices and services. the professional training directorate deals exclusively with the training of police officers, in contrast to other units of the ministry of internal affairs, where it is carried out within the human resources services. the newly created structure manages activities on five lines of work: physical education and self-defense, police tactics, shooting instruction, driving vehicles in defensive and priority mode and specialized training. a new department, established within the unit, the professional training bureau, led by chief police inspector iftenie sorin, coordinates the initial and continuous professional training of police officers, ensuring training in areas such as tactics, physical education, weapons transfers and driving. the objective of this office is to train competent police officers according to european standards, in order to achieve institutional objectives and fulfill the duties of the positions (order no. 140 of 02.09.2016 of the minister of internal affairs of romania). the professional training of police officers, regulated by normative acts, includes initial and continuous training and aims to maintain and improve skills, progress in career and advance in rank. the activities are carried out formally, non-formally and informally, and the annual training process starts on april 1 and ends on march 31 of the following year. at the level of the sălaj police unit, a specific provision is issued annually, adapted to local needs, detailing the necessary documentation, the time budget, the responsibilities, the evaluations and the necessary preparation for the following year. 2.1. training activities during the 2021-20222 year in the 2021-2022 training year, at the level of the territorial unit i.p.j. sălaj, the training activities were marked by the implementation of a training provision by the human resources service. this provision has been negatively affected by several factors, including the covid19 pandemic, which has imposed severe restrictions on professional training activities, including the limitation of participants and activities with closed physical contact. it also faced a lack of specialized instructors and adequate infrastructure for defensive driving activities. starting with august 2021, the training activities were taken over by the vocational training office, which caused an abrupt transition and syncope in their organization, given that the office initially did not have the necessary staff according to its structure. in order to remedy this situation, the hierarchically superior unit igpr, organized centralized competitions for filling vacant positions. within these competitions, emphasis was placed on the selection of well-trained police officers, capable of coordinating effective training stages. after the staff was hired, an professional training of human resources in the context of sustainable development at the level of the sălaj county police inspectorate 404 inventory of the available training infrastructure was made and new needs were identified for the continuous professional development of police officers. the training activities included career initiation and specialization courses, practical internships on different lines of work and shooting sessions at the shooting range. a novelty this year was the introduction of practical night shooting sessions, necessary due to the real field conditions in which the police use the weapons. the year 2021 marked a turning point in the professional training of police officers, with significant efforts to adapt and improve the training process in optimal and realistic conditions for operational missions. 2.2. training activities during the 2022-2023 year in the 2022-2023 training year, at the level of the police unit, the activities started with the elaboration of a training provision that regulated the manner and frequency of training activities for all personnel. the management of the unit and the professional training structure focused their efforts on carrying out an extensive number of practical activities and developing the training infrastructure necessary to achieve the proposed objectives. this year, an important moment was marked by the organization for the first time of practical defensive driving activities within the police unit. these exercises were carried out in a public parking lot, adapted to reproduce the conditions of a car park, in order to train police officers in driving techniques to prevent accidents and anticipate traffic hazards. after acquiring these skills, the policemen were also trained in driving special vehicles with priority traffic regime, essential for missions and rapid interventions. in the context of equipping the police with new weapons and noting the infrastructural deficiencies, it was decided to allocate funds for the rental of a private shooting range. this measure was necessary to ensure adequate training, including immediate evaluation of practical performance in the use of weapons. in contrast to military ranges, where resources are limited, the use of a private shooting range allowed for more efficient planning of firing sessions and immediate correction of identified deficiencies in the handling of weapons. particular attention was paid to the development of physical training, self-defense and police tactics, essential for the activities carried out by traffic police and public order. the acquisition of specific equipment and the use of modern training methods have increased the efficiency of training sessions and the involvement of police officers in these activities. following a significant number of new hires, the focus was on career initiation courses and staff specialization, including obtaining professional degrees and further training in various lines of work. an innovation in 2022-2023 was the introduction of a first aid training program, supported by specialists from i.s.u. porolisum sălaj. this program included theoretical and practical training for police officers in the field of first aid, with the use of specialized dummies and equipment. the year 2022-2023 was marked by significant progress in the professional training of police officers within the sălaj county police inspectorate, with a focus on developing practical and theoretical skills in various areas relevant to the efficient performance of job duties. roxana demian 405 2.3. training activities during the 2023-2024 year in the 2023-2024 professional training year, activities were initiated at the sălaj county police inspectorate according to a well-structured plan, starting with the drafting of a training provision for the entire staff. each police structure developed its own training plan, which included both theoretical aspects and practical activities. particular emphasis was placed on the development of the infrastructure necessary for carrying out practical activities and on improving the professional training system to accommodate the staff with this concept. the training in defensive and priority driving included the identification and rental of an adequate area for the arrangement of a car park. the practical activities focused on practicing realistic situations encountered in traffic, such as emergency braking, obstacle avoidance and parking, addressing especially the police officers in the street segment, in order to reduce the road risk among them. as for the shooting instruction, the collaboration with a private shooting range continued, where practical activities were carried out to simulate real shooting situations. a special emphasis was placed on theoretical training regarding the legislation on the use of weapons, given the increase in situations that require such interventions in current activities. physical education, self-defense and police tactics were approached by organizing activities structured on consecutive modules of three days, allowing the police officers to develop multidisciplinary. these modules included practical and theoretical training in selfdefense, police tactics and the use of weapons, demonstrating the effectiveness of this format in the advancement of personnel. in the field of specialized training, a significant amount of time was allocated for the theoretical training of police officers, with a focus on working procedures and legislation. the activities included case studies and the participation of specialists from various fields, providing complete and up-to-date training for staff. as innovations, an observation sheet for the evaluation of training activities and an anonymous feedback questionnaire have been introduced, contributing to the continuous improvement of training programs. conclusions after analyzing the three years of activity of the specialized professional training structure established within the unit, it was found that, in order to achieve a continuous development of this concept of professional training, it would be necessary for the institution not to limit itself only to the identification in the external environment of buildings/surfaces suitable for carrying out practical training activities, but also by expanding its own infrastructure and purchasing modern equipment to ensure preparation in step with developments in the field and to maximize the efficiency of the activities carried out. within the romanian police, professional training is vital for the continuous development of personnel skills and adaptation to the needs of contemporary society. the institution has implemented a structure dedicated to this purpose, reflecting its commitment to improving skills. adaptability to change is essential for the success and efficiency of the organization in responding to current requirements. for better efficiency, employee rewards must stimulate desired behaviors and encourage the development of new skills, including through financial and non-financial professional training of human resources in the context of sustainable development at the level of the sălaj county police inspectorate 406 rewards. recognition of merit and fairness in reward are essential for employee morale and engagement. the police unit should value the diversity of non-financial rewards, such as recognition, promotion and leave benefits, in order to support job satisfaction and deep engagement in work. the integration of new employees and teamwork solidifies an effective and proactive team spirit. in conclusion, the training strategy of the romanian police must be well-structured, effectively combining training, incentives and rewards to ensure optimal performance and a sustainable contribution to the community. references 1. manolescu a., managementul resurselor umane [human resources management], ed. a iv-a, ed. economică, bucureşti, 2004; 2. mathis.r, nica p.c., rusu.c, managementul resurselor umane [human resources management], ed. economică, bucureşti 1997; 3. urziceanu ramona mihaela, dezvoltarea durabilă a resurselor umane, note de seminar, universitatea agora, oradea, 2019; 4. order no. 140 of 02.09.2016 of the minister of internal affairs of romania regarding the human resources management activity in the police units of the ministry of internal affairs. https://prolex.ro/wp-content/uploads/2016/11/omai-140-2016-prinvindactivitatea-de-ru.pdf 5. https://sj.politiaromana.ro/ro/informatii-generale/scurt-istoric 6. https://sj.politiaromana.ro/ro/ipj-salaj/servicii-si-birouri-judetene/serviciul-resurseumane 7. https://sj.politiaromana.ro/ro/stiri-si-media/stiri/actiuni-preventiv-reactive-in-sistemintegrat-pentru-un-sfarsit-de-saptamana-in-siguranta1705317018 https://prolex.ro/wp-content/uploads/2016/11/omai-140-2016-prinvind-activitatea-de-ru.pdf https://prolex.ro/wp-content/uploads/2016/11/omai-140-2016-prinvind-activitatea-de-ru.pdf https://sj.politiaromana.ro/ro/informatii-generale/scurt-istoric https://sj.politiaromana.ro/ro/ipj-salaj/servicii-si-birouri-judetene/serviciul-resurse-umane https://sj.politiaromana.ro/ro/ipj-salaj/servicii-si-birouri-judetene/serviciul-resurse-umane https://sj.politiaromana.ro/ro/stiri-si-media/stiri/actiuni-preventiv-reactive-in-sistem-integrat-pentru-un-sfarsit-de-saptamana-in-siguranta1705317018 https://sj.politiaromana.ro/ro/stiri-si-media/stiri/actiuni-preventiv-reactive-in-sistem-integrat-pentru-un-sfarsit-de-saptamana-in-siguranta1705317018 agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 17, no. 2 (2023), pp. 68-77 68 the development of agrotourism in azerbaijan: based on the italian experience m. hasanzadeh mirali hasanzadeh azerbaijan tourism and management university, azerbaijan orcid no. 0009-0005-4965-507x, e-mail: miralihasanzadeh55@gmail.com abstract: agrotourism, an innovative type of rural tourism, is growing quickly across the world. agrotourism is seen as a vital factor in increasing farmer prosperity, boosting economic growth, and improving the general quality of life in remote areas by visitors’ incoming. promoting this type of tourism in western european nations has been a main goal as attaining long-term growth and started developing during the 1960s. azerbaijan's principal priority is the sustainable development of diverse economic sectors, and increasing agrotourism stands out as a vital goal within this context. this article investigates italian viewpoints regarding agrotourism and strategies to implement and promote its growth, as well as, submit proposals for the expansion of agrotourism and policy implementation in azerbaijan. the study encompassed in-depth information on the azerbaijani tourism industry, including programs implemented through cooperation between governmental and non-governmental organizations to promote advancement of agrotourism. the exploration bases its findings on recent investigations, information from statistics, and research papers. keywords: agrotourism, rural areas, farmers, agriculture, activities of agrotourism introduction the notion of “agrotourism” firstly published in the international literature in the previous century. the name "agrotourism" arose with the complex in two terms: “agro” and “tourism”. so, the phrase of “agro” was taken from the greek context: “agros” meaning “soil” and “agronomos” who possesses land as manager, on the other hand, “tourism” consists of a wide range of leisure activities motivated by intellectual, recreational, business-related, and other goals (michał sznajder et al., 2009). while there is no clear definition of agrotourism, it is often defined as activities in which local inhabitants participate in rural regions to cater to tourists. it may also be referred to as a rural business concept that combines well with the agricultural sector and the tourism industry (dr. nicole l. vaugeois et al.,2017). farmers, tour operators, and local communities all benefit with the help of agrotourism. it can be thought of as a supplement to the budget of farms, involving the manufacturing of various products and services, as well as the exchange of local culture and customs between visitors and inhabitants. this industry first emerged in western europe in the 1960s, contributing to the transformation of mountains, as well as, rural locations in numerous countries into tourist attractions. this type of tourism has developed extensively in european countries, positively influencing people's lifestyles, financial growth, and more. european union also is interested in this industry because of sustainable progress goals. the european mailto:miralihasanzadeh55@gmail.com mirali hasanzadeh 69 union is also heavily invested in it since it coincides with its sustainable development goal (ramona ciolac et al., 2019). agrotourism is growing in countries such as italy, austria, germany, france, denmark, and others. several agreements were signed, and multiple meetings were held to enhance azerbaijan-italy collaboration. the declaring of 2020 as the year of azerbaijan in italy, the establishment of an italian-azerbaijani university in azerbaijan, and ongoing collaboration in sectors such as tourism, defense, economy, and others highlight italy's role as azerbaijan's most reliable and prominent partner among members of european union. that is why the researcher discussed below agrotourism in italy and generated suggestions to stimulate agrotourism growth in azerbaijan. the scientific novelty of the presented research is the using of experience in agrotourism of italy in azerbaijan. it should be acknowledged that one of the most significant objectives for governments throughout the world, including azerbaijan, is to guarantee that the progress of any industrial sector is based on sustainable development goals. it is extremely important to take into account that, despite the potential for agrotourism expansion in azerbaijan, the lack of adequate scientific research is a barrier to the sector's advancement. the goal of this study is to investigate the agrotourism in italy and to implement this experience in azerbaijan. the second goal is to promote agrotourism industry in azerbaijan in the scientific area. the following research objectives will aid in the achievement of the goal:  to investigate the main characteristics of agrotourism in italy  to investigate programmes which implemented in azerbaijan to enhance agrotourism methodology the secondary data plays the important role in the research article and was utilized. the sources included scientific articles and journals, books, statistics. statistics data were gathered from italian national institute with qualitative methodology. literature review the tourism industry in the republic of azerbaijan tourism in azerbaijan is booming, due to the country's rich cultural legacy, the great hospitality of its people, the country's diversified landscapes, and a variety of other elements. azerbaijan implemented a number of laws to support the advancement of the tourism sector. the approval of the "state program for tourism development in the republic of azerbaijan from 2002 to 2005," as per presidential decree no. 1029 issued on august 27, 2002, created a favorable environment for the tourism sector's growth and laid the groundwork for azerbaijan's entry into the international tourism market. under presidential decree no. 838, dated april 6, 2010, the "state program for the growth of tourism in the republic of azerbaijan from 2010 to 2014" was sanctioned in accordance with this ongoing plan. its purpose was to develop a progressive tourism industry that meets demanding economic, social, and environmental standards, by an ultimate goal of making tourism a cornerstone of the country's economy (strategic roadmap for the development of specialized tourism industry in the republic of azerbaijan, 2016). the development of agrotourism in azerbaijan: based on the italian experience 70 the strategic road map for the advancement of the specialized tourism sector in the republic of azerbaijan was approved by presidential decree on december 6, 2016. the strategic road map strives to accomplish numerous major results as part of its broader objectives. these include promoting tourism development, providing top-tier and competitive tourism services on both domestic and international levels, creating experience in tourism rooted in culture of community and values, catalyzing new investment ventures driven by contemporary concepts and innovation, and fostering coordination among relevant tourism authorities. the strategic roadmap includes goals such assisting the growth of tourism sector within specified timeframes, guarantying the delivery of high-quality, competitive tourism services in both global and local markets, shaping experience in tourism industry that reflect national values, stimulating new investment initiatives rooted in contemporary concepts and innovations, and fostering collaboration among relevant authorities for tourism advancement (madina hashimli, 2019). the 1999 tourist law was changed in 2021 to improve the basic components of public administration in the tourist sector, the regulatory framework for the tourism industry, recommendations for the effective usage of tourism resources, and tourism financing sources (about tourism law of the republic of azerbaijan, 2021). the foundation of the azerbaijan state tourist agency in 2018 resulted in the construction of a specific body entrusted with tourism management and the creation of tourism rules, among other functions. tourism zones or regions were formally formed in the republic of azerbaijan on february 8, 2023, in compliance with a presidential proclamation, including baku-absheron regional tourism administration; ganja regional tourism administration; sheki regional tourism office; lankaran regional tourism administration; mingachevir regional tourism administration; guba regional tourism administration; karabakh regional tourism administration; ismayilli regional tourism office ( azerbaijan state tourism agency, 2023) table 1. types of tourism and opportunities in azerbaijan types of tourism opportunities cultural tourism customs and traditions, multiculturalism historical tourism rich history and historical monuments culinary tourism delicious cuisine rural tourism landscape, hospitable people health tourism naftalan, mineral springs business tourism hosting international events, conferences (also convention centers and conference rooms of hotel) agrotourism landscape, agriculture ecotourism national parks, landscape source: azerbaijan tourism board mirali hasanzadeh 71 table 1 represents the main types of tourism in azerbaijan as well as the resources contributing to the development of the tourism sector. it is understood, in azerbaijan more types of tourism are advanced or can be improved because of culture, franchise hotel, history, holding international events, landscape and so on. according to the table, azerbaijan is growing or has the potential to develop many types of tourism as a result of elements such as culture, franchise hotels, historical monuments, hosting international events, picturesque landscapes, and etc. because of elements such as friendly local people, rich culture, delicious food, agriculture, and other contributing aspects, agrotourism, as an emerging kind of rural tourism in azerbaijan, has progress for expansion. azerbaijan's principal objective is to promote growing kinds of tourism and welcome the number of visitors. state initiates programs and collaborates with international unions and other states in this context. the foundation of the agrotourism association in azerbaijan in 2023 signified the start of efforts to advance and broaden agrotourism in the country (ministry of agriculture of the republic of azerbaijan, 2023). materials and methods "guidebook on the organization of agrotourism activities" was published by state tourism, as well as, the united states agency for international development in order to contribute the utilizing of agrotourism actions that were made between tourism and agriculture. the major goal of book was to deliver assistance and to train professionals who are engaged in agrotourism or want to be expertise in this industry; including information and advice on providing and organizing agrotourism services. in the process of preparation of book specialists met with 15 farmers from various villages, including lankaran, gadabey, dashkasan, tovuz, and goygol, and drew on the expertise of global and regional agrotourism experts. the book gave precise details about definition of this type of tourism, evaluation in tourism assets within rural communities and farms for the motivation of launching such initiatives, marketing activities and so on( state tourism agency, 2021) for three years in the past, rural guesthouses were established in azerbaijan as part of the "development of entrepreneurship and self-employment in villages" project, capitalizing on the country's immense opportunities for rural tourism. the project has been underway since 2021, with aid from the ministry of economy's small and medium business development agency (koba), the ministry of labor and social protection of the population's state employment agency, and the state tourism agency. within the scope of the initiative, 15 rural accommodations were first created in the region of ismayilli, and they were suitably furnished and equipped. over 220 people from various places were registered in the project's second phase, which intended to stimulate entrepreneurship in diverse locations, generate self-employment possibilities, improve rural tourism, and improve inhabitants' well-being. individuals satisfying the required standards were picked from this group and provided with the appropriate resources. participants in the project received training in business and tourism-related topics such as developing business plans, efficient leadership, maintaining satisfied clients, selling methods, the hospitality field methods, maintaining cleanliness and hygiene, following to health and safety guidelines, nutrition, and online communication management. the development of agrotourism in azerbaijan: based on the italian experience 72 individuals also received business management and tourist consulting help and mentorship, as well as company growth assistance. similar guesthouses will be established in the western areas. a two-phase selection method is used to choose project members. in the beginning, partners evaluate the proposals based on their location on the tourist route, the existence of required infrastructure, and the present status of the home. individuals' citizenship status in the labor and employment system is checked in accordance with legislative laws in the next step. citizens who pass all parts of the selection process are eligible to participate in the project. sessions of instruction are set up for these persons to develop relevant background in tourism and service-related industries, and rehabilitation and restoration work is carried out in the specified area planned for use as a tourism facility. in the next step, relevant assets are given to establish agrotourism business facilities. it is vital to mention that a rural guesthouse was created as part of this project to accommodate a total of 65 people from various places. in terms of the criterion for selecting designated locations, the agency stated that the initial selection is made on the basis of increased tourism prospective. the project has already been executed in the mountainous shirvan, sheki-zagatala, lankaran-astara, and gubakhachmaz areas, and it is scheduled to be implemented in the western regions at a later time. overall, it can be concluded:  the project's goal is to advance entrepreneurship in rural areas, facilitate selfemployment, boost agrotourism, also improve the well-being of local societies;  initially, partner institutions examine the applications, taking into account variables such as the house's location on the tourist route, the existence of required infrastructure, and the present state of repair;  each residence is expected to get equipment and merchandise worth around 8,000 manats;  the suitable rural guesthouse must have been functioning in this direction for the previous three years in order to participate in the project (the small and medium business development agency of the republic of azerbaijan, 2023) the "agrovision" project, which will last 24 months, is being carried out in the lankaran economic zone by the eurasia partnership foundation and the constitution research foundation, with funding from the european union. the project's goal is to formulate and verify a supportable and replicable agrotourism and ecotourism development model. the basic goal of this approach is to raise the income of rural families in azerbaijan's southern region and to strengthen ties between urban and rural areas within the nation. one of the actions planned for the project's early stages is to identify and assess the capacities of families and farmland in the region with prospects of tourism. the report will assess each tourism destination's (td) progress, assess the capacity of consortium members, and identify significant financial, infrastructure, promotional activities, and other impediments that hamper the td's advancement. the evaluations' findings will provide the foundation for consortium members' future development of td strategies. to attain these goals, foreign specialists in this sector are being encouraged to work with native specialists as a member of a collaborative team. the following duties will be carried out by specialists: mirali hasanzadeh 73  examine relevant territorial and national rural development programmes to aid in the preparation of the evaluations;  provide direction for evaluating the selected tourism locations;  assist the development strategy design process and offer input on the produced documents (eurasia partnershop foundation, 2020). discussions agrotourism, like a great example, owns achieved vast success on a international scale in italy. it is recognized for its scenic landscapes and the production of diverse exquisite foods such as olives, grapes in vineyards, cheese-making enterprises, pasta manufacture, and farms that create the famed mozzarella (umidjon matyakubov, 2016). agrotourism emerged in italy as a natural form of hospitality and a supplement to the major occupations of farming, forestry, as well as animal husbandry (margherita ciervo, 2013). agrotourism, which merges the tourism and agrarian industries, is governed by particular rules in italy. italy is the only western european country having such legislation in force (claudio lupi et al.,2017). italy experienced a significant rise in popularity during the last two decades as a result of the incredible growth and development of its agrotourism business (harshavardhan reddy kummitha et al., 2018) a pioneering group of persons, mostly from a renowned farmers' union centered in tuscany, founded "agriturist" in 1965 with the goal of developing this type of tourism both nationally and locally. the family farmers' union coldiretti executed a project called "terranostra " in 1973. "agriturist" executed an initial educational course in partnership with the national ministry which is engaged in agriculture to educate native stakeholders, along with duture operators in this field in 1978. in 1980, a second group called "turismo verde" was founded by small-scale farmers. the national organization "anagritur" was established with joining of these three groups in order to manage their efforts and operations (fabio maria santucci, 2011). italy has had a statewide regulation, known as regulation 730/1985, in place since 1985 to control agrotourism operations throughout the country (matyakubov u., 2018). beginning in the 1990s, italy saw a shift in agricultural techniques on its farms. this transition has had obvious environmental implications as well as beneficial benefits (n. galluzzo., 2015) a more stringent national law, no. 96/2006, states that agrotourism can only be performed by the farmer and their close family members. furthermore, rather than financial concerns, the fundamental criterion for establishing priority should be the proportion of working hours allocated to agricultural operations (barbara zanetti et al., 2022). italy is divided into 19 regions and two provinces, each with its own set of legislation controlling agrotourism, agriculture, customs, and history (fabio maria santucci, 2013) beginning in 2013, italy adopted the trademark "agriturismo italia," which was followed by the introduction of a new categorization system. the brand denotes farms that follow existing norms and regulations. its distinguishing emblem is a sunflower surrounded by a farm. because of these characteristics, the sunflower, a lovely flower signifying recognition, an icon of italian summer, a depiction of holidays, and the joy in its bright hues, has been designated as the categorization trademark. farm classification, similar to hotel rating, strives to provide the public a thorough impression of the degree the development of agrotourism in azerbaijan: based on the italian experience 74 of comfort, range of services (hospitality), and quality of the natural environment (nature, landscape, quiet) that each farm can deliver. in order to construct this framework, the ministry of agriculture cooperated with regional and national agrotourism organizations to perform significant research at both the national and global levels. the primary aim was providing insight into the tastes and needs of both italian and foreign tourists in agrotourism. each farm will be rated from 1 to 5, and its categorization level will be represented with an appropriate symbol (the agriturismo italia trademark, 2013). agrotourism is rapidly expanding throughout italy. however, this expansion has been unbalanced, with some regions seeing faster and more significant growth than others. the tuscany area and the province of bolzano, for example, account for one-third of all italian agrotourism firms (emilio chiodo et al., 2019). figure 1. the number of farms and beds in italy source: italian national institute of statistics the data in figure 1 demonstrate the entire amount of farms and beds in italy from 2018 to 2022. between 2018 and 2022, the total number of farms did not change much. there will be 4% fewer farms in 2022 than there had been in 2018. there were 270,541 beds in 2018; by 2022, the count had increased by 4% to 282,915. in comparison with the quantity of farms, the number of beds increased, with 2021 beds included. during the same time period, this amount of farms and beds did not considerably rise or decrease. 2018 2019 2020 2021 2022 farms 20280 20149 20160 19069 19485 beds 270541 277112 281002 274541 282915 0 50000 100000 150000 200000 250000 300000 farms beds mirali hasanzadeh 75 figure 2. the number of local and foreign tourists in italy source: italian national institute of statistics figure 2 shows how many local and foreign tourists stayed on farms and used services in italy between 2018 and 2022. in general, the number of overnight guests (both foreign and domestic) greatly surpasses the plenty of tourists who utilize services. there are more arrival domestic tourists than international visitors. foreign visitors were banned from visiting italy for agrotourism due of the global covid-19 epidemic in 2019, which had a severe detrimental impact on the travel and tourism business. there is no question that fewer visitors, both domestic and foreign, visited in 2020. however, data on overseas tourists shows that this loss is especially noticeable, with a 62% and 57% decline in arrivals and overnight visits from 2019 under post-pandemic conditions. following the epidemic in 2022, there was a discernible increase in both categories, with a particularly substantial increase in international tourists. in comparison to 2019, there was a 193% rise in arriving tourists and a 154% increase in overnight passengers. conclusion the article focused on the growth of agrotourism in italy, traced its development and analyzed initiatives to promote agritourism in azerbaijan. it is essential to point out that achievements of italy in agrotourism were aided not only by its natural beauty, landscape, history, and culture, but also by a variety of initiatives such as the formation of an association, the classification of guest houses, and the passage of supportive legislation. given experience of italy in agrotourism and friendly relations of azerbaijan with italy, azerbaijan has an opportunity to benefit from experience of italy in this type arrivals nights arrivals nights foreign tourists local tourists 2018 1640412 7913858 1792305 5513848 2019 1795549 8215005 1965185 5842530 2020 669932 3542412 1535715 5682517 2021 1122733 5612853 1897890 6438328 2022 1963085 9031507 2115802 6542586 0 1000000 2000000 3000000 4000000 5000000 6000000 7000000 8000000 9000000 10000000 2018 2019 2020 2021 2022 the development of agrotourism in azerbaijan: based on the italian experience 76 of tourism. implementing these principles can have positive results in just a short period of time. azerbaijan is notable for its multiracial setting natural beauty, diversified landscapes, hospitable population, current culture, rich history, and delicious cuisine. these elements function as drivers for the rapid growth of agrotourism. the formation of an agrotourism association may be viewed as a driving force in the expansion of this type of tourism. some ideas can be offered to promote the growth of agrotourism:  in order to execute pre-planned projects, the government should work closely with local citizens. prior to project implementation, it is critical to examine the community's viewpoints, which are an important aspect in development of sustainability, particularly in agrotourism;  furthermore, there is a possibility to give assistance to farmers active in agritourism or those with a future interest in agrotourism by exempting them from income taxes for a particular period of time;  collaboration between public, private and governmental organizations will drive continued growth of this industry, and the government may facilitate such collaboration;  it is critical to organize seminars and training sessions on tourism, agriculture, culinary skills, management of farms and sales;  the agritourism association ought to coordinate with the state tourism agency, ministry of economy's small and medium business development agency, food agency, ministry of ecology, ministry of health, ministry of agriculture, and ministry of emergency situations and evaluations of activities of farms should be done in collaboration with these groups.  similar to italy, categorizing of farmers in the republic of azerbaijan can be performed via the use of a star system or other methods. farms can also be grouped based on the surnames of individual craftsmen, since many family members carry on their predecessors' professions.  furthermore, museums and parks concentrating on agriculture and agrotourism must be established inside the remote areas to fascinate tourists. references 1. azerbaijan state tourism agency. (2021). tourism law of the republic of azerbaijan. retrieved from https://e-qanun.az/framework/49162 2. azerbaijan state tourism agency. (2023). azerbaijan republic president ilham aliyev signs decree on state tourism agency. retrieved from https://tourism.gov.az/news/azerbaycan-respublikasinin-prezidenti-ilham-eliyevdovlet-turizm-agentliyi-ile-elaqedar-ferman-imzalayib 3. azerbaijan tourism board. (2023). publications. retrieved from https://www.tourismboard.az/az/publications 4. zanetti, b., verrascina, m., licciardo, f., & gargano, g. (2022). agritourism and farms diversification in italy: what have we learnt from covid-19? https://e-qanun.az/framework/49162 https://tourism.gov.az/news/azerbaycan-respublikasinin-prezidenti-ilham-eliyev-dovlet-turizm-agentliyi-ile-elaqedar-ferman-imzalayib https://tourism.gov.az/news/azerbaycan-respublikasinin-prezidenti-ilham-eliyev-dovlet-turizm-agentliyi-ile-elaqedar-ferman-imzalayib https://www.tourismboard.az/az/publications mirali hasanzadeh 77 5. lupi, c., giaccioa, v., mastronardi, l., giannelli, a., & scarderac, a. (2017). exploring the features of agrotourism and its contribution to rural development in italy. 6. vaugeois, n. l., bence, s., romanova, a., et al. (2017). farm diversification through agri‐tourism. 7. chiodo, e., fantini, a., dickes, l., et al. (2019). agritourism in mountainous regions—insights from an international perspective. 8. eurasia partnershop foundation. (2020). call for international experts. retrieved from https://epfound.az/az/2020/08/21/call-for-international-experts/ 9. santucci, f. m. (2013). agrotourism for rural development in italy: evolution, situation and perspectives. 10. kummitha, h. r., huseynov, r., & wojtaszek, m. (2018). development of agrotourism in the light of economics: case studies of italy and poland. 11. italian national institute of statistics. (2022). agritourism and farms. retrieved from https://www.istat.it/en/archivio/agritourism+farms 12. ministry of agriculture of the republic of azerbaijan. (2023). retrieved from https://agro.gov.az/az/news/0206231 13. galluzzo, n. (2015). relation between typologies of agritourism in italy and agritourists aspirations. 14. ciolac, r., adamov, t., iancu, t., et al. (2019). agritourism-a sustainable development factor for improving the ‘health’ of rural settlements. case study apuseni mountains area. 15. strategic roadmap for the development of specialized tourism industry in the republic of azerbaijan. (2016). 16. agriturismo italia trademark (2013): agriturismo italia trademark. (2013). retrieved from http://www.agriturismoitalia.gov.it/en/agriturismo-italia-trademark 17. small and medium business development agency of the republic of azerbaijan. (2023). rural guesthouses: a new chapter in the development of the country's tourism. retrieved from https://smb.gov.az/en/all-news/rural-guesthouses-a-newchapter-in-the-development-of-the-countrys-tourism 18. matyakubov, u. (2016). geographic indications and agritourism (italy’s experiences). https://epfound.az/az/2020/08/21/call-for-international-experts/ https://www.istat.it/en/archivio/agritourism+farms https://agro.gov.az/az/news/0206231 http://www.agriturismoitalia.gov.it/en/agriturismo-italia-trademark https://smb.gov.az/en/all-news/rural-guesthouses-a-new-chapter-in-the-development-of-the-countrys-tourism https://smb.gov.az/en/all-news/rural-guesthouses-a-new-chapter-in-the-development-of-the-countrys-tourism agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 18, no. 2 (2024), pp. 113-123 113 the impact of the implementation of guaranteed and intervention prices on food security a. gurbanzade azer gurbanzade azerbaijan cooperation university, azerbaijan https://orcid.org/0000-0002-9249-0849, e-mail: azercooperation@hotmail.com abstract: improving food security in contemporary conditions directly depends on solving numerous issues. it is crucial to consider that the processes of globalization significantly impact food security. in countries where the influence of import channels on the food market is high, this often leads to a deterioration in food security. therefore, there is an urgent need for state regulation measures. the regulatory measures implemented by the government to improve food security, especially in the context of globalization and market economies, involve the application of guaranteed and intervention prices. the implementation of both guaranteed and intervention prices is considered one of the indirect tools for regulating the food market and does not contradict the fundamental principles of market economies. the application of these price controls particularly involves the government's procurement processes, which stabilize market prices and the incomes of agricultural producers. such interventions create favorable conditions for stabilizing food prices and improving food security. in this environment, it becomes possible to improve food security by ensuring equal access to the food market for producers. imbalances in the food market, particularly among low-income populations, can lead to food security issues. keywords: food security, food market, guaranteed prices, intervention prices, state food reserves, private funds, agriculture, processing industry. 1. introduction improving food security is a multifaceted challenge that requires a comprehensive approach encompassing economic, social, and political dimensions. according to experts in the field, food security is defined not only by the availability of food but also by its accessibility, utilization, and stability over time (fao, 2009). in today’s globalized economy, food security is increasingly influenced by various global factors, such as climate change, international trade policies, and market fluctuations. these elements often cause disruptions in food supply chains, leading to shortages and price volatility, which directly impact the availability of food in local markets. as highlighted by scholars, global markets play a crucial role in determining food prices, and international trade often results in countries becoming more dependent on imports, making them vulnerable to price changes in global markets. a key strategy for addressing these vulnerabilities involves the application of government policies such as guaranteed and intervention prices. according to economists like stiglitz (1997), price stabilization mechanisms are essential in ensuring that both producers and consumers are protected from excessive market fluctuations. these mechanisms include https://orcid.org/0000-0002-9249-0849 mailto:azercooperation@hotmail.com the impact of the implementation of guaranteed and intervention prices on food security 114 interventions that help regulate supply and demand in the food market, especially during times of scarcity or seasonal changes. in particular, intervention prices, which involve the government purchasing surplus food during periods of excess or providing food to the market during shortages, play a significant role in maintaining market stability and preventing extreme price increases. globalization has intensified the interconnectedness of food markets, often exacerbating the vulnerability of countries that rely on imports for their food security. in this context, government intervention becomes a critical tool to mitigate the risks posed by global market fluctuations. scholars argue that government interventions are particularly vital in countries with low agricultural productivity or limited access to global food markets. these interventions help stabilize food prices, ensuring that food remains affordable for all population segments, especially marginalized and low-income groups. moreover, interventions such as the establishment of strategic food reserves, are essential in ensuring that food can be distributed effectively during times of crisis or seasonal shortages. by creating a regulatory framework that includes guaranteed prices and commodity interventions, governments can promote a more stable and resilient food system. these measures not only benefit agricultural producers by securing their incomes but also ensure that consumers have reliable access to affordable food. as noted, the concept of "food sovereignty" emphasizes the importance of local agricultural production and the role of state-led interventions in maintaining food security. such interventions can reduce reliance on international markets and enhance self-sufficiency, which is crucial for long-term food security. 2. materials and methods this study investigates global food security interventions, focusing on strategic food reserves, commodity intervention funds, and government involvement in stabilizing food prices. a qualitative research approach was used, relying on secondary data from international organizations, government reports, and academic literature. the data was collected from various sources, including the food and agriculture organization (fao), world bank, and national agricultural ministries, to analyze the practices of food reserves and intervention policies in countries like the usa, china, russia, brazil, and the eu. the research includes both historical and contemporary perspectives on food security measures, with a particular emphasis on the impact of the russia-ukraine war on global food markets and the role of state intervention in stabilizing commodity prices. a comparative analysis was conducted to evaluate the effectiveness of different intervention strategies across countries, using statistical data on grain reserves, price fluctuations, and food market performance. the role of guaranteed prices in agricultural development and food security ensuring the sustainable development of the agricultural sector in the economy is largely dependent on the successful completion of the extensive reproduction process in agriculture and the enhancement of the competitiveness of agricultural commodity producers. as is well known, agriculture is a sector that directly depends on natural climatic conditions and the fertility of land resources. changes in these climatic conditions ultimately affect productivity levels and the volume of products produced (tsakhaev, 2013). therefore, azer gurbanzade 115 measures aimed at increasing the volume of agricultural production are not only dependent on the capabilities of agricultural commodity producers but also directly related to the effectiveness of the agricultural policies implemented by the state. it should also be noted that since a market economy reflects the fundamental laws of free competition, demand and supply, as well as economic freedom and liberalization processes, the development of agriculture and the food market, in general, based on market conditions, results in market fluctuations and price increases (dolan & simon, 2005). however, fluctuations in market conditions do not always lead to price increases. in some cases, there are instances of price reductions, which, although beneficial for consumers, have a negative impact on producers’ ability to continue their activities profitably in the future (stiglitz, 1997). these rapid price fluctuations in the market characterize market cycles and create harmful tendencies that affect both producers and consumers negatively (galbraith, 1976). the price formation process is quite complex and multi-dimensional, and the increase in the influence of price-forming factors leads to various fluctuations. the enhancement of these factors in market conditions often leads to harmful tendencies, and thus, it is essential for the state to implement effective price policies to eliminate these harmful tendencies (kosyakin, 2009). the state can play a role as the most important purchaser and buyer of agricultural products. the provision of national defense and security needs and food requirements in other sectors are directly dependent on the supply processes implemented by the state (pakhomov, 2019). figure 1. impact of guaranteed and intervention prices on food security in 2023 source: data synthesized from global trends and fao reports the impact of the implementation of guaranteed and intervention prices on food security 116 this analysis explores how guaranteed and intervention pricing strategies affect food security across various regions in 2023. the bar chart highlights price disparities, with developed regions offering higher guaranteed and intervention prices, ensuring better market stability. conversely, the scatter plot shows a negative correlation between inflation rates and food security indices. regions with higher inflation, particularly in africa and south america, experience lower food security. these visuals underscore the crucial role of price controls and economic stability in mitigating food insecurity amid global challenges such as inflation and geopolitical tensions. it is true that in a market economy, prices are usually determined freely, based on demand and supply. however, it should be noted that in countries where state intervention in economic activities is implemented, the state's influence on the price formation process is quite high (charikova & chernysheva, 2019). for instance, american economist g. simon argues that in most markets, the prices are not determined by competition, but by managed prices (dolan & simon, 2005). in developed countries, the level of prices in various sectors accounts for 10-30% of the total production volume and is regulated by the government (galbraith, 1976). it is possible to agree with these economists’ views, as in many cases in developed and even developing countries, the level of prices for agricultural products is often determined through necessary and indirect compensation and subsidies by the state. this process has a unique effect on both consumer and producer interests. in our view, the state's intervention through price policies can help achieve balance in various sectors of the economy, including agriculture, and create favorable conditions for equal access for consumers to the food market (stiglitz, 1997). another american economist, d.k. galbraith, argues that state regulation often involves intervention in the level of aggregate demand, with the government’s regulatory tools performing fiscal functions on prices and incomes (galbraith, 1976). the experience of developed countries shows that price regulation measures are primarily implemented in the agricultural sector and food markets. this is due to the unstable nature of agricultural product prices (kosyakin, 2009). the high elasticity of supply in agricultural products makes their prices more susceptible to fluctuations. additionally, the inadequate or sometimes non-adequate demand for agricultural products also causes price changes. therefore, in such situations, it is necessary to stabilize food prices and ensure that agricultural producers’ prices are set at levels that improve their financial position (pakhomov, 2019). this can be achieved by limiting price fluctuations and protecting both consumers and producers from harmful price changes. in this regard, price regulation by the state plays a key strategic role in eliminating the harmful effects of the market mechanism and ensuring the balanced development of the agricultural sector (charikova & chernysheva, 2019). in our opinion, the measures aimed at regulating price levels should serve to maintain the principles of a free market mechanism. in this sense, agricultural producers should be able to sell their products at market prices determined by demand and supply. however, when the market prices do not align with the financial situation of agricultural producers, the state should intervene and establish necessary price regulations. the fundamental principle of price regulation should be a price priority system, which ensures that the government creates an acceptable and sufficient price level for agricultural producers' interests and adjusts it when necessary (galbraith, 1976). azer gurbanzade 117 studies show that agricultural producers can face different situations regarding price fluctuations. in some cases, their incomes may increase, but in most cases, price reductions lead to a decrease in their revenues (kosyakin, 2009). in the past, under the centralized socialist economy, price levels were regulated by the state. at that time, uniform sales prices and differentiated supplements were applied across the entire union, enabling compensation for commodity producers when necessary. the costs and profits in these price mechanisms were reflected in the production costs per unit of agricultural products (tsakhaev, 2013). with the transition to a market economy, the economic system is largely based on liberal free market laws, and in this process, free market prices are proposed, which leads to the formation of prices based on demand and supply, and often monopolistic price levels. as a result, agricultural producers cannot gain enough profit from these market prices (dolan & simon, 2005). therefore, the use of guaranteed prices in agriculture is crucial to protect agricultural producers and ensure stability in the food market, improving food security. guaranteed prices can be defined as a system where the government sets a minimum procurement price for agricultural products (stiglitz, 1997). when the free market prices align with the agricultural producers' interests, they can sell their products at those prices. however, when market prices do not favor agricultural producers, they can rely on guaranteed prices to sell their products. the methodology for forming guaranteed prices is widely used, where economists argue that guaranteed prices should cover the material costs of commodity producers and provide necessary income for subsequent years to carry out large-scale agricultural reproduction processes (pakhomov, 2019). economists believe that guaranteed prices should not only compensate for the costs incurred in agriculture but also ensure a minimum profitability level in the worst-case scenario (galbraith, 1976). in the european union, price policies play an important role in the structure of the common agricultural policy, with a greater emphasis on guaranteed prices (charikova & chernysheva, 2019). guaranteed prices are usually determined through a minimum price system, which is applied when market prices are low. these price levels play a vital role in protecting the economic interests of agricultural producers. in the european union, various programs are implemented to enhance the sustainability and efficiency of national agriculture, including measures to eliminate food product imports and ensure food security under conditions of inter-country integration. in conclusion, the protection of the guaranteed price system, particularly in times of economic crises, stabilizes the financial position of agricultural commodity producers and prevents bankruptcy. the implementation of guaranteed prices also contributes to improving food security by enabling producers to sell their products at these prices when market prices are unfavorable. thus, in the current context of deepening globalization, the use of guaranteed prices in developing countries can significantly improve national food security (daoud et al., 2019). 3. discussion and results intervention prices play an essential role in government price policy aimed at supporting agricultural commodity producers. through intervention prices, the government acquires products from agricultural commodity producers at supply prices and intervenes in the food market when prices fall (tsakhaev, 2013). in this context, intervention prices are applied during supply interventions and commodity market interventions. these price types the impact of the implementation of guaranteed and intervention prices on food security 118 are crucial in defending agricultural commodity producers and contributing to the stabilization of the food market (dolan & simon, 2005). it should be noted that intervention prices are implemented during market interventions, that is, when the government intervenes in the food market. historical analysis of the formation of intervention prices suggests that active efforts to regulate the food market through commodity interventions began in the 1930s. during the great depression of the 1930s, specifically between 1929 and 1933, the united states introduced federal agricultural price support programs to achieve several social and economic goals. commodity interventions applied in the food market during this period helped stabilize the food market (galbraith, 1976). after the agricultural adjustment act of 1933, agricultural productivity levels in the u.s. experienced significant increases (kosyakin, 2009). government interventions in the food market occur under market conditions and within the global competitive environment, in the form of purchased interventions and commodity interventions (pakhomov, 2019). the government’s purchase and commodity interventions aim to stabilize the prices of agricultural products, raw materials, and food, while ensuring balanced income levels for agricultural commodity producers (charikova & chernysheva, 2019). the government’s purchase interventions are carried out when the prices of agricultural products fall below the minimum settlement prices in market transactions, including at auction (tsakhaev, 2013). commodity interventions, on the other hand, occur when the prices of agricultural products rise. the government intervenes by selling purchased agricultural products at auction and applying maximum settlement prices (dolan & simon, 2005). government food market purchase interventions are characterized as supply interventions. these supply interventions involve organizing the acquisition of agricultural products, raw materials, and food through collateral transactions (pakhomov, 2019). the commodity intervention stabilizes the price levels in the agricultural market, ensuring that agricultural commodity producers maintain a necessary income level to sustain widespread reproduction. this process involves sales of agricultural products from state and regional food reserves (charikova & chernysheva, 2019). from the author's perspective, government intervention in the food market occurs in the following scenarios: when agricultural products are abundant in the food market, meaning the supply level is high, and prices fall, the government acquires food products to eliminate surplus supply in the market (stiglitz, 1997). in the second case, when agricultural product prices rise, the government intervenes by selling products from food reserves, thus reducing the prices in the market (kosyakin, 2009). supply interventions are implemented when agricultural products, raw materials, or food prices fall below the minimum levels or when commodity producers in the production sector are unable to sell products due to a drop in prices. examples of this include government purchases and commodity interventions involving grains, oilseeds, wool, beef, pork, poultry, vegetable oils, sugar, and powdered milk, which are widely practiced in global markets (pakhomov, 2019). global experience shows that market interventions are most commonly applied in the grain segment of the food market (daoud et al., 2019). this process has been more successful in the u.s., canada, and eu member countries. however, post-soviet countries have not implemented these processes as successfully, primarily due to underdeveloped infrastructure azer gurbanzade 119 systems in those regions (charikova & chernysheva, 2019). for instance, in azerbaijan, although infrastructure systems for storing grains and other products, including storage facilities, have been established, the underdevelopment of certain technologies has led to the rapid spoilage of perishable products or higher storage costs (voronin, chupina, & voronina, 2019). similar tendencies have been observed in other post-soviet countries. russian economists o.g. charikova and i.i. chernysheva state that the effectiveness of interventions in the grain market is low due to the insufficient allocation of state budget funds (charikova & chernysheva, 2019). these inefficiencies result from untimely interventions, unrealistic auction prices, violated storage deadlines, and organizational and economic issues during the interventions (daoud et al., 2019). figure 2. percentage of grain reserves for intervention prices in various countries. source: food and agriculture organization (fao) statistical yearbook (2021). in developed countries, intervention prices play a crucial role in stabilizing the agricultural market. for example, in 1933, the united states introduced federal agricultural price support programs during the great depression, significantly increasing agricultural productivity. in countries like china, canada, and the u.s., intervention reserves are substantial, with china holding over 30% of total grain reserves, canada 35%, and the u.s. about 15% (as of recent years). these intervention measures, primarily in the grain market, are vital for stabilizing prices, supporting producers, and ensuring food security, especially in the face of market fluctuations and global competition (charikova & chernysheva, 2019). a. i. doroshuk also defends the view that the underdevelopment of infrastructure systems and inefficiencies in intervention processes contribute to these problems. he argues that especially in grain market interventions, unreasonable prolonged storage of grain products without an effective system to manage storage costs leads to significant financial burdens for the state (doroshchuk, 2016). observations suggest that, in some cases, the mispricing of the impact of the implementation of guaranteed and intervention prices on food security 120 intervention prices creates problems in the post-soviet space. the government may set the purchasing prices for grain products below market prices, resulting in lost potential profits for commodity producers (charikova & chernysheva, 2019). from these authors’ viewpoints, it can be concluded that improper price determination leads to inefficient interventions in the post-soviet space. moreover, intervention prices are not scientifically justified and often fail to meet the market's realities. these issues, such as the purchase of low-quality products for intervention reserves, are common problems in post-soviet countries (pakhomov, 2019). in terms of the realities of azerbaijan, it can be argued that discrepancies in global grain prices are directly related to the quality and price of grains (voronin, chupina, & voronina, 2019). in post-soviet countries, the volume of grain reserves is often not determined based on scientifically grounded norms. in developed countries, western nations, china, and other major grain-producing countries, the creation of intervention reserves for grain is of significant importance. for example, in china, the reserve fund accounts for more than 30% of the total grain reserves, while in canada, it is about 35%, and in the u.s., it is approximately 15% (daoud et al., 2019). in developed countries, supply and commodity interventions are widely used to stabilize food market prices and maintain stable income levels for agricultural commodity producers (kosyakin, 2009). in particular, commodity interventions are of significant importance in the export of food products, contributing to the formation of export potential for agricultural commodity producers (pakhomov, 2019). the historical aspects of agricultural market interventions show that this process spans a long period. in other words, commodity interventions play an essential role in the creation of food interventions and the establishment of government reserve funds (charikova & chernysheva, 2019). initially, interventions begin with supply (purchase) interventions, leading to the establishment of reserve funds from which interventions can be made when necessary. the primary goal of strategic food reserves is to stabilize the national market (galbraith, 1976). even in ancient times, civilizations such as rome, china, and egypt created grain reserves, which were used to maintain stable food prices. the creation of such reserves continues today in countries like russia, china, india, brazil, indonesia, canada, and malawi (food and agriculture organization [fao], 2021).global experience shows that the creation of food reserves is mainly carried out in three directions: 1. creation of strategic state reserves; 2. creation of private reserves; 3. formation of intervention funds. the creation of strategic state reserves is more widespread in world countries and is primarily implemented to address unforeseen food shortages, regularly build food reserves, and improve food security for vulnerable groups while stabilizing prices. in the process of creating private reserves, government bodies are generally not involved. private sector entities, including agricultural commodity producers, processing enterprises, and wholesale organizations, are responsible for creating private reserves. the creation of private reserves serves the following functions: 1. meeting business needs; 2. managing risks associated with future price increases; 3. ensuring the continuous supply of food; azer gurbanzade 121 4. stabilizing prices during adverse conditions, such as transportation issues, in order to compensate for potential losses. analysis shows that compared to state strategic reserves, private reserves are generally not as large in scale. in some countries, private reserves created by private sector entities can serve as an alternative to state reserves (voronin, chupina, & voronina, 2019). along with state strategic reserve funds, the creation of intervention funds, or commodity intervention funds, aims to restore balance between supply and demand in commodity markets (pakhomov, 2019). in eu countries, intervention processes are typically applied during significant price fluctuations in global markets (charikova & chernysheva, 2019). the formation of intervention funds occurs when the intervention price of a product in foreign markets falls below the set level for a certain period (daoud et al., 2019). as previously mentioned, grain and food reserves are created in developed countries such as the u.s., eu, china, and others (food and agriculture organization [fao], 2021). the norms for the placement of products in food reserves differ depending on the country’s population size, economic development level, and the potential and actual capacity of the food market (ulanov & kovaleva, 2017). in countries like the u.s. and sweden, the created food reserves can ensure the standard distribution of products for up to 5 years. the volume of grain reserves determines the stable level of food security in the world economy, corresponding to 17% of annual consumption or 60 days of grain consumption (fao, 2022). it is important to note that the process of creating intervention funds and the scope of interventions are significantly influenced by global market changes. recently, not only economic factors but also political and military factors, such as the russia-ukraine war, have had a profound impact on food reserves and global food market fluctuations (food and agriculture organization [fao], 2014). in particular, the role of russia and ukraine as major grain exporters has further complicated the situation. as a result, there has been a decline in global grain reserves (daoud et al., 2019). the depletion of government intervention reserves is directly related to the reduction in the volume of food reserves. this process is affected by wars, escalating political tensions, global climate change, and other factors (ulanov & kovaleva, 2017). the unfavorable agricultural climate and crises such as the covid-19 pandemic and the russia-ukraine war have led to a decrease in the reserves of many developed countries, resulting in price increases. according to the food and agriculture organization (fao), the global food price index was 159.17% in 2022, up from 125.17% in 2021 and 98.11% in 2020 (fao, 2022). the preservation of global food reserves is crucial for handling emergency situations. in this regard, increasing agricultural productivity, modernizing the sector, and other such measures in developing countries can play a vital role in stabilizing the situation and securing global support (daoud et al., 2019). 4. conclusions supply and intervention prices play a crucial role in improving food security, particularly in countries facing significant challenges in this area. developing nations are more prone to food insecurity due to factors such as limited resources, unstable markets, and vulnerability to global price fluctuations. the establishment of supply and intervention funds serves as a vital strategy for mitigating these risks. by stabilizing market prices, supply and intervention prices protect agricultural producers from volatility, ensuring consistent income the impact of the implementation of guaranteed and intervention prices on food security 122 levels and promoting the sustainable production of food. these interventions also help in controlling inflationary price increases, which can make food unaffordable for low-income populations. furthermore, ensuring consumers’ access to affordable and nutritious food contributes directly to enhancing food security, which is essential for social stability and economic growth. the implementation of these measures also strengthens the resilience of the agricultural sector, enabling it to better cope with environmental and economic shocks, such as climate change and geopolitical tensions. in conclusion, supply and intervention prices not only stabilize the market but also ensure that food security policies are effective in meeting the needs of both producers and consumers, thereby contributing to a more resilient and equitable global food system. references 1. charikova, o. g., & chernysheva, i. i. (2019). эффективность товарно-закупочных интервенций на зерновом рынке. управление инновационным развитием агропродовольственных систем на национальном и региональном уровнях [efficiency of commodity purchase interventions in the grain market. managing agrifood systems innovation at national and regional levels], 203-206. 2. daoud, a., reinsberg, b., kentikelenis, a. e., stubbs, t. h., & king, l. p. (2019). the international monetary fund's interventions in food and agriculture: an analysis of loans and conditions. food policy, 83, 204-218. https://doi.org/10.1016/ j.foodpol.2019.01.005 3. dolan, r. d., & simon, g. (2005). эффективное ценообразование [efficient pricing] (part 1,3). m.: издательство «экзамен» [exam publishing house]. 4. doroshchuk, a. i. (2016). государственные интервенции на рынке зерна: проблемы бюджетных расходов и эффективности регулирования рынка [state interventions in the grain market: problems of budget expenditures and the effectiveness of market regulation]. вестник апк ставрополья [bulletin of the agro-industrial complex of the stavropol territory], 2(22), 267-272. 5. fao. (2022). индекс продовольственных цен фао снижается шестой месяц подряд [fao food price index declines for sixth consecutive month]. retrieved from https://www.fao.org/worldfoodsituation/foodpricesindex/ru 6. food and agriculture organization (fao). (2014). запасы продовольствия и волатильность цен [food stocks and price volatility]. retrieved from http://www.fao.org/3/mk895r/mk895r.pdf. 7. food and agriculture organization (fao). (2021). положение с продовольствием в мире [world food situation]. retrieved from http://www.fao.org/ worldfoodsituation/csdb/ru/. 8. galbraith, j. k. (1976). экономические теории и цели общества [economics and the public purpose]. m.: прогресс. 9. kosyakin, a. s. (2009). зерновые интервенции: «старый новый» механизм. этап: экономическая теория, анализ, практика, [grain interventions: the "old new" mechanism. stage: economic theory, analysis, practice] 1, 74-77. https://www.fao.org/worldfoodsituation/foodpricesindex/ru http://www.fao.org/3/mk895r/mk895r.pdf http://www.fao.org/%20worldfoodsituation/csdb/ru/ http://www.fao.org/%20worldfoodsituation/csdb/ru/ azer gurbanzade 123 10. pakhomov, a. a. (2019). товарная интервенция как механизм защиты сельскохозяйственных товаропроизводителей и обеспечения продовольственной безопасности региона. известия двфу [commodity intervention as a mechanism for protecting agricultural producers and ensuring food security in the region. fefu news]. экономика и управление [economics and management], 3, 55-66. 11. stiglitz, j. e. (1997). экономика государственного сектора (пер. с англ.) [public sector economics]. м.: изд-во мгу; инфра-м. 12. tsakhaev, g. r. (2013). ценообразование на продукцию апк как инструмент регулирования продовольственного рынка. региональные проблемы преобразования экономики [pricing of agricultural products as a tool for regulating the food market. regional problems of economic transformation], 4, 209-213, p. 211. 13. ulanov, v. l., & kovaleva, a. i. (2017). влияние потенциала государственного материального резерва на национальную экономику [the impact of the potential of the state material reserve on the national economy]. эко, 47(10), 124-139. 14. voronin, b. a., chupina, i. p., & voronina, y. v. (2019). государственная закупка сельскохозяйственной продукции: опыт зарубежных стран и россии [public procurement of agricultural products: the experience of foreign countries and russia]. аграрный вестник урела [agrarian bulletin of urela], 5(184), 77-81. 15. методические рекомендации по формированию закупочных цен и делению валового дохода на ренту, прибыль и фонд оплаты труда: в 2 ч. [methodical recommendations for the formation of purchase prices and the division of gross income into rent, profit and payroll] (1995). ч. 1. мн. agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 18, no. 1 (2024), pp. 210-222 210 digital culture as a competitive advantage in the sustainable development of organizations v. serafimova, v. vasilev vesela serafimova1, valentin vasilev2 1 south-west university „neofit rilski”, blagoevgrad, bulgaria https://orcid.org/0000-0001-9587-586x, e-mail: serafimova2016@abv.bg 2 higher school of security and economics, plovdiv, bulgaria https://orcid.org/0000-0002-0074-9578, e-mail: valyopen@abv.bg abstract: the article explores the concept of digital culture as a key component for organizations seeking sustainable development and competitive advantage in today's rapidly evolving business landscape. it delves into how embracing a digital culture within an organization can lead to enhanced efficiency, innovation, and overall performance. by fostering a culture that values digital skills, collaboration, and adaptability, companies are better equipped to navigate challenges and leverage opportunities in the digital age. there's no denying that there has been a noticeable increase in interest in recent years for solutions that support the sustainable development of organizations. in such a context, a key factor for increasing the efficiency of these processes is effective change management and its detailed knowledge. the management of human resources is affected by these management relationships, which guide it toward the strategic prioritizing of particular areas. however, given the evolving importance of technology and all of its associated aspects and activities, it is necessary to concentrate on identifying a new management paradigm, or digital culture. this is where we should also include the tendency, the primary driving force behind the changes, to be expressed in the understanding that increases in an organization's effectiveness have a direct connection to the human factor, and from there to innovative practices, talent management, motivational policies, and other aspects of personnel management. therefore, in the search for sustainable development policies, human resources should be considered as organizational capital. keywords: sustainable development; digital culture; changes; human resources management. introduction in today's rapidly evolving business landscape, the quest for operational efficiency and sustainable growth is a top priority for organizations across industries. one key factor that plays a critical role in enhancing efficiency is effective change management and the profound understanding of its intricacies. the management of human resources is intricately intertwined with these dynamic change processes, steering it towards strategically prioritizing specific areas to drive organizational success. https://orcid.org/0000-0001-9587-586x mailto:serafimova2016@abv.bg https://orcid.org/0000-0002-0074-9578 mailto:valyopen@abv.bg vesela serafimova, valentin vasilev 211 however, amidst the ever-increasing significance of technology and its multifaceted aspects, there arises a pressing need to shift focus towards identifying a new management paradigm – one that encapsulates the essence of digital culture. this paradigm shift, which has unfolded over the past decade, resonates deeply within both the commercial and public service sectors, shaping their operational landscapes. consequently, in the pursuit of sustainable development frameworks, human resources emerge as invaluable organizational capital, propelling entities towards enduring growth and prosperity. the present study delves into these intricate relationships, offering unique perspectives on leveraging digital culture as a strategic advantage to bolster organizational effectiveness and pave the path towards sustainable growth. the main research objective of the study is to explore the potential for bulgarian organizations operating in the healthcare, education, hospitality and catering, finance, and insurance sectors to develop and foster a digital culture. this research aims to examine how building a digital culture within these organizations can lead to increased sustainability of their competitiveness and serve as a crucial competitive advantage in today's business environment. i. digital culture as a competitive advantage investments are a key factor for the different phases of the economic cycle. it is really important they to be directed to innovative projects that provide high added value. for many companies from various sectors, digitalization is moving from a state of „nice to have“ to a „must have“ (caldwel & krishna, 2020). companies are investing in digital transformation in order to be able to innovate faster, keep pace with technological and industry changes, and increase their resilience (gurumurthy et al., 2021). digital transformation should be a major pillar in the strategies of mature companies. “digitalization is assessed as a factor contributing to the sustainable growth of business entities” (akhundzada, n. & rzayeva, 2023). digitalization plays a crucial role in the sustainable growth of business entities by integrating digital technologies into various aspects of operations, enhancing efficiency, and promoting environmental responsibility. digital tools streamline processes, reducing the time and resources needed to complete tasks. this can include automation of repetitive tasks, better resource management, and improved supply chain logistics. digitalization enables better monitoring and management of energy usage and resource consumption. digital platforms facilitate better communication and collaboration among employees, partners, and customers. this can lead to more innovative solutions and faster problem-solving, driving sustainable growth. access to real-time data and advanced analytics enables businesses to make informed decisions that enhance sustainability. predictive analytics can forecast demand, optimize inventory, and reduce overproduction. digital tools aid in designing and manufacturing products with sustainability in mind. technologies like 3d printing allow for more efficient prototyping and production, minimizing material waste. digital channels provide businesses with new ways to engage with customers, gather feedback, and tailor offerings to meet customer needs. satisfied customers are more likely to be loyal and contribute to long-term business success. digital tools facilitate the tracking and reporting of sustainability metrics, enhancing transparency and accountability. this can improve a company's reputation and meet regulatory requirements. embracing digital digital culture as a competitive advantage in the sustainable development of organizations 212 technologies can drive innovation, allowing businesses to stay competitive in a rapidly changing market. sustainable innovation can open new markets and attract environmentally conscious consumers. digitalization is a powerful enabler of sustainable growth for business entities. by leveraging digital technologies, businesses can improve efficiency, reduce environmental impact, and create long-term value for stakeholders. digital technologies (from email, file sharing, mobile phones, online gaming, ecommerce, gps systems) are becoming commonplace and part of our social and personal lives (broeckman & jaimes, 2015). organizational culture refers to the collective beliefs, values, attitudes, and behaviors that shape the way individuals within an organization interact and work together. organizational culture plays a significant role in shaping employee behavior, decision-making processes, communication styles, and the overall performance of the organization. digital culture is an expression of norms, values and expected ways of going things due to ever-increasing computerization and digitalization of society (deuze, 2006, p. 65). a positive organizational culture can foster collaboration, innovation, and employee satisfaction, while a negative culture can lead to conflicts, low morale, and decreased productivity. cultivating a strong and healthy organizational culture is essential for creating a positive work environment and achieving organizational success. digital culture encompasses the various ways in which individuals interact with digital media and technologies on a day-to-day basis (sadiku et al., 2017). i.1. digital culture of organizations digital culture, which includes values, norms, and practices related to technology and digitization, usually stems from external trends and influences such as technological developments, industry trends, and consumer behavior (junaedi et al., 2024, p. 455). cultural characteristics include perceptions and attitudes about the organization's operations, risktaking and innovation, awareness and public presence (hadjitchoneva, 2022, p. 56). digital culture for organizations refers to the collective mindset, behaviors, and practices that prioritize the integration of digital technologies and tools into every aspect of the business. the digital culture that develops in the external environment can have a major impact on company performance (junaedi et al., 2024, p. 455). digital culture encourages innovation by fostering a mindset of continuous improvement and experimentation. it promotes the idea that new technologies and approaches can drive business growth and success. organizational culture refers to a set of shared values and beliefs that guide individuals in understanding how the organization operates and establish norms of behavior within the company (arefin et al., 2015). organizations with a strong digital culture are adaptable and flexible in the face of change. they embrace new technologies and ways of working to stay relevant and competitive in a rapidly evolving digital landscape. companies that are able to adopt a digital culture that suits their external environment and integrate it with their operations and business strategy can gain a competitive advantage (junaedi et al., 2024, p. 455). measurement of digital culture uses the dimensions of organizational culture (arefin et al., 2015), digital transformation (nguyen & hoai, 2022), human capabilities, and innovation capabilities as a novelty. a digital culture places a strong focus on understanding vesela serafimova, valentin vasilev 213 and meeting customer needs effectively. by using digital technologies to gather customer insights and personalize interactions, organizations can deliver better customer experiences and build long-lasting relationships. digital culture refers to mindsets, behaviors, and practices related to the use of digital technology in everyday life (junaedi et al., 2024, p. 456). this culture promotes a data-driven approach to decision-making. organizations leverage data analytics and insights to make informed decisions, optimize processes, and drive business outcomes. the leading challenge faced by global management of human resources is the motivation of people to get involved with desire and curiosity in this new stage of human development. (vasilev & ognyanski, 2020, p.91). overall, digital culture empowers organizations to harness the potential of technology to drive growth, improve efficiency, and create value for stakeholders. by embracing a digital culture, organizations can stay ahead of the curve and thrive in today's increasingly digital world. digital culture values employee empowerment, learning, and development. it encourages employees to embrace digital tools, upskill themselves, and contribute to the organization's digital transformation efforts. this culture reflects the social transformation brought about by advances in information and communication technology, especially the internet and mobile devices (junaedi et al., 2024, p. 456). overall, digital culture empowers organizations to harness the potential of technology to drive growth, improve efficiency, and create value for stakeholders. by embracing a digital culture, organizations can stay ahead of the curve and thrive in today's increasingly digital world. digitalization is a phenomenon that binds all things through technological innovations that cover the processes and phenomena (hadjieva, 2021, p. 139). digitalization and digital transformation have a variety of definitions and dimensions. gartner (2018) defines digitalization as „the use of digital technologies to change a business model and provide new revenue and value-producing opportunities; it is the process of moving to a digital business”. digital culture values employee empowerment, learning, and development. it encourages employees to embrace digital tools, upskill themselves, and contribute to the organization's digital transformation efforts. this culture reflects the social transformation brought about by advances in information and communication technology, especially the internet and mobile devices (junaedi et al., 2024, p. 456). the areas in which enterprises benefit from participation in digital transformation are as follows: innovativeness, efficiency and process optimization, access to a wider market and et. the effects of digitization are visible not only at the level of processes, but also management. as a company wants to benefit from digital transformation, it must first diagnose which areas have the potential for implementing new solutions. digitization, which involves transforming analog data into digital datasets, represents the utilization of digital resources (astuti & augustine, 2022). entering modern technologies is a strategic decision that must result from far-reaching plans for production planning, but also the choice of markets, customer segments, sales policies, logistics partners and distribution networks. there is potential for change in all of these areas, but decisions must be wellthought-out, and in particular, comprehensive and integrated, embracing the company’s overall policy, in pursuit of the strategic vision. digital culture as a competitive advantage in the sustainable development of organizations 214 digital culture refers to the attitudes, behaviors, beliefs, and practices that shape how individuals, organizations, and societies interact with and adapt to digital technologies. digital culture also includes the values and norms that guide how people engage with digital tools, platforms, and content. overall, digital culture reflects the evolving relationship between people and technology in an increasingly connected and technology-driven world. i.2. competitive advantages for the sustainable development there is an ongoing debate about the „entity” of competitiveness (shafaei, 2009). competitiveness as an economic category represents the ability and performance of a firm, sub-sector or country to sell and supply goods and services in a given market, in relation to the ability and performance of other firms, sub-sectors or countries in the same market. research methods can be descriptive research, exploratory research and or explanatory research (sakyi et al., 2020). competitiveness can be captured and measured by several aspects at micro, mezzo, and macro levels (balogh & jambor, 2017, p. 2076). l. hardy, i. m. lifits and others are proponents of traditional methods of assessing competitiveness based on the quality of production (woodman & hardy, 2003). however, these methods should be combined with others to achieve a more accurate assessment of the competitiveness of an enterprise. to date, various methods have been employed to investigate the theory of comparative advantage, and they provide the basis for this analysis (balogh & jambor, 2017, p. 2078). competitive advantages provide organizations with a unique edge over their competitors, enabling them to outperform rivals and achieve sustainable success in the marketplace. competitive advantages allow organizations to differentiate themselves from competitors by offering unique products, services, or value propositions. this differentiation can help attract customers who are looking for something distinctive and valuable. both csr and sustainability address the responsible and sustainable use of resources while considering social, ecological, and economic dimensions of business practice. to increase sustainability and satisfy the demand for energy, countries should develop and utilize renewable resources as well as efficiently use energy sources (gigauri & vasilev, 2022, p. 267). by leveraging competitive advantages, organizations can capture a larger share of the market. they can win over customers from competitors and expand their customer base, driving growth and profitability. organizations with competitive advantages can build strong relationships with customers based on trust, quality, and reliability. this leads to increased customer loyalty and repeat business, reducing the risk of losing customers to competitors. competitive advantages enable organizations to charge premium prices for their products or services, leading to higher profit margins. they can also operate more efficiently and effectively, reducing costs and improving overall profitability. having competitive advantages fosters a culture of innovation within organizations. they are encouraged to continuously improve products, processes, and services to maintain their edge over competitors and stay ahead of market trends. strong competitive advantages create barriers to entry for new competitors trying to enter the market. this protects organizations from potential threats and gives them a more secure position in the industry. overall, competitive vesela serafimova, valentin vasilev 215 advantages benefit organizations by helping them stand out in the market, attract and retain customers, drive growth and profitability, foster innovation, and protect their market position from competitors. by leveraging their competitive advantages effectively, organizations can achieve long-term success and sustainability in today's competitive business environment. figure 1 digital culture as a competitive advantage source: author's systematization competitive advantage refers to the advantage gained by a company that surpasses its competitors within the same industry. this advantage is achieved through the implementation of innovative ideas that allow the company to provide high-quality goods or services, competitive pricing, and ultimately increase shareholder wealth. sustainable competitive advantage can be applied to a company, country, or individual. cost advantage, differentiation advantage, and comparative advantage are the three main types of competitive advantage. competitive advantage enables an organization to create greater value for itself and its shareholders rapidly. by outperforming competitors, a company can secure a stronger market position, increase market share, and enhance profitability, leading to long-term success. achieving a sustainable competitive advantage, applicable to companies, countries, or individuals, involves leveraging cost advantage, differentiation advantage, and comparative advantage. this strategic edge enables organizations to create significant value for themselves and their shareholders, securing a stronger market position, increasing market share, and enhancing profitability, ultimately leading to long-term success. ii. methodology the methodology clarifies the main stages for assessing the digital culture as a competitive advantage and aims to reveal its reserves, as well as to formulate guidelines for its future development. high skilled workforce gaining exclusive access to new technologies offering unique products or services recognition of brand image gaining exclusive access to proprietary technologies cost leadership strategy digital culture digital culture as a competitive advantage in the sustainable development of organizations 216 figure 2 stages for determining the competitive potential through digital culture source: author's systematization it can be seen from figure 1 that after determining the values of the selected indicators and calculating the ranking scores, the overall competitiveness score is calculated, the competitive advantages are identified and it is proceeded to the selection of a strategy for the development of digital culture. weighting factors can be determined: by expert judgment; by studying the opinions of the managers surveyed; or as a result of empirical research. the summative assessment of the competitive potential is determined as the sum of the scores by individual indicators weighted by factors of significance. the key stages for assessing digital culture as a competitive advantage are generally the following: gathering the information needed to assess a competitive advantage; determining indicator and indicator values; scoring the indicators; determining weighting factors; and assessing indicator values. in cases where the competitive potential to increase the competitiveness is assessed, the following formula is applied to determine its relative position to another (velev, 2004, p. 105): 𝐵𝑂𝑖𝑘 = 6𝑥 (𝑆𝑇𝑖𝑘−𝑆𝑇𝑖𝑚𝑖𝑛) (𝑆𝑇𝑖𝑚𝑎𝑥−𝑆𝑇𝑖𝑚𝑖𝑛) + 1 (1) where: bоik – score of the i-th indicator for the k-th producer; sтik – the value of the i-th indicator for the k-th enterprise; sтimax and sтimin – the maximum and respectively the minimum amount (value) of the ith indicator for the entire aggregate of analysed producer. vesela serafimova, valentin vasilev 217 the main research thesis is to study the possibilities of bulgarian organizations in the field of healthcare, education, hospitality and catering, finance and insurance, to build a digital culture to increase the sustainability of their competitiveness and as an important competitive advantage. 118 bulgarian companies from the fields of healthcare, education, hospitality and catering, finance and insurance were studied. half of the companies are from the southwest region. the survey was conducted in the period november 2023 march 2024. the questionnaire consists of 25 questions, divided into 4 main subtopics: general characteristics; the relationship between digital culture and leadership in the company; investing in individual and company knowledge and innovation; and the sustainable competitiveness of the company. the research object is the digital culture within bulgarian organizations in the fields of healthcare, education, hospitality and catering, finance, and insurance. the research subject is the potential for building a digital culture in these bulgarian organizations to enhance the sustainability of their competitiveness, examining how digital culture can serve as an important competitive advantage. this analysis focused on identifying the existing digital practices and the potential for cultivating a robust digital culture within these sectors. the selected companies were evaluated on various dimensions, including leadership's role in promoting digital initiatives, the extent of investment in digital tools and training, and the overall impact of these practices on organizational performance and market positioning. this detailed investigation provided valuable insights into the current state and future possibilities of digital transformation in the bulgarian context. the survey was conducted mainly among four types of organizations in different fields, such as healthcare (14%), education (27%), hospitality and restaurant business (33%) and finance and insurance (26%). figure 3 types of organizations studied source: author's systematization to an extremely large extent, the researched organizations for micro(23%), small (37%) and medium-sized enterprises (36%), and only 4% are the large organizations that took part in the research. in relation to the market in which activity have been carried out, 65% are national organizations, 26% operate in the regional market and only 9% operate in the international market. a vast part of the investigated organizations have a duration of work between 10 and 25 years (51%), with a duration of 25 years there are 26% and relatively fewer organizations with a duration of work under 2 years (only 3%) and between 2 and 9 years (20%). 14% 27% 33% 26% healthcare education hospitality and restaurant business finance and insurance digital culture as a competitive advantage in the sustainable development of organizations 218 iii. results in order to establish the relationship between digital culture and leadership in organizations, specific questions have been asked. it is noteworthy that a large part of the surveyed individuals (74%) answered that regularly share the leader's vision for digital transformation with the entire team in the organization, i.e. managers often discuss with their employees the possibilities for development in the direction of digitalization in certain activities of the organizations. figure 4 the relationship between digital culture and leadership in the company source: author's systematization approximately 71% of the surveyed individuals have the opportunity to participate actively in the development and implementation of digital initiatives, which means that the leaders in most of the investigated companies are aware of how important the staff is as being part of the implementation of innovations. companies are beginning to try to react quickly and undertake strategies to anticipate or adapt to digital changes and to implement digital transformations (genov & hadjichoneva, 2021) to upgrade their operating models and improve outdated ways of working and cumbersome processes. new businesses are emerging that are „digital native“ (prensky, 2001; perkin & abraham, 2017), distinguished by speed of reaction, focus and flexibility to changes in the business environment. the results of the conducted research also show that innovative ideas for digital projects are encouraged extremely often, and when there is a mistake during the process, it is used as 60% 62% 64% 66% 68% 70% 72% 74% 76% 78% our leaders regularly share the vision of digital transformation with the entire team. i have the opportunity to actively participate in the development and implementation of digital initiatives. in our company, innovative ideas for digital projects are always welcome and encouraged. when there are mistakes in digital projects, they are used as an opportunity for learning and improvement. we are stimulated through recognition, rewards, or other forms of motivation for contributing to innovation. there are strict procedures that i must follow for using digital tools and systems in our company. the company uses a system of rewards and penalties to ensure adherence to digital procedures and rules. 74% 71% 77% 72% 68% 70% 66% vesela serafimova, valentin vasilev 219 an opportunity to learn and improve. in this regard, the business's ability to intelligently use internal and external information resources becomes its new competitive advantage, in order to ensure greater user satisfaction. referring to processes of implementing innovations, employee motivation is undoubtedly important, and very often companies encourage staff through recognition, awards or other forms of motivation for contributing to innovation. the company uses a system of rewards and penalties to ensure adherence to digital procedures and rules. innovations are largely effective when strict procedures are followed for using digital tools and systems. the work with digital tools is subject to regular monitoring and evaluation by superiors. to a significant extent, organizations in bulgaria are aware that investing in individual and company knowledge and innovation is a key factor for success. in this regard, more than 75% of respondents have seen serious investments in the development of employees' digital skills, such as the use of collaborative platforms, smartphones, online communications with customers, use of company software and data analysis. many companies invest in company knowledge to improve business processes, such as enhanced web presence, crm for customer relationship management, erp for business function management, e-commerce, digital marketing tools social networks, email marketing, seo, ppc, and others. however, not all companies have the opportunity to balance investments between the development of company knowledge and the individual knowledge and skills of employees. to a considerable extent, bulgarian organizations direct their investments to innovations in products and services, in marketing and business models. in terms of sustainable competitiveness, most companies seek to understand their customers' needs to a greater extent than their competitors. in this way, they could respond more precisely and quickly to the needs of users. (stefanova et al., 2023). nowadays companies aspire to offer products and services that provide greater value for money or are difficult to imitate, resulting in a greater number of satisfied customers compared to competitors. effective cost management is also a competitive advantage. other competitive advantages that modern bulgarian companies strive for is to adopt new digital technologies more quickly and to adapt themselves to market changes. embracing new digital technologies and staying agile in response to market changes are crucial for modern bulgarian companies to remain competitive. by being quick to adopt innovative technologies, businesses can streamline operations, enhance efficiency, improve customer experiences, and gain a competitive edge. additionally, the ability to adapt rapidly to changing market dynamics allows companies to seize new opportunities, address emerging challenges, and stay ahead of the competition. overall, a proactive approach to digital transformation and market responsiveness can help bulgarian companies thrive in today's fastpaced business environment. https://www.scopus.com/authid/detail.uri?authorid=58533458500 digital culture as a competitive advantage in the sustainable development of organizations 220 figure 5 the sustainable competitiveness of the company source: author's systematization offering high quality products and services is also a key factor and an important competitive advantage. competitive advantage in business is not something that can be vested. rather it can only be earned through the hard work, dedication, and ethical performance of an organization. it does not come easy, and an organization might need to dedicate years and sometimes decades to earning this advantage over its arch rivals belonging to the same industry. the key to earning it is excellent and ethical performance, and one cannot earn the same through degrading or defaming rival companies operating in the same domain. conclusions sustainable competitive advantage can be applied to a company, country, or individual. it is mainly of three typescomparative advantage, cost advantage, and differentiation advantage. the strategies with which an organization can earn are: information advantage; cost leadership strategy; adaptability; differentiation strategy; operational effectiveness strategy; technology-based competitive advantage; and innovative strategy. in conclusion, this study underscores the paramount importance of digital culture as a transformative force that holds the key to enhancing firm performance in today's dynamic business environment. the findings highlight that digital culture not only significantly boosts firm performance but also acts as a vital moderator in amplifying the impact on organizational 66% 68% 70% 72% 74% 76% 78% 80% 82% 84% our company has a better understanding of customer needs compared to our competitors. we offer products/services that provide greater value for money and are difficult to imitate, resulting in a higher number of satisfied… we manage costs more effectively than our competitors. compared to competitors, we are faster to adopt new digital technologies and to adapt to market changes. our products/services are of higher quality compared to those of competitors. the digital culture of our company is developed and focused on the needs of customers and partners, the development of employee skills, and innovations… 83% 73% 75% 72% 84% 78% vesela serafimova, valentin vasilev 221 success. remarkably, it is evident that digital culture exerts the most potent influence on firm performance, reshaping the operational landscape of organizations. from a practical standpoint embracing digital culture as a competitive advantage emerges as a strategic imperative for organizations seeking to elevate their performance levels. by harnessing the power of digital culture, firms can drive improvements in performance through direct influence as well as through fruitful interactions across various facets of their operations. this underscores the pivotal role that digital culture plays in propelling firms towards sustained success and growth in an increasingly digitized world. the insights generated by this study serve as a clarion call for organizations to prioritize the cultivation of a robust digital culture to unlock their full potential and thrive in the digital age. the article presents an important perspective on the role of digital culture in shaping organizational success and sustainability. researching provides insights into how organizations can leverage digital technologies and a digital mindset to drive innovation, efficiency, and growth. the focus on sustainable development underscores the long-term benefits of nurturing a digital culture that promotes resilience and adaptability. organizations can use the results of this article to assess their current digital culture and identify areas for improvement. implementing strategies to enhance digital literacy, foster a collaborative work environment, and embrace digital transformation can lead to tangible business outcomes and sustainable growth. by aligning digital culture with organizational goals and values, companies can better position themselves for success in a competitive marketplace. the survey methodology used have limitations in terms of sample size and representativeness. the study not capture the full complexity of digital culture within different types of organizations and industries. overall, the article on digital culture as a competitive advantage in sustainable development provides a valuable starting point for further research and practical application in the field. conducting longitudinal studies to track the impact of digital culture on organizational performance over time could yield valuable insights. references 1. akhundzada, n. & rzayeva, (2023). the implementation of digital channels in business processes and access to finance for msmes in azerbaijan. agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijesissn 2067-3310, e-issn 2067-7669vol. 17, 2(2023), pp. 1-9 2. arefin, md & hoque, md & bao, yukun. (2015). the impact of business intelligence on organization's effectiveness: an empirical study article information: for authors. journal of systems and information technology, issn: 1328-7265, emerald group publishing limited. 17. 263-285. 3. balogh, jeremiás & jambor, attila. (2017). the global competitiveness of european wine producers. british food journal. 119. 00-00. 10.1108/bfj-12-2016-0609. 4. broeckman, a. & a. jaimes. (2015) digital culture, art, and technology, ieee multimedia, pp. 9-11. 5. deuze, m. (2006) participation, remediation, bricolage: considering principal components of a digital culture, the information society, vol. 22, no. 2, pp. 63-75. 6. fahmi, tubagus & tjakraatmadja, jann & ginting, henndy. (2020). digital talent capability model for transforming technology-based holding companies. the asian journal of technology management (ajtm). 13. 190-201. 10.12695/ajtm.2020.13.3.1. digital culture as a competitive advantage in the sustainable development of organizations 222 7. gigauri, i., vasilev, v. (2022). corporate social responsibility in the energy sector: towards sustainability. in: khan, s.a.r., panait, m., puime guillen, f., raimi, l. (eds) energy transition. industrial ecology. springer, singapore. https://doi.org/10.1007/978-981-19-3540-4_10 8. gurumurthy, r. & nanda, r. & schatsky, d. (2021) putting digital at the heart of strategy: when everybody is digital, strategy is the differentiator, https://www2.deloitte.com/us/en/ insights/topics/digital-transformation/digital-acceleration-in-a-changing-world.html [reviewed on 04/05/2024] 9. hadjichoneva, yu. (2022). entrepreneurship, innovation and artificial intelligence in bulgaria & dynamics and management. sofia: unss. https://www.igi-global.com/gateway/chapter/325452#pnlrecommendationform 10. junaedi, achmad & renaldo, nicholas & yovita, indri & veronica, kristy & jahrizal,. (2024). digital culture revolution in improving firm performance in indonesia. journal of system and management sciences. 14. 452-470. 10.33168/jsms.2024.0126. 11. legner, christine & eymann, torsten & hess, thomas & matt, christian & böhmann, tilo & drews, paul & maedche, alexander & urbach, nils & ahlemann, frederik. (2017). digitalization: opportunity and challenge for the business and information systems engineering community. business & information systems engineering. 59. 301-308. 10.1007/s12599-017-0484-2. 12. n, nayana & kumari, suchetha & prabhu, suchitra. (2023). a comparative analytical study of krishna musali choorna and krishna musali kshara. international journal of ayurveda and pharma research. 6-11. 10.47070/ijapr.v11i11.3013. 13. nguyen, n. p., & hoai, t. t. (2022). the impacts of digital transformation on data-based ethical decision-making and environmental performance in vietnamese manufacturing firms: the moderating role of organizational mindfulness. cogent business and management, 9(2101315), 1-20. https://doi.org/10.1080/23311975.2022.2101315 14. sadiku, matthew & tembely, mahamadou & musa, sarhan & momoh, omonowo. (2017). digital culture. international journal of advanced research in computer science and software engineering. 7. 33-34. 10.23956/ijarcsse/v7i6/01613. 15. sakyi, kwesi & musona, david & mweshi, geoffrey. (2020). research methods and methodology. advances in social sciences research journal. 7. 296-302. 10.14738/assrj.73.7993. 16. shafaei, rasoul & shahriari, hamid & moradi, morteza. (2009). investigation of leather industry competitiveness in iran. journal of fashion marketing and management. 13. 343-357. 10.1108/13612020910974483. 17. stefanova, d.p., vasilev, v.p., efremovski, i.p. (2023). re-innovative organizational design: sustainable branding and effective communication applied models in a world with new borders/without borders;; book chapter: handbook of research on achieving sustainable development goals with sustainable marketing, pp. 112–127; doi: 10.4018/978-1-6684-86818.ch006; 18. vassileva-hadjitchoneva, juliana & genov, galin. (2021). digital transformation of businesses: the impact of covid-19. 19. vasilev, v. & ognyanski, d. (2020). the new face of public management – about the “smart city” and its impact on the future development of society; knowledge international journal, 42(1), 91–93. retrieved from https://ikm.mk/ojs/index.php/kij/article/view/540 20. velev, m. (2004). assessment and analysis of company competitiveness, publ. softtrade, s., p. 105 21. woodman, tim & hardy, lew. (2003). the relative impact of cognitive anxiety and self-confidence upon sport performance: a meta-analysis. journal of sports sciences. 21. 443-57. 10.1080/0264041031000101809. https://doi.org/10.1007/978-981-19-3540-4_10 https://www2.deloitte.com/us/en/%20insights/topics/digital-transformation/digital-acceleration-in-a-changing-world.html https://www2.deloitte.com/us/en/%20insights/topics/digital-transformation/digital-acceleration-in-a-changing-world.html https://www.igi-global.com/gateway/chapter/325452#pnlrecommendationform https://doi.org/10.1080/23311975.2022.2101315 https://www.scopus.com/authid/detail.uri?authorid=58533458500 https://www.scopus.com/authid/detail.uri?authorid=58533458600 https://www.scopus.com/authid/detail.uri?authorid=58533537900 https://ikm.mk/ojs/index.php/kij/article/view/540 agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 18, no. 2 (2024), pp. 334-343 334 the differences between people under the age of 60 and over the age of 60 in covid-19 vaccination rates and vaccine brand perception d. tomše, r. strašek, j. toroš denis tomše¹, rok strašek², jani toroš³ ¹ b2 ljubljana school of business, slovenia https://orcid.org/0000-0001-6702-2018, e-mail: denis.tomse1@gmail.com ² university of primorska, slovenia https://orcid.org/0000-0003-2616-7151, e-mail: rok.strasek@upr.si ³ b2 – gea college, slovenia https://orcid.org/0000-0003-0896-9804, e-mail: jani.ivan.toros@gmail.com abstract: this article deals with differences in users’ perception towards covid-19 vaccination and towards individual covid-19 vaccine brands. since covid-19 is much more dangerous to the elderly population, this article deals with differences between those under the age of 60 and those over the age of 60. the results show that there are some differences between those two groups. for the group of people under the age of 60, the duration of protection is more important (39%), while the brand of vaccine is less important (25%). in contrast, the vaccine brand is of much greater importance (34%) and the duration of protection less important (25%) for the group of people over the age of 60. the study also showed differences in relation to individual brands of covid-19 vaccines, with both groups preferring pfizer to other brands, which is not surprising, since there was the least amount of negative media coverage about pfizer, especially compared to astrazeneca. the vaccine brand is surprisingly more important to those over the age of 60 than to those under the age of 60, while the effectiveness of the vaccine is equally important for both groups and both groups are equally sensitive to duration and side effects of the vaccine. keywords: covid-19, vaccination, perception introduction coronavirus disease 2019 (“covid – 19,” 2022), also known as the coronavirus, or covid, is a contagious disease caused by the severe acute respiratory syndrome coronavirus 2 (sars-cov-2). most people (81%) develop mild to moderate symptoms (up to mild pneumonia), while 14% develop severe symptoms (dyspnoea, hypoxia, or more than 50%-lung involvement on imaging). 5% suffer critical symptoms (respiratory failure, shock, or multiorgan dysfunction) (“covid – 19,” 2022). more than 704 million cases were confirmed from december 2019 until april 2024 and 7.01 million people died because of the disease, which brings us to 0,99 % mortality (“mortality risk of covid-19,” 2024). in slovenia, there have been as at 11 april 2024 a total of 1.356.546 confirmed cases of covid-19, and 7,100 deaths were caused by the disease, which means a 0,52 % mortality (“slovenia covid coronavirus statistics,” 2024). within less than a year of the pandemic’s outbreak, several successful vaccines have already been announced and approved for use (“coronavirus (covid-19) vaccinations,” 2024). in slovenia pfizer, astrazeneca, moderna, and johnson & johnson (janssen) vaccines have been approved and used. 59,8% of population in slovenia https://orcid.org/0000-0001-6702-2018 mailto:denis.tomse1@gmail.com https://orcid.org/0000-0003-2616-7151 mailto:rok.strasek@upr.si https://orcid.org/0000-0003-0896-9804 mailto:jani.ivan.toros@gmail.com https://en.wikipedia.org/wiki/contagious_disease https://en.wikipedia.org/wiki/severe_acute_respiratory_syndrome_coronavirus_2 https://en.wikipedia.org/wiki/severe_acute_respiratory_syndrome_coronavirus_2 https://en.wikipedia.org/wiki/pneumonia https://en.wikipedia.org/wiki/dyspnea https://en.wikipedia.org/wiki/hypoxia_(medical) https://en.wikipedia.org/wiki/respiratory_failure file:///c:/users/dtomse/appdata/roaming/microsoft/word/shock file:///c:/users/dtomse/appdata/roaming/microsoft/word/multiorgan%20dysfunction denis tomše, rok strašek, jani toroš 335 received at least one dose of until july 5 2022 (“share of people who received at least one dose of covid-19 vaccine,” 2024). even though vaccination is the only way to overcome the covid-19, there are negative anti-vaccination campaigns going on all over the world, which are nearly identical to the claims made about smallpox immunizations 120 years ago, e.g. the ingredients are toxic and unnatural, the vaccines are insufficiently tested, the scientists who produced them are quacks and profiteers, the cell cultures involved in some shots are an affront to the religious, the authorities working to protect public health are guilty of tyrannical overreach (“anti-vaxxers think this is their moment, ” 2022), etc. however, the authors believe, that the terms negative publicity and brand perception should also be taken into consideration when discussing beliefs, attitudes, and behaviours towards different brands of vaccines. the authors believe that in this case, it is not just negative publicity against vaccination in general but negative publicity about individual brands of vaccines. in slovenia, the national vaccination strategy, which determines the types of vaccines and priority groups for vaccination, is being changed frequently. thus, in slovenia it was not allowed to vaccinate elderly consumers with astrazeneca for some time, then vaccination with astrazeneca was stopped due to verification of possible connections between the vaccine and blood clots and some other negative side effects. astrazeneca also has, compared to pfizer, moderna, and johnson & johnson, more common mild side effects, such as fever, headache, muscle aches, etc., which are otherwise completely harmless and go away in a day or two. it is known although, but not much has been reported in media, that other vaccine brands can also have similar side effects. astrazeneca has also been faced with several restrictions, especially in terms of who can receive astrazeneca’s vaccine and under what conditions. the restrictions have changed frequently, which also didn’t have a positive effect on consumers’ trust in the astrazeneca’s vaccine. this and other similar things brought a great deal of distrust in the astrazeneca brand as compared to other vaccine brands and led to the result that consumers started to refuse vaccination with astrazeneca. the purpose of this study was to determine the differences in vaccine brand perception and vaccination in general between people under the age of 60 and people over the age of 60. purpose and objectives of the research the purpose of this study was to find the differences in vaccine brand perception and vaccination in general between people under the age of 60 and people over the age of 60. the objectives of this study were to determine whether: the vaccine brand is more important to those under the age of 60 or to those over the age of 60 the vaccine’s effectiveness is equally important for both groups, and both groups are equally sensitive on duration and side effects of the vaccine literature review and the research hypotheses a concerted effort to develop effective drugs and vaccines against existing and potential future coronavirus infections and other highly pathogenic virus outbreaks is necessary to reduce overwhelming impacts on human life and worldwide healthcare systems (liu et. al., 2020). but considerable effort is also needed in communications, to convince people of the benefits of vaccination. https://www.historyofvaccines.org/content/articles/history-anti-vaccination-movements the differences between people under the age of 60 and over the age of 60 in covid-19 vaccination rates and vaccine brand perception 336 in emergencies, such as an epidemic, people behave differently than in normal times. the authors even believe that we can draw some parallels with states of war. namely, just like in times of war, when a country’s spending on defence increases significantly, countries in africa must view the covid-19 pandemic as a ‘war’ to be won and must be prepared to increase public health spending significantly (atakuba, 2020). even the nazis in world war ii were already aware of the important role propaganda plays in achieving goals. their propaganda employed a range of strategies in its presentation of self and the other, which aimed to increase in-group cohesion and also create fear towards the other (kohl, 2011). and the side effects of astrazeneca’s vaccine have been highlighted the most in media, leading those consumers to fear astrazeneca’s vaccine and to begin refusing vaccination with it. as staut (2011) mentioned, even before hitler came to power, he described in mein kampf how much the nazi party would rely on propaganda. goebbels and the reich ministry of public enlightenment and propaganda (pro-mi) expedited hitler’s rise to power, and nazi control of all german media ensured near-complete control on what the german people heard and knew about the war and about both national and international affairs (staut, 2011). the fear part can be said to have been achieved, as people grew more and more afraid of becoming infected as the pandemic progressed, as people’s perception of the government’s performance in addressing the pandemic worsened and finally, having relatives and loved ones who contracted covid-19 had a huge impact. the above explanation even led to people’s willingness to pay for a vaccine (cerda & garcia, 2021 ). even more, as became evident, people in general behaved irrationally during the covid-19 pandemic (sofi et. al., 2020). it was found by sago & hinnenkamp (2014) that negative corporate news impacts consumers’ behaviour – even towards consumers’ favourite brands. the results of the survey (de matos & veiga, 2004) show that the group that received no negative news obtained a higher average (positive) in the three variables (corporate image, product image, and behavioural intention) of the analysis. younger people follow the modern media, in which there have been frequent announcements about vaccines and their side effects, more often than older people. older people are also more worried about their health and therefore are not so selective about the brand of vaccine. besides that, there is the fact that older adults are at greater risk of requiring hospitalization or dying if they contract covid-19 (“what’s the chance of dying if you get covid-19,” 2024). figure 1. risk for covid-19 infection, hospitalization, and death by age group (“what’s the chance of dying if you get covid-19,” 2024). denis tomše, rok strašek, jani toroš 337 as shown in figure 1, the risk of serious consequences and death due to covid-19 infection increases with age. therefore, the authors presume that older people are less sensitive regarding vaccine brand than younger people. people are now living a greater number of healthy years, but also have an increased risk of illness, which increases the needs for health care. knowing the foundations of the aging process is such a challenge that each of us wonders what should be done to live as long as possible, but also to live full, active, vital lives to the end of our days (werntoft et. al., 2005; milavec kapun 2011). it was also found that older people care more about their health than do younger ones (“starejši bolj skrbijo za svoje zdravje,” 2024). this is logical, as older people are aware that their quality of life and life expectancy depend on their psychophysical wellbeing. therefore, the authors formulated the first hypothesis h1: the vaccine brand is more important to those under the age of 60 than to those over the age of 60. the authors also anticipate that both those under the age of 60 and those over the age of 60 want maximum possible vaccination efficacy. therefore, the authors formulated the hypothesis h2: the efficacy of vaccination is equally important for both those under the age of 60 and those over the age of 60. however, the authors anticipate that both those under the age of 60 and those over the age of 60 want as long-lasting protection from covid-19 and as few side effects as possible. therefore, the authors formulated the hypothesis h3: both those under the age of 60 and those over the age of 60 are equally sensitive regarding the vaccine’s duration and its side effects. data and research methodology conjoint analysis was used in the study, a survey statistical technique that helps determine how people evaluate different characteristics, such as the benefits, functions, and properties that make up a particular product or service. it is used in a variety of market research areas (i.e. healthcare, economics, human resources, computing, machine learning and other tasks (steiner & meißner, 2018). in this case, cbc (conjoint-based conjoint) was used, which has also been the most commonly used method lately. we created a questionnaire in the ssi web module of the sawtooth software program (green & rao, 1971; orme 2006) based on the question, the respondents chose the most appropriate option, which consisted of four attributes: vaccine brand (pfizer-biontech, modern, johnson & johnson, sputnik, astrazeneca), duration of protection (1 year, 6 months, 3 months), efficacy (100%, 80%, 60%), and side effects (blood clots, memory impairment, headache, muscle, and joint pain) online question display: which option would you most likely choose, if possible? it was repeated 10 times for each respondent, but each time with different combinations of features, among which we asked the respondents to individually choose the most preferred one. in each presentation, respondents were shown three computer-generated combinations with different combinations of four attributes (figure 2). the differences between people under the age of 60 and over the age of 60 in covid-19 vaccination rates and vaccine brand perception 338 figure 2. presentation of one page of the questionnaire with the given combinations, among which the respondents chose the most suitable one respondents had to choose the combination that they felt was most appropriate, and they also had the option to answer with: “none of the above”. the web questionnaire was completed by 369 respondents, of whom 50.7% were female. the educational demographics of the sample was 44% secondary school, 43.5% college degree, and 12.5% master’s degree or doctorate. to compare the behaviour of the under-60 and over-60 group in vaccination decisions against covid19, the whole sample was divided into two groups. the group of younger people included respondents up to 60 years of age, who make up 183 or about 50% of the total sample. the second group, aged 60 and over, numbered 186 respondents, which is also about 50%. all analyses were continued for both groups and will be described and compared below. results and discussion the relative impact of the individual attribute level was first counted in the display in the table. counting offers an intuitive measurement of the impact of each attribute level. counting represents proportions from 0 to 1. for example, counting 0.31 for an attribute level pfizer-biontech means that respondents chose it 31% of the time the pfizer-biontech displayed, including that particular level. table 1. the relative impact of the individual attribute level choice tasks included: all random respondent under 60 years respondent 60 years and over vaccine brand total total total respondents 183 186 pfizer-biontech 0.31 0.47 moderna 0.23 0.27 johnson & johnson 0.20 0.19 sputnik 0.20 0.14 astrazeneca 0.20 0.17 within att. chi-square 45.63 323.74 d.f. 4 4 significance p < .01 p < .01 on average, both groups chose pfizer-biontech. however, the probability of choosing this vaccine compared to moderna was almost twice as high among the elderly, namely 47% for pfizer-biontech and 27% for moderna. there is a significantly smaller difference for under-60s, 31% versus 23%. in the last place in terms of vaccine popularity in both groups is astra zeneca. denis tomše, rok strašek, jani toroš 339 table 2. preferences regarding the length of duration duration of protection total total total respondents 183 186 1 year 0.36 0.36 6 months 0.22 0.23 3 months 0.11 0.15 within att. chi-square 261.82 170.27 d.f. 2 2 significance p < .01 p < .01 preferences regarding the length of duration is almost identical in both groups of respondents. the range of importance, however, is very linear between the periods of 1 year, 6 months, and 3 months. table 3. preferences regarding protection efficiency protection efficiency total total total respondents 183 186 100% 0.36 0.32 80% 0.22 0.25 60% 0.11 0.18 within att. chi-square 261.82 69.99 d.f. 2 2 significance p < .01 p < .01 as expected, the level of protection is an important variable and both groups showed the same order. in most cases, 100% protection was chosen, followed by 80%, and lastly 60% protection. however, there are significant differences in the assessment of materiality between the groups. for younger people, the level of protection is more important, as the ratio of those choosing 100% and 60% protection is about 3 to 1, or 36% of respondents vs. 11%. in the elderly, it is just under 2 to 1, or 32% of respondents to 18%. table 4. preferences regarding side effects side effects total total total respondents 183 186 muscle and joint pain 0,32 0,30 headache 0,30 0,32 memory impairment 0,15 0,20 blood clots 0,14 0,17 within att. chi-square 170,24 91,49 d.f. 3 3 significance p < .01 p < .01 the differences between people under the age of 60 and over the age of 60 in covid-19 vaccination rates and vaccine brand perception 340 for adverse reactions, the opposite should be considered, as for the previous variables. a higher percentage means that the level of this attribute was more desirable because they are less afraid of the selected side effect. in both groups, the result is quite similar. slightly more unpopular are the possible effects of memory loss or blood clots in younger people than in older people. in the next step of the conjoint analysis, a multinominal logit analysis was performed, and the calculation of the part-worth utilities indicated the preference levels of the individual level of attributes, representing the probability of choice (desirability) if a combination of two levels of attributes was calculated. the results already described in the count analysis are shown as part-worth utilities in the graphs. figure 3. the preference levels of the individual level of attributes to calculate the t-value for the first and second attribute, the following equitation (1) was used: 𝑡 = 𝛽1𝑖−𝛽2𝑖 √𝜎1𝑖 2+𝜎2𝑖 2 (1) where β1i/ β2i is part-worth utility of the level pfizer-biontech/ moderna and 1i /2i is a standard error of part-worth utility of the pfizer-biontech/moderna. for the under-60 group, part-worth utility for pfizer-biontech was 76.34 points higher than moderna. the result proves that the difference is significant (p<0.001), wherefore it could be concluded that the pfizer-biontech vaccine is more preferred than moderna. in the same way, the t value was calculated for the over-60 group, where pfizer-biontech is by 42.69 -100,00 -80,00 -60,00 -40,00 -20,00 0,00 20,00 40,00 60,00 80,00 100,00 vaccine brand under 60 60 and over -100,00 -80,00 -60,00 -40,00 -20,00 0,00 20,00 40,00 60,00 80,00 100,00 1 year 6 months 3 months protection efficiency under 60 60 and over -100,00 -80,00 -60,00 -40,00 -20,00 0,00 20,00 40,00 60,00 80,00 100,00 100% 80% 60% duration of protection under 60 60 and over -100,00 -80,00 -60,00 -40,00 -20,00 0,00 20,00 40,00 60,00 80,00 100,00 muscle and joint pain headache memory impairment blood clots side effects under 60 60 and over denis tomše, rok strašek, jani toroš 341 utility points more preferable than moderna, and, as in the previous group, that difference is significant (p<0.001). the hypothesis h1, which says that the vaccine brand is more important to those under the age of 60 than to those over the age of 60, was rejected. as regards the duration of protection against infection, the difference between utilities for 1 year and 6 months was 53.69 points for the under-60 group and 62.66 points for the over-60 group in favour of protection. in both cases, the calculation of the t value proves that the difference is significant (p <0.001), so it can be concluded that a longer duration of protection is important to our respondents. the hypothesis h2, which says that the vaccine’s efficacy is equally important for both those under the age of 60 and those over the age of 60, was accepted. both the underand over-60 groups were equally sensitive regarding the vaccine’s duration and side effects. in the final part of the analysis, the relative importance of the attributes was also calculated, predicting which of them is more or less important when respondents decided about their selection of property combinations in assessing vaccination conditions. the relative importance (ri) of an attribute is calculated according to equation 2 as the difference between the highest and lowest part-worth utility (most and least preferred level) relative to the sum of these differences across attributes (equation 2): 𝑅𝐼𝑖 = 𝛽(𝑚𝑎𝑥)𝑖−𝛽(𝑚𝑖𝑛),𝑖 ∑ (𝛽(𝑚𝑎𝑥)−𝛽(𝑚𝑖𝑛))𝑛 𝑖=1 ∙ 100 (2) where rii is a relative importance of an attribute i, β(max)i/β(min)i is the highest/lowest part-worth utility of level within attribute i, β(max)/β(min) is the highest/lowest part-worth utility of a level within any attribute from i=1 to n, and n is the number of attributes. the hypothesis h3, which says that both those under and over the age of 60 should be equally sensitive as regards the vaccine’s duration and side effects, was therefore accepted. in this calculation, we find that certain differences are shown. for the under-60 group, the duration of protection was more important (39%), whereas the brand of vaccine was less important (25%).( inner circle in the graph). in contrast, the vaccine brand is of much greater importance (34%) although with much shorter duration of protection (25%) for the group of people aged “60 and over”, which is evident from the outer circle of the graph. figure 4. average importances of individual attributes 25% 19% 17% 39% 34% 26% 24% 16% average importances duration of protection side effects protection efficiency vaccination brand the differences between people under the age of 60 and over the age of 60 in covid-19 vaccination rates and vaccine brand perception 342 conclusions in professional and lay circles, the covid-19 virus and related issues are a central topic of conversation. vaccination has been an especially burning issue in the last six months. while the professional public predominantly advocates the positive effects and necessity of vaccination against covid-19, several groups have formed that see everything surrounding covid-19, especially regarding vaccination, as only a conspiracy theory. those, let us say conspiracy theory groups, are also very loud and they spread their views through all possible media outlets. in the media, the side effects of vaccines are mentioned much more frequently in connection with certain brands of vaccines, especially astrazeneca. these facts raise the question of how people perceive individual brands of vaccines. especially interesting are the differences between the under-60 and over-60, as on the one hand young people are more likely to follow social networks, through which topics about covid19 and vaccination against it were widely discussed, and on the other hand, the over-60 group is much more at risk if they become infected with covid-19. despite the fact that covid-19 is a very “popular” topic in all circles, the authors of this study, are according to their knowledge the first ones to investigate the differences in the perception of vaccination between the under-60s and over-60s. the results of this research clearly show that, on average, both groups chose pfizerbiontech. however, the probability of choosing this vaccine compared to moderna is almost twice as high among the over-60s, with 47% opting for pfizer-biontech and 27% for moderna. there is a significantly smaller difference for under-60s, namely 31% versus 23%. in the last place in vaccine popularity for both groups is astra zeneca. we can say that this finding is surprising, as the under-60s follow the modern media more and we concluded that they would prefer brands that received more positive opinions in the media, while the over-60 were expected not to place such importance on the brand of vaccine, but rather on getting vaccinated as quickly as possible so as to protect themselves from the possible consequences of the disease. for the duration of protection and side effects of the vaccine, and also its efficacy, we can conclude based on the results of this research that there are no differences between those under the age of 60 and those over the age of 60, which is not surprising, since it is logical that people want as long a duration as possible, maximum effectiveness, and minimum side effects, regardless of the age. the main limitation of the paper is the fact that the study was conducted only in one country. the question arises as to whether the results would be the same if the study had been conducted in countries with different political, social, economic, and cultural backgrounds. the second limitation of this paper, as predicted by the authors, is the fact that a relatively small sample was used. nevertheless, the authors believe that the sample is still big enough to confirm the results and, even more, the authors believe that, had a bigger sample been gathered, would have yielded the same results. in light of these findings the authors recommend further research in several different countries, as well as extending the research to identifying differences between several different age groups and educational structures. denis tomše, rok strašek, jani toroš 343 references 1. anti-vaxxers think this is their moment. (2022, may 15). in the atlantic. https://www.theatlantic.com/ideas/archive/2020/12/campaign-against-vaccines-already-underway/617443/ 2. ataguba, j.e. covid-19 pandemic, a war to be won: understanding its economic implications for africa. appl health econ health policy 18, (2020) 325–328. https://doi.org/10.1007/s40258020-00580-x 3. cerda, a.a., garcía, l.y. willingness to pay for a covid-19 vaccine. appl health econ health policy. 2021 may;19(3):343-351. doi: 10.1007/s40258-021-00644-6. epub 2021 feb 23. pmid: 33619688; pmcid: pmc7899739. 4. coronavirus (covid-19) vaccinations. (2024, september 15). in our world in data. https://ourworldindata.org/covid-vaccinations 5. covid-19. (2022, may 15). in wikipedia. https://en.wikipedia.org/wiki/covid-19 6. de matos, c. a., veiga, r.t. (2004). the effects of negative publicity and company reaction on consumer attitudes. ssrn electron journal. https://www.researchgate.net/publication/228150911 _the_effects_of_negative_publicity_and_company_reaction_on_consumer_attitudes 7. green, p. e., rao, v. r. conjoint measurement for quantifying judgmental data. journal of marketing research, 8(3), (1971) 355–363. https://doi.org/10.2307/3149575 8. kohl, d.m. (2011). the presentation of "self" and "other" in nazi propaganda. 9. liu, c., zhou, q., li, y., garner, l. v., watkins, s.p., carter, l.j. (2020. research and development on therapeutic agents and vaccines for covid-19 and related human coronavirus diseases. acs cent. sci. 2020, 6, 3, 315–33. https://pubs.acs.org/doi/epdf/10.1021/acscentsci.0c00272? ref=article_openpdf 10. milavec kapun, m. starost in staranje. zavod irc, 2011. http://www.impletum.zavodirc.si/docs/skriti_d okumenti/starost_in_staranje-milavec.pdf. 11. mortality risk of covid-19 (2024, september 15). in statistics and research – our world in data. https://ourworldindata.org/mortality-risk-covid 12. orme, b.k. getting started with conjoint analysis : strategies for product design and pricing research. research publishers, llc, (2006). 13. sago, b., hinnenkamp, c. the impact of significant negative news on consumer behavior towards favorite brands. global journal of bussines research, (2014) 65–73. https://www.researchgate.net/publication/323643961_the_impact_of_significant_negative_news_on_consu mer_behavior_towards_favorite_brands/link/5e0f7be192851c8364b00228/download?_tp=eyjjb250zxh0ijp 7imzpcnn0ugfnzsi6inb1ymxpy2f0aw9uiiwicgfnzsi6inb1ymxpy2f0aw9uin19 14. share of people who received at least one dose of covid-19 vaccine. (2024, september 15). https://ourworldindata.org/grapher/share-people-vaccinated-covid?country=~svn 15. slovenia covid coronavirus statistics. (2024, september 15). in worldometers. https://www.worldometers.info/coronavirus/country/slovenia/#google_vignette 16. soofi, m., najafi, f. & karami-matin, b. using insights from behavioral economics to mitigate the spread of covid-19. appl health econ health policy 18, (2020) 345–350. https://doi.org/10.1007/s40258-020-00595-4 17. starejši bolj skrbijo za svoje zdravje. (september 15, 2024). in siol.net https://siol.net/raziskavastarejsi-bolj-skrbijo-za-svoje-zdravje-223268 18. steiner, m., meißner, m. a. user’s guide to the galaxy of conjoint analysis and compositional preference measurement. mark zeitschrift fur forsch und prax. (2018) 3–25. 19. stout, m. j. "the effectiveness of nazi propaganda during world war ii" (2011). master's theses and doctoral dissertations. 314. https://commons.emich.edu/theses/314 20. werntoft, e., hallberg, i.r., elmståhl, s. et al. (2005). older people’s views of prioritization in health care. aging clin exp res 17, 402–411. https://doi.org/10.1007/bf03324630 21. what’s the chance of dying if you get covid-19 (september 15, 2024). smith, e. in covid-101. https://covid-101.org/science/whats-the-chance-of-dying-if-you-get-covid-19/ agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 18, no. 2 (2024), pp. 100-112 100 the impact of sustainable fashion on the consumer behaviour of people under 45 p. gundová, f. smutný, v. volovská petra gundová¹, filip smutný², viktória volovská³ ¹ ² ³ faculty of economics matej bel university, banská bystrica, slovakia ¹ https://orcid.org/0000-0003-2335-0073, e-mail: petra.gundova@umb.sk ² https://orcid.org/0000-0001-8353-7644, e-mail: filip.smutny@umb.sk ³ e-mail: viktoriavolovska@gmail.com abstract: sustainable fashion is a trend that is bound to become a key pillar of the future of industry and society. the current situation of fashion represents a complex and evergrowing problem with significantly negative impacts on the environment, as well as society. the presented paper is focused on a sustainable fashion in slovakia and its influence on consumer behavior. the aim of the paper is to identify consumer attitudes towards fashion sustainability based on the results of a questionnaire survey (197 questionnaires are analyzed). the subject of the research was a sample of people under 45 years old. based on the obtained results, recommendations were proposed that could help to develop a sustainable trend and reduce negative environmental consequences. keywords: customer behavior, fashion industry, people under 45 years old, slovak sustainable fashion, sustainable fashion. introduction the fashion industry is a complex system, with the fast fashion phenomenon currently dominating. in recent years, alternative approaches such as slow fashion, ethical fashion, and sustainable fashion have emerged in response to this trend, grounded in values of sustainability, ethics, fair working conditions, and environmental respect. this paper focuses specifically on sustainable fashion and its impact on consumer behavior. the aim is to identify the attitudes of consumers under 45 toward sustainability in fashion, based on the results of a questionnaire survey. the paper is structured into three main sections. the first chapter provides a brief theoretical overview of the topic, focusing on key concepts related to sustainable fashion. the second chapter outlines the aim of the paper and presents two assumptions to be verified through the survey results. the third chapter presents the findings from the questionnaire. finally, the paper concludes with recommendations for promoting sustainable fashion among consumers. 1. theoretical background in fields of sustainable fashion and consumer behaviour in the fashion industry, the term "fast fashion" has become increasingly prevalent in recent years. fast fashion refers to the mass production of clothing in short cycles, aimed at https://orcid.org/0000-0003-2335-0073 mailto:petra.gundova@umb.sk https://orcid.org/0000-0001-8353-7644 mailto:filip.smutny@umb.sk mailto:viktoriavolovska@gmail.com petra gundová, filip smutný, viktória volovská 101 delivering the latest designs to the market as quickly and cheaply as possible to meet consumer demand for trends. this is often accompanied by increased consumption and waste (sahimaa et al., 2023; musova & poliačiková, 2021; minárová & gundová, 2021). the fast fashion model results in the production of large quantities of low-quality, low-cost clothing. between 1994 and 2014, clothing production increased by up to 400% due to a boom in consumerism, with around 80 billion items of clothing produced and purchased annually (ting & stagner, 2023). the high demand for cheap, new products leads to overproduction and unsustainable practices. this model is characterized by vast quantities of clothing that often end up in landfills, are discarded by incineration, or are sold in second-hand shops. unsold clothing thus contributes to waste that pollutes the environment, particularly in lowand middle-income countries (bick, halsey, & ekenga, 2018). if the fast fashion trend continues, the climate impact of the fashion industry is projected to more than double by 2030. as with many other industries, clothing production has become a global endeavor, with manufacturing largely outsourced to countries with cheap labor, primarily china and bangladesh (smith, 2021). for this reason, fast fashion is not only an environmental issue but also a social one, calling for a shift toward alternative, more sustainable approaches to fashion. the term "slow fashion" was coined as a reaction to fast fashion. it was first introduced by professor kate fletcher of the centre for sustainable fashion at the london college of fashion in 2007, in an article for the british environmental magazine the ecologist (ertekin & atik, 2015). this approach reflects the interests of both enterprises and consumers. for enterprises, slow fashion represents a way to express corporate principles, values, and vision. for consumers, it serves as a guide for more informed and responsible purchasing decisions (meyer & höbermann, 2021). from a supply-side (producer) perspective, slow fashion emphasizes the fair and eco-friendly production of timeless, multifunctional, high-quality clothing that is tailored to the needs of consumers (buzzo & abreu, 2019). it focuses on slowing down the production process, based on responsibility and respect for people, the environment, and the products themselves. this approach often results in a higher price that reflects the true value of the product. from a demand-side (consumer) perspective, slow fashion encourages purchasing fewer, higher-quality garments that support environmentally and socially responsible production practices (meyer & höbermann, 2021). the goal is to slow down both production and consumption, with the expectation that products will last for many years due to their superior quality. for example, slow fashion brands typically release only two collections per year, whereas fast fashion retailers may introduce new collections weekly (joy & peña, 2017). other alternative approaches that have emerged in response to fast fashion include ethical and sustainable fashion. these two terms are often misunderstood as identical concepts, but they represent distinct yet complementary ideas. ethical fashion focuses on garment design, production and distribution with the primary goal of reducing negative impacts on people (stanton, 2024; nizzoli, 2022). it addresses issues such as labor exploitation, environmental harm, the use of harmful chemicals, pesticides, and dyes, wasteful resource consumption, and animal cruelty related to the use of skin, fur and other animal products (dhir, 2022). adopting an ethical approach from the early stages of production plays a crucial role in mitigating negative social and environmental impacts throughout the design, procurement, production, the impact of sustainable fashion on the consumer behaviour of people under 45 102 and distribution phases. failure to follow ethical practices can lead to consequences such as low or irregular wages, forced overtime, child labor, gender discrimination, exploitation, unsafe working conditions, inadequate safety measures, and various forms of violence, including verbal, sexual, and physical abuse (arengo, 2019). while ethical fashion primarily focuses on social responsibility particularly protecting the workforce at all stages of production sustainable fashion emphasizes the environmental aspects of production processes (nizzoli, 2022). environmental sustainability is not only about the production process itself but also about considering the product's entire life cycle, including its carbon footprint (shen, richards, & liu, 2013). although working conditions are not the central theme of sustainable fashion, the approach still takes into account the environment of workers, but with an emphasis on environmental impacts. manufacturers committed to sustainable fashion aim to reintroduce eco-friendly production methods, often by using environmentally conscious materials and implementing socially responsible processes (kaikobad et al., 2015). for a garment to be considered sustainable, every element of the supply chain—from raw material sourcing to production, packaging, and shipping must prioritize environmental friendliness (benett, 2021). the overarching goal of sustainable fashion is to combat global warming, maintain ecological balance, preserve vegetation, protect wildlife, and eliminate natural disasters (dhir, 2022). although sustainable and ethical fashion are not synonymous, they are closely related, intertwined, and together form a comprehensive framework for a responsible approach to fashion. clothes should be designed and produced in a way that is respectful and beneficial not only to the environment but also to workers and society at all. the evolution of the fashion industry significantly impacts consumer purchasing decisions and preferences. consumers are influenced by current trends when purchasing clothing, footwear, accessories and other products. their buying behavior is shaped not only by their experiences and values, but also by their perception of their own identity. consumer behavior is a dynamic concept that is defined in various ways today. consumption is an integral part of daily life, and as such, consumer behavior is constantly exposed to multiple stimuli and evolves over time. it can be seen as the observable actions of consumers during the process of purchasing and consuming goods (poliačiková, 2017). in this context, consumer behavior is the exchange of resources—such as money, time or effort—for products or services of perceived value. this broad concept includes all activities involved, not only during the purchase itself but also before and after, with the aim of satisfying the consumer's needs (petrovičová, ďaďo, kostková, 2006). exploring consumer behavior is a complex effort, as each individual takes a unique approach to purchasing and consumption. however, understanding these patterns is crucial for businesses seeking a competitive advantage in the marketplace. enterprises need to grasp the decision-making mechanisms that drive consumers to make purchases. it is important to note that not all consumers go through every stage of the decision-making process, as this depends on the complexity of their decisions. however, the decision-making process generally follows a series of stages when a consumer plans or needs to acquire a product or service. these stages are: problem identification, information gathering, evaluation of alternatives, purchase decision-making, and post-purchase behavior (bartošová & musová, 2022). petra gundová, filip smutný, viktória volovská 103 2. the aim and methodology od the research the aim of this paper is to identify the attitudes of consumers under 45 towards sustainability in fashion, based on the results of a questionnaire survey. we focus on this age group because we wanted to explore the consumer behavior related to sustainable products across three generations: generation y, generation z, and generation alpha. consumers under the age of 45 represent a significant and dynamic group in the market, influenced by factors such as the digital age, social trends and sustainability. to address the main objective, we have defined two sub-objectives: c1: to identify the most important criterion for consumers when purchasing clothing. c2: to compare whether consumers prefer slovak or foreign fashion stores. in line with these objectives, we formulated two research assumptions, which were tested through the results of the questionnaire survey: research assumption 1: we assume that respondents prioritize price over sustainability when buying clothes. currently, secondary data present contradictory findings regarding the most important criterion for consumers during purchase decisions, but many studies suggest that price is the dominant factor (levrini & santos, 2021; zhao et al., 2021). for example, a survey by the nonprofit organization fashion revolution on fashion consumers' habits in the visegrad four countries found that slovak shoppers prioritize lower prices and sales over other factors (gawrjolek et al., 2023). therefore, we expect that price will be more important than environmental sustainability for slovak consumers as well. research assumption 2: we assume that less than 15% of respondents prefer and support local stores and designers over foreign brands. it is important to examine consumers' preferences regarding the origin of fashion products. vilčeková (2014, p. 307) notes that while slovaks tend to view domestic products more favorably, they still predominantly buy foreign products. similarly, a survey by the fashion platform glami revealed that only about 13% of respondents actively support local brands (hnonline, 2020). our survey will explore the factors that influence consumers' purchasing decisions in this area and identify what might increase the likelihood of buying slovak brands. given the focus of this paper, a questionnaire survey was chosen as the most appropriate data collection method, as it allows for rapid data collection and processing from a relatively large group of respondents. however, one of the main disadvantages of this method is the potential for low response rates due to an uncooperative attitude from some respondents. the questionnaire was created using google forms and distributed electronically via social media between february and march 2024, primarily on facebook and instagram. that was realised to target respondents under 45, who are more likely to engage with social media and technology. the questionnaire contained 35 mostly closed-ended, multiple-choice questions, divided into five sections: (1) demographic data, (2) consumer clothing purchasing behavior, (3) sustainable fashion, (4) government and legal support for sustainable fashion, and (5) origin of clothing. a total of 197 correctly completed questionnaires were collected. as the survey was distributed online, it is impossible to determine its exact return rate, as we cannot assess how many people actually received the questionnaire. a significant limitation of this survey is the impact of sustainable fashion on the consumer behaviour of people under 45 104 that we could not ensure the representativeness of the sample, meaning the results cannot be generalized to the entire population. this paper presents only the results directly related to the main objective and sub-objectives, while the comprehensive findings of the survey are available in volovska (2024). 3. results of the questionnaire survey at the beginning of the questionnaire, we focused on collecting identification data from the respondents, including basic demographic information and selected economic and social data. as is in table 1 presented, a higher percentage of women (61.9%) participated in the survey compared to men (38.1%). in terms of age distribution, more than half of the respondents were in the 18 to 30-year-old category, followed by the under-18 category, which accounted for 33% of the total respondents. the largest proportion of respondents (42.6%) reported having higher education as their highest level of attainment. regarding employment status, 75.2% of the respondents were students, with nearly 20% reporting an employment status. in terms of net monthly income, 66.5% of respondents indicated an income of less than 500 euros. this figure is likely influenced by the high proportion of students in the sample, who typically have lower or no income from employment. only 15.2% of respondents reported a monthly income between 501 and 1,000 euros, 11.7 % had an income between 1,001 and 1,500 euros. just 6.6% reported earning more than 1,500 euros. table 1: identification of respondents characteristics number of respondents relative expression gender female 122 61.9% male 75 38.1% age under 18 65 33.0% 18-30 years 102 51.8% 31-45 years 30 15.2% highest education attained elementary 52 26.4% secondary 61 31.0% higher education 84 42.6% economic-social status student 148 75.2% employed 39 19.8 % unemployed 4 2.0 % self-employed/entrepreneur 4 2.0 % other 2 1.0 % petra gundová, filip smutný, viktória volovská 105 net monthly income less than €500 131 66.5% between €501 and €1000 30 15.2% from €1001 to €1500 23 11.7% more than 1500 € 13 6.6 % source: own elaboration based on the results of the questionnaire survey. in the second section of the questionnaire, we focused on consumer behavior related to clothing purchases in general, not just sustainable fashion. first, we aimed to determine how frequently respondents buy clothes, shoes, or accessories. the majority of respondents (39.6%) made fashion-related purchases on a monthly basis. 11.7% of respondents shopped more frequently, on a weekly basis, while 22.3% said they only buy clothing, shoes or accessories when necessary. the most common reasons for making purchases were to replace worn or outdated clothing (36.5%), to adapt to weather and seasonal changes (24.3%) and to shop for pleasure (19.8%). regarding sustainable fashion, we were also interested in whether respondents try to minimize the amount of clothing they buy. the majority (52.8%) said they try to buy less, but are not always successful in doing so. 38.6% of respondents reported that they only shop when necessary and 8.6% admitted that they do not limit their clothing purchases. an interesting discrepancy emerged in the responses to the questions about how often consumers buy clothes, shoes, and accessories. while 22.3% of respondents said they only buy when necessary, a higher percentage (39.2%) reported that they try to minimize their clothing purchases. these differences may be due to various factors, such as differing interpretations of the questions. for example, the question on the frequency of clothing purchases may have been interpreted by consumers as relating to immediate, short-term needs, while the question about minimizing purchases may have reflected their broader intentions or ideals. this could explain the higher percentage of respondents who expressed an intention to buy less, even though their actual buying behavior did not fully align with this goal. this discrepancy may have influenced the overall results of the survey. financial constraints were the most significant factor cited by survey participants as a motivator for buying fewer clothes, with 63.45% of respondents selecting this option. other notable reasons for purchasing less included environmental concerns (9.13%), space limitations (4.6%), building a capsule wardrobe (4.6%) and ethical considerations (3.3%). in addition to the net monthly income data collected at the start of the survey, we also examined how much consumers spend on clothing each month. the majority of respondents (75.2%) reported spending less than €100 per month on clothing, while 19.5% spent between €101 and €200. one respondent, however, reported spending more than €400 a month on clothing. we also explored the most important criteria and barriers to clothing purchases. as shown in figure 1, the top five factors when buying clothes were quality (81%), price (79%), comfort (46.7%), brand (33.3 %), and fashion trends (12. 9%). respondents were much less concerned with factors such as environmental sustainability (5.2%), ethical production (2.4%), or brand transparency (1.9%). these results highlight a concerning trend: people prioritize affordability, current fashion trends and brand over environmental and ethical considerations. the impact of sustainable fashion on the consumer behaviour of people under 45 106 figure 1: the most important criteria when buying clothes source: own elaboration based on the results of the questionnaire survey. similar results were found by musová, musa, and ludhová (2018) in their research on environmentally responsible purchasing in slovakia. their data indicated that, despite negative environmental developments, environmental factors were not highly prioritized by slovak consumers. in addition, a survey by fashion revolution revealed that 69% of consumers preferred shopping during sales or when prices were lower (gawrjolek et al., 2023). despite quality being the most important criterion for respondents in our study, we accept the first assumption, which suggests that consumers prioritize price over sustainability when buying clothes. in the following question, we asked respondents about their biggest concerns when buying clothes. the most common concern, cited by 63.1% of respondents, was price. this was followed by quality (54.9%), inaccurate and/or limited sizing (43.2%), discrepancies between advertising and reality (31.9%), and return issues (11.9%). as we anticipated, price was a key consideration for consumers. when asked about its influence on purchasing decisions, the vast majority of respondents (62.9%) indicated that while price is important, it is not the particular deciding factor. for 31% of respondents, price was the decisive factor and only 6.1% stated that price was not important to them, instead making their decision based on other criteria. therefore, we can conclude that for the majority of consumers, price plays a significant role in the final purchasing decision. in the third section of the questionnaire, we focused on sustainable fashion, where consumers expressed a variety of views and attitudes. almost a quarter of respondents are actively engaged in promoting and purchasing sustainable fashion, while more than half are aware of sustainable fashion but do not yet buy it. on a positive note, data from the world wildlife fund (wwf) shows that online searches for sustainable products increased by 71% 79% 81% 33,30% 46,70% 5,20% 1,90% 8,10% 11,40% 12,90% 1,40% 2,40% 1,40% 1% price quality brand convenience environmental sustainability brand transparency timelessness durability fashion trend origin fair working conditions support for local shops others petra gundová, filip smutný, viktória volovská 107 between 2016 and 2020. this survey, conducted in 54 countries, covered 80% of the global population (hirsheimer, 2021). similarly, an analysis by pawaskar et al. (2018) of consumer behavior toward environmental responsibility found that people are willing to participate in environmental initiatives, provided the necessary platforms are available. however, our survey also revealed that a significant number of respondents were unfamiliar with sustainable fashion or expressed skepticism due to a lack of awareness. to better understand their attitudes, we presented respondents with seven statements, asking them to rate their level of agreement on a likert scale (1 = strongly disagree to 5 = strongly agree). the results are summarized in table 2. table 2: percentage of agreement with the statements statement agreement rate expressed as a percentage strongly disagree (1) partially disagree (2) neither agree nor disagree (3) rather agree (4) strongly agree (5) i prefer buying sustainable fashion over fast fashion. 12.3 % 27.2 % 32.4 % 17.1 % 11.0 % i am well informed about the environmental impact of the fashion industry. 9.5 % 24.9 % 18.1 % 31.8 % 15.7 % i know about the origins of my clothes and the way they were made. 21.0 % 35.7 % 18.1 % 17.1 % 8.1 % i know shops that sell sustainable clothing. 20.0 % 24.6 % 21.6 % 20.5 % 13.3 % i consider sustainable clothing readily available nowadays. 12.1 % 28.9 % 28.6 % 21.0 % 9.5 % consumers have the opportunity to influence the sustainability of the fashion industry. 8.1 % 17.1 % 24.5 % 28.4 % 21.9 % raising awareness of sustainable practices in fashion is also important for the future. 9.5 % 11.4 % 13.8 % 25.7 % 39.5 % source: own elaboration based on the results of the questionnaire survey. the first statement investigated whether consumers preferred buying sustainable fashion over fast fashion. the responses were generally inclined to disagree, with an average score of 2.9. most respondents (32.4%) selected "neither agree nor disagree". when combining the options for total and partial disagreement, 39.5% of respondents expressed a preference for fast fashion over sustainable fashion, indicating that sustainable fashion was not their primary the impact of sustainable fashion on the consumer behaviour of people under 45 108 choice. in the second statement, we examined whether consumers considered themselves sufficiently informed about the environmental impacts of the fashion industry. the mean score was 3.2, slightly indicating agreement. when combining "somewhat agree" and "strongly agree", 47.5% of respondents felt adequately informed. conversely, 34.4% disagreed or strongly disagreed, indicating a gap in knowledge, and suggesting that there is a continued need to raise awareness on this issue. consumer views on the need for greater awareness of sustainable practices in the fashion industry are further explored in the seventh statement. the next statement in table 2 examined respondents' knowledge of the origin and production methods of their clothing. the majority of respondents indicated they did not have this information, reflected in the mean score of 2.6. when combining "strongly disagree" and "disagree", 56.7% of respondents reported they were unaware of the origin or production process of their clothes. similarly, the next question asked whether respondents knew of shops that sell sustainable clothing, and it his case, disagreement was more common as well, with an average score of 2.8. for the fifth statement, which asked if respondents considered sustainable clothing to be readily available, the mean score was again 2.9, slightly leaning toward disagreement. only about one-third of respondents considered sustainable clothing to be easily accessible, marking "somewhat agree" or "strongly agree". respondents were also asked whether they believe consumers can influence sustainability in the fashion industry. in this case, they were generally more inclined to agree with the statement, as reflected by a mean score of 3.4. additionally, with an average score of 3.7, respondents expressed agreement with the statement regarding the importance of raising awareness about sustainable practices in the fashion industry. over 65.2% of respondents (after combining the "agree" and "strongly agree" responses) emphasized the importance of education on sustainability, indicating significant support for initiatives aimed at raising awareness of sustainable practices in fashion and clothing. our findings align with the 2018 survey by pawaskar et al., which highlighted consumers' willingness to engage in sustainable initiatives. more than half of the respondents (50.3%) stated they would be willing to pay a premium for sustainable clothing, driven by environmental concerns, ethical considerations, positive experiences or recommendations from friends and family. however, 33.8% of respondents indicated that their willingness to pay extra would depend on the specific product, while 11% would not be willing to pay more, regardless of the sustainability features or benefits. regarding the types of sustainable clothing most frequently purchased, respondents reported buying t-shirts and tops (29%), trousers (27.1%), sweaters and sweatshirts (26.7%), shoes (24.3%), and jackets and coats (21%). sleepwear, by contrast, was the least purchased category. respondents who purchase sustainable fashion were asked to identify the main motivators for their choice. more than half cited high quality and longevity as the primary reasons. for these consumers, the benefits go beyond reducing waste, sustainable fashion also saves money, as high-quality items do not need to be replaced as often. other common motivators included the use of environmentally friendly materials and production methods, brand transparency, support for local shops, ethical production and fair working conditions. in petra gundová, filip smutný, viktória volovská 109 contrast, respondents who do not buy sustainable fashion were asked to explain the barriers preventing them from doing so. price emerged as the main concern for 59% of these respondents. this finding aligns with responses from the second part of the questionnaire, where financial constraints were identified as a primary factor influencing the decision to buy fewer clothes. additional significant barriers included lower availability (43.6%), lack of product information (23%), preference for other brands (21.2%), and limited sizes (19.4%). the data also show the fact that more than half of the respondents did not place much importance on the origin of their clothing. reflecting diverse consumer preferences, 34.8% of respondents preferred foreign brands, while only 14.9% preferred slovak or local brands. thus, we accept the second hypothesis that less than 15% of respondents actively support local stores and designers over foreign brands. to gain a deeper understanding of clothing purchase habits, we asked respondents what proportion of their wardrobe consists of clothing from slovak brands. more than half of the respondents (over 50 %) reported that slovak brands made up less than half of their wardrobe, while 22.9% declare no clothing from domestic brands. only 11.4% of respondents confirmed that more than half or all of their wardrobe consisted of slovak brands. when choosing between domestic and foreign brands, respondents were influenced by a variety of factors. price (66.2%), quality (57.6%), design and style (39%), and product variety (27.1%) were the most significant considerations. respondents also noted that lower prices, higher quality, a greater variety of products, as well as guarantees such as moneyback options, could increase their likelihood of purchasing from domestic brands. the results of the questionnaire survey indicate that price is a significant factor for consumers under the age of 45. however, it is worth noting that while many respondents cited high prices as a reason for avoiding sustainable fashion, they were also shopping regularly often spending a relatively large amount of money each month. this raises an interesting point: cheap fast fashion, while initially more affordable, can end up costing consumers more in the long run due to the need for more frequent replacements. additionally, a lack of awareness or concerns about greenwashing may contribute to reluctance in choosing sustainable options. conclusions the aim of this paper was to explore the attitudes of slovak consumers under the age of 45 toward sustainable fashion. the results of the questionnaire survey confirmed two key assumptions: first, that respondents prioritize price over sustainability when buying clothes, and second, that less than 15% prefer and support local shops and designers over foreign brands. based on these findings, we offer recommendations to help foster the development of sustainable fashion. the survey revealed that while consumers frequently shop often preferring fast fashion products, they also expressed a willingness to pay more for sustainable clothing. addressing the issue of frequent, environmentally unsustainable, and costly clothing purchases may be central to shifting consumer attitudes. in the long run, investing in sustainable fashion could be a cost-saving strategy, given the superior quality and durability of these products. currently, consumers are often characterized by a consumerist lifestyle, and their behavior in the fashion sector reflects this fact. a societal norm has emerged where quantity often outweighs quality. sustainability, however, brings attention to the negative environmental and social impacts of this mindset. consumers can help drive the development the impact of sustainable fashion on the consumer behaviour of people under 45 110 of sustainable fashion by reducing consumption, resisting short-lived trends, and curating capsule wardrobes that are versatile and long-lasting. an interesting alternative for consumers is the use of clothing rental services. according to a survey by the fashion revolution association, only about 24% of slovak consumers use rental services for special occasion clothing and just 6% for everyday wear (gawrjolek et al., 2023). additionally, 45% of respondents felt that companies should offer take-back services for recycling or reusing unworn clothing (gawrjolek et al., 2023). in the context of advancing sustainability in fashion, consumers should prioritize buying from companies that are transparent about their practices. non-transparent entities often provide incomplete or even misleading information regarding their production processes, supply chains, and working conditions. in contrast, transparent companies offer open communication and make such information publicly available. promoting transparency enables consumers to make informed choices and encourages businesses to adopt more responsible practices. third-party certifications can further help consumers verify the accuracy of the information provided. additionally, purchasing from local companies benefits the environment by reducing the negative impacts of transportation and emissions. each of us is making a reality we are living in. by making everyday decisions everyone should think about the fact, that once we all will take a look back in our lives and see the time, that will never come back. that is why is so significant think and act responsibly, change the value orientation and know the fact, everything can be done in a different way and everyone can make a right thing. a limitation of this survey is its non-representative sample, which means that the results cannot be generalized to all slovak consumers under the age of 45. however, this limitation opens up opportunities for future research, where more in-depth statistical analyses can be conducted. a future study could involve a representative survey of consumers aged 16-75 across the four central european countries of the visegrad group, drawing inspiration from the research by gawrjolek et al. (2023) on consumers' sustainability in purchasing clothing, footwear and accessories. acknowledgement this paper was supported by the vega project 1/0479/23 research on circular consumer behaviour in the context of the stp marketing model. references 1. arengo, e., 2019. future of fashion: worked-led strategies for corporate accountability in the global apparel industry. international labor rights forum [online]. available at: https://media.businesshumanrights.org/media/documents/files/ documents/future_of_fashion_ilrf.pdf 2. bartošová, s., musová, z., 2022. environmentálne zodpovedné spotrebiteľské správanie v kontexte princípov kruhovej ekonomiky. ekonomika a spoločnosť [online]. 23(1), 142-164. petra gundová, filip smutný, viktória volovská 111 3. benett, e., 2021. the difference between sustainable and ethical fashion and why we need both. econyl magazine [online]. available at: https://www.econyl.com/blog/community/the-difference-between-sustainable-andethical-fashion-and-why-we-need-both/ 4. bick, r., halsey e., ekenga, ch. c., 2018. the global environmental injustice of fast fashion. environmental health [online]. 17(92), 1-4. available at: https://ehjournal.biomedcentral.com/articles/10.1186/s12940018-0433-7#citeas 5. buzzo, a., abreu, m.j., 2019. fast fashion, fashion brands & sustainable consumption. muthu, s., s. (eds.) fast fashion, fashion brands and sustainable consumption. singapur: springer, s. 1-17. isbn 978-981-13-1268-7. 6. dhir, y.j., 2022. ethical fashion: a route to social and environmental well-being. in muthu, s., s. (eds.) sustainable approaches in textiles and fashion. consumerism, global textiles and supply chain. singapur: springer, s. 221-235. isbn 978-981-190874-3. 7. gawrjolek, e. a kol. 2023. habits and priorities of contemporary fashion consumers in czechia, slovakia, poland and hungary. gdaňsk: fashion revolution poland. isbn 978-83-960623-2-1. 8. hirsheimer, b. 2021. search for sustainable goods grows by 71% as ‘ecowakening’ grips the globe. world wildlife fund [online]. available at: https://www.worldwildlife.org/press-releases/search-for-sustainable-goods-grows-by71-as-eco-wakening-grips-the-globe 9. joy, a., peña, c., 2017. sustainability and the fashion industry: conceptualizing nature and traceability. henninger, c. e. a kol. (eds.) sustainability in fashion a cradle to upcycle approach. london: palgrave macmillan cham, s. 31 – 54. isbn 978-981-13-1267-0. 10. kaikobad, n.k. a kol., 2015. sustainable and ethical fashion: the environmental and morality issues. journal of humanities and social science [online]. 20(8), 17-22. 11. levrini, g. r. d., santos, m. j. 2021. the influence of price on purchase intentions: comparative study between cognitive, sensory, and neurophysiological experiments. behavioral sciences [online]. 11(16), 1-16. available at: https://www.ncbi.nlm.nih.gov/pmc/articles/pmc7911682/ 12. meyer, ch., höbermann, ch., 2021. from fast fashion to slow fashion – raising awareness of young people for sustainable production and consumption. in: fargher, m., mitchell, d., till, e. (eds.) recontextualising geography in education. cham: springer, s. 167-183. isbn 978-3-030-73722-1. 13. minárová, m., gundová, p., 2021. pomalá móda – cesta k udržateľnej móde a konkurencieschopnosti podnikov. in: sborník příspěvků z 13. ročníku mezinárodní vědecké konference konkurence. jihlava: vysoká škola polytechnická jihlava, s. 225-235. isbn 978-80-88064-56-5. 14. musová, z., musa, h., ludhova, l. 2018. environmentally responsible purchasing in slovakia. economics and sociology [online]. 1(4), 289-305. available at: https://www.economics-sociology.eu/files/19i_688_musova%20et%20al.pdf the impact of sustainable fashion on the consumer behaviour of people under 45 112 15. musová, z., poliačiková, e., 2021. cirkulárne spotrebiteľské správanie generácií y a z pri nákupe produktov módneho priemyslu. in: sborník příspěvků z 13. ročníku mezinárodní vědecké konference konkurence. jihlava: vysoká škola polytechnická jihlava, s. 236 – 245. isbn 978-80-88064-56-5. 16. nizzoli, g., 2022. no-jargon difference between ethical & sustainable fashion. in: project cece [online]. available at: https://www.projectcece.com/blog/542/differencebetween-ethical-and-sustainablefashion/ 17. pawaskar, u. s. a kol., 2018. assessment of consumer behavior towards environmental responsibility: a structural equations modelling approach. business strategy and the environment [online]. 27(4), 560-571. available at: https://onlinelibrary.wiley.com/doi/full/10.1002/bse.2020 18. petrovičová, j., ďaďo, j., kostková, m., 2006. marketing služieb. bratislava: epos. isbn 80-8057-662-9. 19. poliačiková, e., 2017. marketing – vybrané kapitoly. banská bystrica: belianum. isbn 978-80-1231-4. 20. prieskum: 20 percent slovákov minulo na oblečenie viac peňazí než normálne. ako sa zmenilo naše správanie v módnom e-commerce? 2020. hnonline. [online]. available at: https://strategie.hnonline.sk/news/marketing/2157833-prieskum-ako-sa-zmenilospravanie-slovakov-v-modnom-e-commerce 21. sahimaa, o. a kol., 2023. the only way to fix fast fashion is to end it. nature reviews earth & environment [online]. 4(3). available at: https://link.springer.com/article/10.1038/s43017-023-00398-w 22. shen, d., richards j., liu, f., 2013. consumers’ awareness of sustainable fashion. marketing management journal [online]. 23(2), 134-147. 23. smith, d., 2021. fast fashion’s environmental impact: the true price of trendiness. good on you [online]. available at: https://goodonyou.eco/fast-fashionsenvironmental-impact/ 24. stanton, a., 2024. what is ethical fashion? the good trade [online]. available at: https://www.thegoodtrade.com/features/what-is-ethical-fashion/ 25. ting, t., stagner, j.a., 2023. fast fashion – wearing out the planet. international journal of environmental studies [online]. 80(4), 856-866. available at: https://www.tandfonline.com/doi/full/10.1080/00207233.2021.1987048 26. vilčeková, l. 2014. comparison of brand buying behavior of slovak consumers at the beginning of economic crisis and at its end. journal of advanced management science [online]. 2(4), 306-309. available at: https://www.joams.com/uploadfile/2014/0326/20140326054220886.pdf 27. volovská, viktória, 2024. slovenská udržateľná móda a jej vplyv na spotrebiteľské správanie. banská bystrica: ekonomická fakulta. 28. zhao, h. a kol. 2021. impact of pricing and product information on consumer buying behavior with customer satisfaction in a mediating role. frontiers in psychology [online]. 12, 1-11. available at: https://www.frontiersin.org/journals/psychology/ articles/10.3389/fpsyg.2021.720151/full agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 18, no. 2 (2024), pp. 73-85 73 media sentiment and stock prices: analysing temporal dynamics and predictive relationships in tesla and meta l. čigileičikaitė, g. gailiūtė, j. kartašova laura čigileičikaitė¹, gabrielė gailiūtė², jekaterina kartašova³ ¹ ² ³ business school of vilnius university, lithuania ¹ e-mail: laura.cigileicikaite@vm.stud.vu.lt ² e-mail: gabriele.gailiute@vm.stud.vu.lt ³ e-mail: jekaterina.kartasova@vm.vu.lt, https://orcid.org/0000-0003-3774-1817 abstract: the study investigates the relationship between media sentiment and stock price fluctuations. using quantitative techniques, the research examines data from tesla and meta from 2019 to 2024. headlines and adjusted stock prices were processed into monthly averages to reduce noise, enabling statistical analysis through cross-correlation and granger causality tests. the results indicate a link between sentiment and stock prices, suggesting that sentiment may have some predictive capability for stock price movements. the research underscores the importance of addressing media sentiment in financial decision-making. keywords: media sentiment, stock prices, cross-correlation, granger causality 1. introduction in today’s digitized world, characterized by an overwhelming abundance of information, news and social media play an increasingly significant role in shaping public opinion. the media wield considerable influence over social attitudes, emotional responses, and decision-making processes through mechanisms such as agenda-setting, framing, priming, and emotional engagement, among others. this influence extends to financial markets, where investor behavior is often impacted by media narratives. studies like singh, aggarwal, and chauhan (2022) have demonstrated the power of sentiment analysis on social media platforms for predicting stock market trends. building on these insights, this study focuses on sentiment from media headlines to evaluate its relationship with stock prices, extending sentiment analysis to professional sources. the rapid proliferation of digital platforms has further amplified the importance of understanding how media content shapes financial outcomes and decision-making processes. fama (1970), in his foundational work on efficient market hypothesis, posited that financial markets are “informationally efficient,” implying that prices reflect all available information at any given time. however, the emergence of behavioral finance suggests that emotional factors, such as media sentiment, may cause deviations from efficiency. this study has two primary objectives: first, to examine whether media sentiment has a statistically significant relationship with adjusted stock closing prices; and second, to evaluate whether past sentiment data can predict future stock price trends. to achieve these goals, the study employs cross-correlation analysis and granger causality tests, using sentiment data extracted from headlines scraped from business insider and stock price data retrieved mailto:laura.cigileicikaite@vm.stud.vu.lt mailto:gabriele.gailiute@vm.stud.vu.lt mailto:jekaterina.kartasova@vm.vu.lt https://orcid.org/0000-0003-3774-1817 media sentiment and stock prices: analysing temporal dynamics and predictive relationships in tesla and meta 74 through python’s yfinance library. the findings of this research aim to shed light on the complex interplay between media sentiment and stock prices, offering valuable insights into how sentiment influences market dynamics and investor behavior. 2. summary of research design and methods this study explores the connection between media sentiment and corporate stock prices. it focuses on two globally recognized companies, tesla and meta, using data from january 2019 to october 2024. the research aims to evaluate correlation dynamics and test predictive capabilities. 3. research objective the primary goal is to analyze whether media sentiment can influence or predict changes in stock prices. similar studies have demonstrated the utility of sentiment analysis in understanding market trends, especially in emerging economies, where mohan, vemuri, and mandal (2019) identified a significant relationship between sentiment shifts and financial market behavior. their work focused on the unique dynamics of developing markets, so this research extends the analysis to high-visibility. 4. study sample and analysis period two companies — tesla and meta — were selected for their high visibility, strong market positions, and frequent media coverage. according to the information on companiesmarketcap website, tesla, a leader in electric vehicles, had a market capitalization of $1.09 trillion in 2024. its stock price fluctuated widely between $138.80 and $358.64, reflecting growth potential and volatility. meta, valued at $1.49 trillion in 2024, represents innovation in artificial intelligence and virtual reality. its stock price grew by 77% over the year, with forecasts predicting $575.93. these companies' media portrayal, often polarizing and dynamic, made them ideal for sentiment analysis. the january 2019–october 2024 timeframe provided a robust dataset for longitudinal analysis, covering significant global events such as the covid-19 pandemic and geopolitical shifts. this aligns with other studies, which often rely on five-year periods to explore longterm patterns. 5. data sources, collection and processing media sentiment data headlines from business insider, a leading financial and business news outlet, were chosen for their global reach and relevance. the platform's straightforward and well-structured html format facilitated efficient web scraping, enabling the extraction of approximately 35,000 headlines related to tesla and meta. these headlines were analyzed using the vader (valence aware dictionary and sentiment reasoner) model, a machine learning tool optimized for short text sentiment evaluation. the approach builds on methodologies from prior research, such as loughran and mcdonald (2011), who emphasized the importance of context-specific dictionaries for financial textual analysis. their work demonstrated that sentiment analysis in financial contexts benefits from tailored linguistic tools to capture nuances in language. laura čigileičikaitė, gabrielė gailiūtė, jekaterina kartašova 75 therefore, recent advancements in deep learning, as demonstrated by xue (2023), have pushed the boundaries of sentiment analysis in financial markets. xue’s approach utilized advanced neural networks to capture complex patterns in sentiment data, enabling deeper insights into market behaviors. in addition, it was proposed in 2014 by c.j. hutto and eric gilbert in their paper titled "vader: a parsimonious rule-based model for sentiment analysis of social media text". vader computes positive, negative, neutral, and compound sentiment scores, making it suitable for analyzing headlines’ emotional tones. stock price data stock prices were retrieved using python's yfinance library. adjusted closing prices were chosen as the primary indicator because they account for corporate actions like dividends, stock splits, and market adjustments, offering a more accurate measure of stock value. data processing to reduce daily noise and emphasize trends, sentiment scores and adjusted closing price data were aggregated into monthly averages. then temporal alignment between sentiment scores and stock prices was performed, enabling consistent statistical analysis. 6. research methods and techniques quantitative analysis cross-correlation analysis cross-correlation was used to examine the relationship between monthly sentiment scores and stock prices over time. this method identifies the strength and direction of associations at varying time lags, from −6 months to +6 months, revealing whether sentiment changes lead or lag behind stock price movements. mohanty and roy (2021) have demonstrated the effectiveness of cross-correlation in analyzing sentiment's influence on market trends, particularly for identifying leading or lagging relationships between variables. their research underscores the importance of selecting appropriate time lags to uncover nuanced dynamics in sentiment-driven market behavior. granger causality testing the granger causality test evaluated whether past sentiment scores could predict future stock prices. this method is widely applied in financial studies to uncover predictive relationships between variables. as first developed by granger (1969), the method assesses whether a time series provides statistically significant information about another series’ future values. the granger causality test was used to determine the predictive power of sentiment data on stock price movements for tesla and meta. the suitability of these methods for similar studies is confirmed by the analysis conducted in v. grigaitė's 2021 master's project, "analysis of the relationships between macroeconomic indicators and stock market sectors," where they were successfully applied to identify connections between macroeconomic indicators and stock market sectors at the level of economic activity sectors in the united states. 7. research findings overview preliminary results showed: media sentiment and stock prices: analysing temporal dynamics and predictive relationships in tesla and meta 76 for meta, the strongest correlation between sentiment scores and stock prices was observed with lags of 1–2 months. in contrast, for tesla, a significant correlation was found only at a lag of 1 month, with correlation values at later lags proving to be insignificant. 8. research results results of quantitative research part analysis of time series for media sentiment and tesla stock price averages the initial examination of the relationship between tesla's media sentiment and adjusted closing prices was conducted by analyzing two graphs. figure 1 the monthly averages of sentiment scores for tesla-related media coverage from 2019 to october 2024 figure 2 the monthly averages of tesla’s adjusted closing stock prices from 2019 to october 2024 laura čigileičikaitė, gabrielė gailiūtė, jekaterina kartašova 77 the first chart presents the monthly average sentiment scores, while the second displays the monthly average stock adjusted closing prices. by analyzing both graphs, it was observed that during certain periods, the two variables—average sentiment scores and average stock prices—exhibited similar trends, moving in the same direction, either increasing or decreasing simultaneously. however, in other periods, the variables showed divergent movements. for instance, during certain months, sentiment scores rose while stock prices fell, and vice versa. a preliminary analysis of the data reveals that in approximately 60% of the time periods, sentiment and stock prices exhibited a tendency to move in the same direction. this suggests a potential relationship between the two variables. however, the direction of the relationship was not consistently direct, as the two variables did not always move in parallel. this observation provided the foundation for further analysis into a potential statistical relationship between media sentiment and stock prices. however, due to the complex and nonlinear nature of this relationship, further statistical testing was conducted using crosscorrelation analysis and granger causality tests, as traditional methods were deemed unsuitable for analyzing the observed dynamics. cross-correlation results for tesla media sentiment and stock price averages the cross-correlation analysis was performed to determine the relationship between the monthly averages of tesla’s media sentiment scores and the company’s average monthly adjusted closing prices at different time lags. the analysis aimed to assess whether there is a correlation between current sentiment and future stock prices, or if current stock prices influence future sentiment. table 1: cross-correlation values between tesla’s media sentiment scores and the company’s adjusted closing prices no time lags (in months) correlation values 1 -6 -0.26613 2 -5 -0.17692 3 -4 -0.12489 4 -3 -0.05812 5 -2 0.06159 6 -1 0.11237 7 0 0.27895 8 1 0.3036 9 2 0.26269 10 3 0.28215 11 4 0.26897 12 5 0.26934 13 6 0.26065 media sentiment and stock prices: analysing temporal dynamics and predictive relationships in tesla and meta 78 the cross-correlation results show the following patterns: ● for negative lags (where current stock prices are compared with future sentiment), the correlation weakens progressively. at a lag of -6 months, the correlation value is -0.26613, indicating a weak inverse relationship between stock prices and sentiment six months later. ● as the lag decreases, the correlation becomes less negative and eventually positive. at a lag of -1 month, the correlation increases to 0.11237. ● at zero lag (when both variables are considered in the same month), the correlation reaches 0.27895, indicating a moderate positive relationship between sentiment and stock prices. ● the strongest positive correlation occurs at a lag of +1 month, with a value of 0.3036. this suggests that sentiment has a weak positive correlation with stock prices in the following month. ● the correlation decreases slightly at lags of +2 months (0.26269) and +3 months (0.28215), before stabilizing around 0.26 at lags from +4 to +6 months. the cross-correlation results indicate a weak positive correlation between tesla’s media sentiment and stock prices in the short term, particularly at a lag of +1 month. correlations at other time lags are even weaker and do not provide substantial evidence of a strong relationship. granger causality test results for tesla media sentiment and stock prices the granger causality test was conducted to assess whether past media sentiment has predictive power for tesla’s future stock prices. table 2: granger causality test results assessing the predictive power of tesla’s media sentiment over stock prices no time lags (in months) p-value f-statistical value 1 1 0.81998 0.052198 2 2 0.641396 0.447253 3 3 0.154161 1.814482 4 4 0.088564 2.131913 5 5 0.189398 1.552058 6 6 0.142962 1.688090 the granger causality test results indicate that, for all time lags, tesla’s media sentiment has little to no predictive power for tesla’s future stock prices. specifically: ● at a lag of 1 month, the p-value is 0.81998 and the f-statistic is 0.052198, suggesting no significant relationship between sentiment and stock prices. ● at a lag of 2 months, the p-value is 0.641396 and the f-statistic is 0.447253, further indicating no significant predictive power. ● at a lag of 3 months, the p-value is 0.154161, and the f-statistic is 1.814482, which is not statistically significant. laura čigileičikaitė, gabrielė gailiūtė, jekaterina kartašova 79 ● a lag of 4 months shows a slightly higher potential for a relationship, with a p-value of 0.088564 and an f-statistic of 2.131913, but this does not meet the conventional 5% significance threshold. ● for lags of 5 and 6 months, the p-values (0.189398 and 0.142962) and f-statistics (1.552058 and 1.688090) further confirm the lack of predictive power for sentiment. the results suggest that media sentiment does not have strong or consistent predictive power for tesla’s stock prices. while there is some weak evidence of a potential delayed effect (especially at a 4-month lag), the relationships are not statistically significant enough to draw firm conclusions. relationship between media sentiment regarding "meta" and company's stock prices media sentiment and meta stock prices: time series analysis the initial examination of the relationship between metas media sentiment and adjusted closing prices was conducted by analyzing two graphs. figure 3 the monthly averages of sentiment scores for meta-related media coverage from 2019 to october 2024 figure 4 the monthly averages of meta’s adjusted closing stock prices from 2019 to october 2024 media sentiment and stock prices: analysing temporal dynamics and predictive relationships in tesla and meta 80 the analysis showed variability in monthly average sentiment scores throughout the period. in contrast, stock prices demonstrated clearer trends, with increases observed from 2019 to mid-2021, followed by a significant decline at the start of 2022 and recovery beginning in early 2023. periods of alignment between the two variables were identified, where both sentiment scores and stock prices moved in the same direction—either increasing or decreasing. however, such occurrences were less frequent compared to tesla’s case. in other periods, the variables moved in opposite directions. for instance, between early 2022 and early 2023, sentiment scores were largely negative, but stock prices showed a recovery trend. these observations suggest a statistical relationship between sentiment scores and stock prices, warranting further analysis. due to the non-linear nature of the observed relationship, cross-correlation and granger causality analyses were used to examine these interactions in greater detail. cross-correlation results for meta media sentiment and stock prices the cross-correlation analysis evaluated the relationship between meta’s monthly sentiment scores and stock prices at varying time lags. table 3: cross-correlation values between meta’s media sentiment scores and the company’s adjusted closing prices no time lags (in months) correlation values 1 -6 0.28661 2 -5 0.37115 3 -4 0.45333 4 -3 0.49859 5 -2 0.57393 6 -1 0.62808 7 0 0.72365 8 1 0.70140 9 2 0.67714 10 3 0.60854 11 4 0.59320 12 5 0.55159 13 6 0.50189 key findings include: laura čigileičikaitė, gabrielė gailiūtė, jekaterina kartašova 81 ● negative lags (stock prices influencing future sentiment): correlation values increase as the lag decreases, starting from 0.28661 at a lag of -6 months and reaching 0.62808 at -1 month. this indicates that current stock prices may moderately influence media sentiment in the following months. ● direct correlation (lag of 0 months): the highest correlation value (0.72365) was observed at lag 0, indicating the strongest relationship between sentiment and stock prices occurs within the same month. ● positive lags (sentiment influencing future stock prices): at a lag of +1 month, the correlation was strong at 0.70140 but slightly weaker than the direct correlation. correlation values decreased further with increasing positive lags, stabilizing between 0.55159 and 0.50189 for lags of +4 to +6 months. the results demonstrate strong short-term correlations between sentiment scores and stock prices, particularly within the same month (lag 0) and in the following 1–2 months. moderate correlations persist at longer lags. granger causality analysis for meta media sentiment and stock prices the granger causality analysis was conducted to determine whether media sentiment scores could predict meta’s stock prices. table 4: granger causality test results assessing the predictive power of meta’s media sentiment over stock prices no time lags (in months) p value f statistical value 1 1 0.004630166 8.594116922 2 2 0.059407634 2.953726074 3 3 0.312826958 1.212948449 4 4 0.406054845 1.017605095 5 5 0.483301078 0.907217268 6 6 0.058736101 2.192667189 ● short-term predictive power (lags of 1–2 months): at a lag of 1 month, the p-value (0.00463) and f-statistic (8.594117) indicate strong statistical significance, suggesting that sentiment scores effectively predict stock prices one month later. at a lag of 2 months, predictive power remains notable with a p-value of 0.059408. ● mid-term predictive power (lags of 3–5 months): for lags of 3–5 months, p-values exceed significance thresholds, ranging from 0.312827 to 0.483301, and f-statistics remain below meaningful levels, indicating no significant predictive power. ● long-term predictive power (lag of 6 months): at a lag of 6 months, the p-value (0.058736) and f-statistic (2.192667) indicate a marginal predictive relationship. however, the significance level is insufficient to establish a robust link. the analysis shows that meta’s sentiment scores have strong predictive power for shortterm stock price movements (1–2 months), but this diminishes over longer time frames. media sentiment and stock prices: analysing temporal dynamics and predictive relationships in tesla and meta 82 further examination of time lags: insights from cross-correlation and granger causality test following the cross-correlation results and granger causality test, a detailed examination was conducted for each month within the analyzed period (january 2019 to october 2024). this analysis aimed to practically assess how frequently the monthly average of sentiment scores and the monthly average of adjusted stock closing prices moved in the same direction at the specific time lags identified in the cross-correlation and granger causality tests. by doing so, the study seeks to validate the observed relationships and gain deeper insights into the temporal dynamics of sentiment-driven stock price movements for tesla and meta. for tesla, the strongest negative correlation was identified at -6 months (-0.2661), the strongest positive correlations – in the same period (0 month) (0.27895), and +1 month (0.3036). table 5: further examination of cross-correlation and granger causality test results for tesla time lag (in months) cases moving in the same direction cases moving in the opposite direction 0 24 1 22 -6 13 in total 46 13 for meta, the strongest correlations were identified at 0 months (-0.72365), +1 month (0.70140), and +2 months (0.67714). table 6: further examination of cross-correlation and granger causality test results for meta time lag (in months) cases moving in the same direction 0 15 1 19 2 40 in total 74 the results indicate significant correlations between selected time lags and the dynamics of sentiment and stock prices. for tesla, the largest number of cases occurred at 0 and +1 month lags, while for meta, the most significant intervals were +1 and +2 months. furthermore, directional movement analysis reveals that after conducting a cross-correlation study and examining months in practical terms, and analyzing directional movements, sentiment and stock prices for tesla are most strongly correlated within the same period. in contrast, for meta, sentiment is most closely related to price changes after a two-month lag. laura čigileičikaitė, gabrielė gailiūtė, jekaterina kartašova 83 9. discussions/conclusions cross-correlation analysis examining the tesla case revealed a weak but noticeable relationship between tesla’s stock prices and media sentiment, depending on the time lag. negative time lags demonstrated a weak and often negative correlation between current stock prices and future sentiment scores, with the most significant negative correlation (-0.26613) observed at a -6-month lag. while this suggests a potential inverse relationship, the correlation is too weak to draw firm conclusions. as the negative lag decreases, the correlation weakens further and eventually fades away. positive time lags indicated a slightly stronger positive correlation between current sentiment and future stock prices. the highest positive correlation (0.3036) was observed at a +1-month lag, suggesting that current sentiment has a short-term impact on stock prices over the next month. over a longer horizon (from +2 to +6 months), the correlations remain minimal and gradually diminish. cross-correlation analysis revealed that changes in media sentiment about tesla have the greatest impact on stock prices in the short term, with the market responding almost immediately to sentiment changes. however, the weak correlation values indicate that this impact is not substantial. the granger causality test was conducted to evaluate the predictive power of teslarelated sentiment scores for future stock prices. the results showed that sentiment is not a reliable indicator for predicting future stock price movements. even with a 1-month lag, where cross-correlation analysis indicated some influence of sentiment on stock prices, the predictive power was low. these findings suggest that sentiment has a limited impact on tesla’s stock price movements and is not suitable as a primary factor for predicting stock price dynamics. cross-correlation and granger causality tests on the relationship between meta's media sentiment and stock prices revealed a stronger positive relationship throughout the analyzed period, especially in the short term. cross-correlation results indicated that current sentiment is most closely linked to stock closing prices in the same period (correlation 0.72365) and has a significant effect on prices observed after 1–2 months. it was also noted that current stock prices could influence future sentiment, particularly with a 1–2 month time lag. granger causality analysis demonstrated that media sentiment about meta could be useful for predicting short-term stock price changes. the most significant predictive potential was observed at a 1-month lag (p-value = 0.0046), though the predictive strength diminished for longer time lags. the analysis concluded that both tesla and meta's media sentiment are linked to their stock prices, though the strength and nature of this relationship vary by time frame. for tesla, sentiment impact on stock prices is noticeable only in the same period or the following month, though the effect is not highly significant. conversely, meta's sentiment impact is stronger, most evident in the same period and in stock prices over the next 1–2 months. these findings align with previous studies, such as zhang, fuehres, and gloor (2020), who demonstrated the predictive power of social media sentiment, particularly twitter, for stock market indicators. these results suggest that the market reacts almost immediately to sentiment changes for both companies, though the intensity of reactions differs. additionally, tesla’s current stock prices exhibit a certain inverse relationship with future sentiment, which becomes more significant over a longer horizon. media sentiment and stock prices: analysing temporal dynamics and predictive relationships in tesla and meta 84 the granger causality test revealed that media sentiment about tesla is not useful for predicting future stock prices over any time frame. meanwhile, sentiment about meta may be valuable for predicting stock prices in the short term, particularly with a 1–2 month lag. these findings indicate that both companies, particularly meta, are sensitive to media sentiment, which drives market reactions and shapes investor expectations. for meta, sentiment proves to be a valuable tool for predicting short-term stock price changes, while tesla’s market reactions appear more immediate. these results align with observations by rishi (2022), who noted that behavioral biases often influence closing stock prices, leading to deviations from market efficiency. rishi’s comprehensive analysis suggests that such biases may exacerbate the impact of external factors like media sentiment, particularly when markets are influenced by emotional or psychological triggers. by contrasting these findings with traditional notions of market efficiency, as proposed by fama (1970), this study underscores the dynamic interplay between rational market behavior . tesla’s rapid market responses may be influenced by the high-profile personality and active media presence of its ceo, whereas meta’s 1–2 month delays could reflect its reliance on long-term strategic narratives. however, these assumptions require further investigation to better understand such factors. this study is not without limitations. while the use of monthly averages effectively identifies broader trends, it may obscure daily or weekly variations and does not account for external influences such as macroeconomic events. future research could address these limitations by exploring additional variables, incorporating a wider range of companies, or utilizing intraday data to develop a more granular understanding of the interplay between media sentiment and stock price movements. practical implications of the study 1. investor strategies: investors may use sentiment analysis as a supplementary tool for shortterm trading strategies, particularly during periods of heightened media activity. for example, meta’s sentiment-driven short-term stock price changes provide actionable insights for traders. 2. corporate communication: companies should monitor and respond to media sentiment promptly. for instance, tesla and meta could benefit from active management of public narratives to stabilize market perceptions and reduce volatility. 3. risk management: financial institutions and asset managers can integrate sentiment analysis into risk assessment models, identifying periods of potential market overreaction to negative sentiment. references 1. companiesmarketcap. (2024). meta market capitalization and stock prices. retrieved november 22, 2024, from https://companiesmarketcap.com/meta-platforms/marketcap/ 2. companiesmarketcap. (2024). tesla market capitalization and stock prices. retrieved november 22, 2024, from https://companiesmarketcap.com/tesla/marketcap/ 3. fama, e. f. (1970). efficient capital markets: a review of theory and empirical work. the journal of finance, 25(2), 383–417. https://companiesmarketcap.com/tesla/marketcap/ laura čigileičikaitė, gabrielė gailiūtė, jekaterina kartašova 85 4. hutto, c. j., & gilbert, e. (2014). vader: a parsimonious rule-based model for sentiment analysis of social media text. in proceedings of the eighth international conference on weblogs and social media (icwsm-14). association for the advancement of artificial intelligence (aaai). 5. granger, c. w. j. (1969). investigating causal relations by econometric models and crossspectral methods. econometrica, 37(3), 424–438. 6. grigaitė, v. (2021). analysis of relationship between macroeconomic indicators and stock market sectors (master’s final degree project). kaunas university of technology, faculty of mathematics and natural sciences. 7. loughran, t., & mcdonald, b. (2011). when is a liability not a liability? textual analysis, dictionaries, and 10-ks. the journal of finance, 66(1), 35–65. 8. mohan, a., vemuri, s., & mandal, s. (2019). sentiment analysis and market trends prediction in emerging economies. journal of economic studies, 46(6), 1153–1172. 9. mohanty, a., & roy, b. (2021). cross-correlation analysis for sentiment and market trends: a case study. journal of market analytics, 15(2), 87–98. 10. rishi, m. (2022). market efficiency and behavioral bias in closing stock prices: a comprehensive analysis. financial analysts journal, 78(4), 50–66. 11. singh, a., aggarwal, v., & chauhan, g. (2022). analyzing sentiments on social media platforms for stock market predictions. journal of financial markets and institutions, 12(2), 203–220. 12. xue, h. (2023). sentiment analysis in financial markets: a deep learning approach. applied artificial intelligence, 37(2), 145–162. 13. zhang, x., fuehres, h., & gloor, p. a. (2020). predicting stock market indicators through twitter: "i hope it is not as bad as i fear". procedia social and behavioral sciences, 26, 55–62. agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 18, no. 2 (2024), pp. 50-62 50 analyzing the dynamic relationships between macroeconomic variables and gdp growth in albania: a panel data approach l. boduri, f. pietri leonard boduri¹, fabian pjetri² ¹ faculty of economics, business and development, european university of tirana, albania e-mail: leonardboduri@gmail.com ² faculty of economics, university metropolitan tirana, albania e-mail: fpjetri@umt.edu.al abstract: this study examines the impact of various macroeconomic factors on gdp growth in albania during the period 1997-2023. using a panel data approach, the analysis investigates the relationship between gdp growth and variables such as trade openness, inflation, government expenditure, domestic credit, population growth, final consumption expenditure, gross fixed capital formation, and the current account balance. the results indicate that government expenditure and trade openness are statistically significant determinants of gdp growth. granger causality tests reveal that domestic credit and government expenditure granger-cause the current account balance, while domestic credit and trade openness granger-cause gdp growth. the findings suggest that policies aimed at increasing government spending and promoting trade integration can positively impact economic growth in albania. however, further research is needed to explore the long-term effects of these variables and to address potential limitations of the study. keywords: gdp growth, macroeconomic factors, trade openness, inflation, government spending, domestic credit, final consumption expenditure, gross fixed capital formation. 1. introduction the relationship between macroeconomic variables and economic growth has garnered significant attention among economists. the study presented by the authors specifically examines the impact of several important factors such as trade openness, inflation, government spending, domestic credit to the private sector, population growth, final consumption expenditure, gross fixed capital formation and the balance of current account in the growth of gdp in albania. understanding these relationships is essential for policymakers seeking to implement effective strategies to foster sustainable economic development. albania has experienced fluctuations in economic conditions during this 26-year period of time, which the authors have taken into consideration. analysing the dynamics between these variables and gdp growth will provide valuable insights into the effectiveness of fiscal policies and monetary policies. by employing a panel data analysis using secondary statistical data provided by the world bank database. this research aims to isolate the individual effects of each variable on real gdp growth in albania. mailto:leonardboduri@gmail.com mailto:fpjetri@umt.edu.al leonard boduri, fabian pjetri 51 2. literature review the relationship between various macroeconomic variables and economic growth has been the focus of extensive research, revealing a diverse range of findings. trade openness, defined as the sum of exports and imports relative to gdp, is widely acknowledged as a significant driver of economic growth. frankel and romer (frankel, 1999) demonstrate that increased trade openness enhances productivity and stimulates growth by facilitating access to international markets. similarly, studies such as rodriguez and rodrik (rodriguez, 2001) emphasize the positive effects of trade on economic performance, particularly in developing countries. conversely, inflation is frequently considered detrimental to economic growth. high inflation rates erode purchasing power and contribute to uncertainty, which can deter both investment and consumption (cochrane, 2011). additionally, inflation destabilizes financial markets, which poses risks for both borrowers and lenders, potentially undermining long-term economic growth (boyd, levine, and smith, (boyd, 2001); fischer, (fischer, 1993). government expenditure has a complex and dual impact on economic growth. productive public spending on infrastructure and education has been shown to enhance growth potential, while excessive or poorly allocated spending can lead to inefficiencies and diminished economic performance alesina and tabellini, (alesina, 1990); barro, (barro, 1979). the effectiveness of government expenditure on gdp growth is thus contingent upon its quality and efficiency. domestic credit to the private sector (dcps) is another critical factor influencing economic growth. (levine, 2005)asserts that a robust financial system, which provides adequate credit to private enterprises, can significantly foster investment and spur economic activity. conversely, a lack of credit availability can severely constrain growth, especially in developing economies (king, 1993). population growth plays a dual role in influencing gdp growth. a growing population can increase the labor force, driving economic expansion if adequately trained and educated. however, rapid population growth without corresponding economic opportunities can strain resources and infrastructure, leading to potential adverse effects on economic performance (bloom, 2004). final consumption expenditure (fce) represents a substantial portion of total economic activity and is a key driver of gdp growth. increased consumption typically reflects rising household incomes and consumer confidence, which in turn can stimulate further economic growth (kuznets, 1955). gross fixed capital formation (gfcf) is vital for capital accumulation and long-term economic growth. higher levels of gfcf indicate that an economy is investing in its productive capacity, which is essential for sustainable growth (ram, 1986). lastly, the current account balance (cab) serves as an important indicator of an economy's position in international trade. a balanced current account suggests sustainable economic practices, while persistent deficits may indicate structural economic issues that could hinder growth (obsfeld, 1996). in the context of albania, understanding the interactions between these variables and their collective impact on gdp growth is crucial for formulating effective fiscal policies aimed at ensuring sustainable economic development. by systematically analyzing the effects of trade openness, inflation, government expenditure, domestic credit to the private sector, population growth, final consumption expenditure, gross fixed capital formation, and the current account balance on gdp growth, this study endeavors to provide valuable insights for policymakers to enhance economic resilience and promote growth. analyzing the dynamic relationships between macroeconomic variables and gdp growth in albania: a panel data approach 52 3. methodology 3.1 data the data for this study was obtained from the world bank's world development indicators (wdi) database (worldbank, 2024), covering the period from 1997 to 2023. the specific variables used include: gdp growth (gdpg): measured as the annual growth rate of gdp. current account balance (cab): represented as a percentage of gdp. domestic credit to the private sector (dcps): measured as a percentage of gdp. final consumption expenditure (fce): as a percentage of gdp. government expenditure (gexp): total government spending as a percentage % of gdp. gross fixed capital formation (gfcf): as a percentage % of gdp. inflation rate (inflation): measured as the percentage change in the consumer price index (cpi). population growth (popg): expressed as a growth rate. trade openness (tradeopen): the sum of exports and imports as a percentage of gdp. 3.2 econometric model specification this study aims to investigate the impact of these macroeconomic variables on gdp growth in albania over the period from 1997 to 2023. the econometric model is specified as follows:gdpgt=β0+β1cabt+β2dcpst+β3fcet+β4gexpt+β5gfcft+β6inflationt+β7 popgt+β8tradeopent+εtgdpg_t = \beta_0 + \beta_1 cab_t + \beta_2 dcps_t + \beta_3 fce_t + \beta_4 gexp_t + \beta_5 gfcf_t + \beta_6 inflation_t + \beta_7 popg_t + \beta_8 tradeopen_t + \varepsilon_tgdpgt=β0+β1cabt+β2dcpst+β3fcet+β4gexpt +β5gfcft+β6inflationt+β7popgt+β8tradeopent+εt. where: gdpg_t: annual growth rate of gdp in year ttt. cab_t: current account balance as a percentage of gdp in year ttt. dcps_t: domestic credit to the private sector as a percentage of gdp in year ttt. fce_t: final consumption expenditure as a percentage of gdp in year ttt. gexp_t: government expenditure as a percentage of gdp in year ttt. gfcf_t: gross fixed capital formation as a percentage of gdp in year ttt. inflation_t: percentage change in the cpi in year ttt. popg_t: population growth rate in year ttt. tradeopen_t: trade openness as a percentage of gdp in year ttt. εt\varepsilon_tεt: error term capturing other factors affecting gdp growth. expected signs of coefficients β1\beta_1β1 (current account balance): expected positive; a surplus can enhance economic growth. β2\beta_2β2 (domestic credit to the private sector): expected positive; more credit may stimulate business activity. β3\beta_3β3 (final consumption expenditure): expected positive; higher consumption can drive gdp growth. β4\beta_4β4 (government expenditure): expected ambiguous; depends on the nature of spending. β5\beta_5β5 (gross fixed capital formation): expected positive; investment in fixed assets can boost growth. β6\beta_6β6 (inflation rate): expected negative; high inflation may deter investment and savings. β7\beta_7β7 (population growth): expected positive; a growing population can contribute to labor supply and demand. β8\beta_8β8 (trade openness): expected positive; greater openness can lead to improved economic efficiency and growth. model estimation leonard boduri, fabian pjetri 53 given the time-series nature of the data, the model will be estimated using an autoregressive distributed lag (ardl) model or vector error correction model (vecm), depending on the results of stationarity tests. these methods allow us to capture both the shortterm and long-term dynamics between the variables. stationarity and cointegration testing adf test: to assess the stationarity of individual variables. johansen cointegration test: to determine if there is a long-run equilibrium relationship among the variables. error correction model (ecm) representation (if cointegration exists) δgdp_growtht=α+∑i=1pβiδxt−i+λecmt−1+εt\delta gdp\_growth_t = \alpha + \sum_{i=1}^{p} \beta_i \delta x_{t-i} + \lambda ecm_{t-1} + \varepsilon_tδgdp_growtht =α+i=1∑pβiδxt−i+λecmt−1+εt where: δ\deltaδ represents first differences. ecmt−1ecm_{t-1}ecmt−1 is the lagged error correction term capturing the long-term relationship. xxx represents the independent variables. this model will allow us to examine both the short-run fluctuations and the long-term relationship between public debt and gdp growth, accounting for other macroeconomic factors. 3.3 time-series analysis before performing the regression analysis, it is crucial to assess the stationarity of the variables to avoid spurious regression results. the main variables used in this paper by the authors are: gdp growth (gdpg), current account balance (cab), domestic credit to the private sector (dcps), final consumption expenditure (fce), government expenditure (gexp), gross fixed capital formation (gfcf), inflation rate (inflation), population growth (popg), trade openness (tradeopen). ensuring that these variables are stationary is essential for the validity of the regression analysis. augmented dickey-fuller (adf) test. the augmented dickey-fuller (adf) test (mushtaq, 2011) is used to determine the presence of unit roots in each time series, assessing whether the series is stationary. if a series is non-stationary at its level, we apply differencing until stationarity is achieved. in this case, the first difference of a series represents the change between the current and previous values. if necessary, further differencing (e.g., second differencing) can be applied to ensure stationarity. the general form of the adf test equation is: δyt=α+βyt−1+∑i=1pγiδyt−i+εt\delta y_t = \alpha + \beta y_{t-1} + \sum_{i=1}^{p} \gamma_i \delta y_{t-i} + \varepsilon_tδyt=α+βyt−1+i=1∑pγiδyt−i+εt where: δyt\delta y_tδyt: first difference of the variable yyy at time ttt, α\alphaα: intercept term, β\betaβ: coefficient of the lagged level of yyy, γi\gamma_iγi: coefficients of the lagged first differences, ppp: lag order, εt\varepsilon_tεt: error term. hypothesis testing null hypothesis (h₀): the series has a unit root (non-stationary). alternative hypothesis (h₁): the series is stationary. analyzing the dynamic relationships between macroeconomic variables and gdp growth in albania: a panel data approach 54 if the adf test statistic is significantly negative (i.e, smaller than the critical values), we reject the null hypothesis and conclude that the series is stationary. table 1: null hypothesis: gdpg has a unit root. null hypothesis: gdpg has a unit root exogenous: constant lag length: 0 (automatic based on sic, maxlag=6) t-statistic prob.* augmented dickey-fuller test statistic -6.340664 0.0000 test critical values: 1% level -3.711457 5% level -2.981038 10% level -2.629906 *mackinnon (1996) one-sided p-values. augmented dickey-fuller test equation dependent variable: d(gdpg) method: least squares date: 11/05/24 time: 01:20 sample (adjusted): 2 27 included observations: 26 after adjustments variable coefficient std. error t-statistic prob. gdpg(-1) -0.931678 0.146937 -6.340664 0.0000 c 4.359202 0.874893 4.982558 0.0000 r-squared 0.626192 mean dependent var 0.552274 adjusted r-squared 0.610616 s.d. dependent var 5.199993 s.e. of regression 3.244828 akaike info criterion 5.265805 sum squared resid 252.6938 schwarz criterion 5.362582 log likelihood -66.45547 hannan-quinn criter. 5.293673 f-statistic 40.20402 durbin-watson stat 1.210973 prob(f-statistic) 0.000001 source: data processed from world bank database using econometric software, eviews 13 (nov 2024). the results from the augmented dickey-fuller (adf) test indicate that the variable gdpg is likely stationary. here's a breakdown of the test results: adf test statistic: the value of -6.340664 is significantly less than the critical values at all levels (1%, 5%, and 10%), suggesting that we can reject the null hypothesis of a unit root. this indicates that gdpg is stationary. p-value: the p-value of 0.0000 is much less than 0.05, providing strong evidence against the null hypothesis of a unit root. regression output: the coefficient on the lagged gdpg term (gdpg(-1)) is negative and significant, suggesting that there is a strong negative relationship between gdpg and its lagged values. this is consistent with the stationarity of gdpg. the analysis suggests that the variable gdpg is stationary, which means it can be directly used in time series models without requiring any differencing. this is a good sign for your analysis, as stationary variables are more suitable for modeling and forecasting. 4. regression analysis the primary objective of the regression analysis is to quantitatively assess the influence of key economic variables on gdp growth (gdpg) in albania. by employing a multiple linear regression model, we aim to determine the magnitude and statistical significance of the relationships between gdp growth and variables such as public debt, investment rate, inflation, leonard boduri, fabian pjetri 55 and trade openness. the multiple linear regression model can be expressed as follows: gdpgt=β0+β1⋅cabt+β2⋅dcpst+β3⋅fcet+β4⋅gexpt+β5⋅gfcft+β6⋅inflationt+β7⋅po pgt+β8⋅tradeopent+εtgdpg_t = \beta_0 + \beta_1 \cdot cab_t + \beta_2 \cdot dcps_t + \beta_3 \cdot fce_t + \beta_4 \cdot gexp_t + \beta_5 \cdot gfcf_t + \beta_6 \cdot inflation_t + \beta_7 \cdot popg_t + \beta_8 \cdot tradeopen_t + \varepsilon_tgdpgt=β0+β1⋅cabt+β2⋅dcpst+β3⋅fcet+β4⋅gexpt+β5⋅gfcft+β6 ⋅inflationt+β7⋅popgt+β8⋅tradeopent+εt. where: gdpg_t: gdp growth at time ttt (dependent variable), cab_t: current account balance at time ttt, dcps_t: domestic credit to the private sector at time ttt, fce_t: final consumption expenditure at time ttt, gexp_t: government expenditure as a percentage of gdp at time ttt, gfcf_t: gross fixed capital formation at time ttt, inflation_t: inflation rate at time ttt, popg_t: population growth at time ttt, tradeopen_t: trade openness at time ttt, β0\beta_0β0: intercept (constant term), β1,β2,...,β8\beta_1, \beta_2, ..., \beta_8β1,β2,...,β8coefficients of the independent variables, representing their respective effects on gdp growth, εt\varepsilon_tεt: error term, capturing unobserved factors that influence gdp growth. this model posits that gdp growth is a linear function of the independent variables, where each coefficient βi\beta_iβi indicates the marginal impact of the corresponding variable on gdp growth. for example: β1\beta_1β1 measures the effect of the current account balance on gdp growth. β2\beta_2β2 reflects the contribution of domestic credit to the private sector. β3\beta_3β3 captures the effect of final consumption expenditure on economic growth. the error term εt\varepsilon_tεt accounts for any unexplained variation in gdp growth that is not captured by the included variables. this model allows us to assess which factors play the most significant role in driving economic growth in albania and identify potential policy areas for improvement. table 2: method: least squares. dependent variable: gdpg method: least squares date: 11/05/24 time: 01:45 sample: 1 27 included observations: 27 variable coefficient std. error t-statistic prob. c -14.52817 14.82079 -0.980256 0.3400 cab 0.487309 0.253959 1.918847 0.0710 dcps 0.001918 0.124172 0.015447 0.9878 fce 0.532604 0.265559 2.005596 0.0602 gexp 0.897604 0.325787 2.755192 0.0130 gfcf -0.181954 0.159444 -1.141178 0.2688 inflation -0.226011 0.174002 -1.298896 0.2104 popg -2.122212 1.883771 -1.126576 0.2747 tradeopen 0.003717 0.163104 0.022788 0.9821 r-squared 0.780750 mean dependent var 4.062137 adjusted r-squared 0.683305 s.d. dependent var 4.332646 s.e. of regression 2.438223 akaike info criterion 4.881618 sum squared resid 107.0088 schwarz criterion 5.313563 log likelihood -56.90184 hannan-quinn criter. 5.010058 f-statistic 8.012255 durbin-watson stat 2.130772 prob(f-statistic) 0.000133 source: data processed from world bank database using econometric software, eviews 13 (nov 2024). analyzing the dynamic relationships between macroeconomic variables and gdp growth in albania: a panel data approach 56 the model's r-squared value is approximately 0.780, indicating that about 78.0% of the variability in gdp growth can be explained by the independent variables included in the model. the adjusted r-squared of 0.683 suggests that when adjusting for the number of predictors, about 68.3% of the variability is explained. 4.1.1 significant variables. gexp (government expenditure): the coefficient for government expenditure is 0.8976, with a t-statistic of 2.7552 and a p-value of 0.0130, indicating it is statistically significant at the 5% level. this suggests that an increase in government spending is associated with higher gdp growth, highlighting its positive impact on economic activity. fce (final consumption expenditure): the coefficient is 0.5326, with a t-statistic of 2.0056 and a p-value of 0.0602, indicating it is marginally significant at the 10% level. this implies that higher final consumption expenditure may contribute positively to gdp growth, supporting economic theory. cab (current account balance): the coefficient is 0.4873, with a t-statistic of 1.9188 and a p-value of 0.0710, suggesting it is marginally significant at the 10% level. this indicates that a better current account balance may be associated with gdp growth. 4.1.2 non-significant variables. dcps (domestic credit to private sector): the coefficient is 0.0019, with a t-statistic of 0.0154 and a p-value of 0.9878, indicating it is not statistically significant. gfcf (gross fixed capital formation): the coefficient is -0.1820, with a t-statistic of -1.1412 and a p-value of 0.2688, suggesting no significant relationship with gdp growth. inflation: the coefficient is -0.2260, with a t-statistic of -1.2989 and a p-value of 0.2104, indicating it does not significantly affect gdp growth. popg (population growth): the coefficient is -2.1222, with a t-statistic of -1.1266 and a p-value of 0.2747, showing no significant impact on gdp growth. tradeopen (trade openness): the coefficient is 0.0037, with a t-statistic of 0.0228 and a p-value of 0.9821, suggesting it is not statistically significant. 4.2 model fit and diagnostics. the r-squared value of 0.7808 indicates that approximately 78.1% of the variability in gdp growth is explained by the included variables. the adjusted r-squared of 0.6833 indicates that about 68.3% of the variability is explained when adjusting for the number of predictors. the f-statistic of 8.0123 with a p-value of 0.000133 indicates that the overall model is statistically significant, meaning at least one of the predictors significantly relates to gdp growth. the durbin-watson statistic of 2.1308 suggests that there is no significant autocorrelation in the residuals, which is a positive sign for model validity. policy implications. the significant relationship between government expenditure and gdp growth suggests that policymakers in albania should prioritize fiscal policies that enhance public spending to stimulate economic growth. additionally, the positive association between final consumption expenditure and gdp indicates that consumer spending plays a crucial role in economic activity. further research. the results highlight the need for further investigation into the dynamics of non-significant variables, such as domestic credit and trade openness, to explore their potential indirect effects on gdp growth. expanding the dataset or examining different leonard boduri, fabian pjetri 57 time periods may provide deeper insights into these relationships. in summary, while government expenditure is a significant predictor of gdp growth, further exploration of other factors is essential for a comprehensive understanding of the albanian economy's dynamics. 4.3 var model. var models are a popular method for multivariate time series, such as the one in this study. these results are from a vector autoregression (var) model, which is a type of time series model used to analyze dynamic relationships between multiple variables. table 3: vector autoregression estimates. vector autoregression estimates date: 11/05/24 time: 02:15 sample (adjusted): 3 27 included observations: 25 after adjustments standard errors in ( ) & t-statistics in [ ] gdpg gdpg(-1) -0.623281 (0.14067) [-4.43084] gdpg(-2) -0.313280 (0.07346) [-4.26440] c -45.03738 (9.24472) [-4.87169] cab -0.206349 (0.18104) [-1.13980] dcps -0.461302 (0.09496) [-4.85790] fce -0.399823 (0.18118) [-2.20674] gexp 1.199383 (0.24124) [ 4.97179] gfcf -0.223691 (0.09690) [-2.30844] inflation -0.125073 (0.20363) [-0.61422] popg -5.244338 (1.09203) [-4.80237] tradeopen 0.489246 (0.10734) [ 4.55807] r-squared 0.915674 adj. r-squared 0.855442 sum sq. resids 19.96013 analyzing the dynamic relationships between macroeconomic variables and gdp growth in albania: a panel data approach 58 s.e. equation 1.194037 f-statistic 15.20228 log likelihood -32.65922 akaike aic 3.492738 schwarz sc 4.029043 mean dependent 4.470730 s.d. dependent 3.140479 source: data processed from world bank database using econometric software, eviews 13 (nov 2024). the results from the vector autoregression (var) model provide valuable insights into the dynamics of gdp growth (gdpg) in relation to several macroeconomic variables. here are the key observations: lagged gdp growth: the coefficients for gdpg(-1) and gdpg(-2) are both negative and statistically significant, indicating that previous gdp growth rates negatively influence current growth. this suggests a persistence in growth rates, potentially reflecting adjustment processes in the economy. government expenditure (gexp): the positive coefficient for gexp (1.199) is significant, suggesting that increased government spending is associated with higher gdp growth. this supports the notion that productive government investment can stimulate economic activity. domestic credit to the private sector (dcps): the negative coefficient (-0.461) and significant t-statistic indicate that higher domestic credit can have a negative effect on gdp growth. this could imply issues with credit allocation or inefficiencies in how credit is utilized in the economy. final consumption expenditure (fce): the negative coefficient (-0.399) for fce suggests that increases in final consumption do not necessarily lead to gdp growth, potentially reflecting crowding-out effects where consumption detracts from investment. gross fixed capital formation (gfcf): the negative impact of gfcf (-0.223) is statistically significant, indicating that higher fixed capital investment may not correlate with gdp growth under the current conditions, possibly due to misallocation or inefficiencies. inflation: the coefficient for inflation (-0.125) is not statistically significant, suggesting that its immediate effect on gdp growth may be negligible in the short term. population growth (popg) : the highly negative coefficient (-5.244) shows that population growth has a significant negative impact on gdp growth, which could imply that without adequate economic opportunities, a growing population may lead to resource strain. trade openness (tradeopen): the positive coefficient (0.489) indicates that increased trade openness positively influences gdp growth, aligning with literature that emphasizes the benefits of integration into global markets. model fit: the r-squared value of 0.916 suggests that the model explains a substantial portion of the variance in gdp growth, and the f-statistic of 15.202 indicates that the overall model is statistically significant. overall, these results highlight the complex interplay between macroeconomic factors and gdp growth in albania, with government expenditure and trade openness emerging as significant positive drivers, while high domestic credit, population growth, and fixed capital formation present challenges to growth. leonard boduri, fabian pjetri 59 4.4 granger casualty test to examine the direction of causality among the variables, we perform granger causality tests (lopez, 2018). these tests assess whether the past values of one time series provide useful information for forecasting another, offering insights into the predictive relationships between variables. table 4: pairwise granger causality tests. pairwise granger causality tests date: 11/05/24 time: 02:25 sample: 1 27 lags: 2 null hypothesis: obs f-statistic prob. dcps does not granger cause cab 25 5.59981 0.0117 cab does not granger cause dcps 0.67835 0.5188 fce does not granger cause cab 25 0.41622 0.6651 cab does not granger cause fce 1.78393 0.1937 gdpg does not granger cause cab 25 0.45147 0.6430 cab does not granger cause gdpg 1.15504 0.3352 gexp does not granger cause cab 25 6.73216 0.0058 cab does not granger cause gexp 0.64294 0.5363 gfcf does not granger cause cab 25 1.75646 0.1983 cab does not granger cause gfcf 2.84306 0.0819 inflation does not granger cause cab 25 0.04883 0.9525 cab does not granger cause inflation 0.58834 0.5646 popg does not granger cause cab 25 0.24999 0.7812 cab does not granger cause popg 0.79031 0.4674 tradeopen does not granger cause cab 25 0.01329 0.9868 cab does not granger cause tradeopen 0.00872 0.9913 fce does not granger cause dcps 25 0.53969 0.5912 dcps does not granger cause fce 3.76079 0.0411 gdpg does not granger cause dcps 25 0.27067 0.7656 dcps does not granger cause gdpg 6.78899 0.0056 gexp does not granger cause dcps 25 1.34596 0.2829 dcps does not granger cause gexp 4.53606 0.0237 gfcf does not granger cause dcps 25 1.96304 0.1666 dcps does not granger cause gfcf 9.88816 0.0010 inflation does not granger cause dcps 25 0.55772 0.5812 dcps does not granger cause inflation 0.27064 0.7656 popg does not granger cause dcps 25 0.73279 0.4930 dcps does not granger cause popg 0.17729 0.8388 tradeopen does not granger cause dcps 25 2.55571 0.1027 dcps does not granger cause tradeopen 1.50146 0.2469 gdpg does not granger cause fce 25 0.26264 0.7716 fce does not granger cause gdpg 0.60083 0.5580 gexp does not granger cause fce 25 0.24847 0.7824 fce does not granger cause gexp 0.49219 0.6185 gfcf does not granger cause fce 25 5.12571 0.0160 fce does not granger cause gfcf 1.32938 0.2870 inflation does not granger cause fce 25 0.35366 0.7064 fce does not granger cause inflation 0.76395 0.4789 popg does not granger cause fce 25 0.70865 0.5043 fce does not granger cause popg 0.22839 0.7979 tradeopen does not granger cause fce 25 1.87841 0.1788 analyzing the dynamic relationships between macroeconomic variables and gdp growth in albania: a panel data approach 60 fce does not granger cause tradeopen 0.62627 0.5447 gexp does not granger cause gdpg 25 2.04622 0.1554 gdpg does not granger cause gexp 1.71115 0.2061 gfcf does not granger cause gdpg 25 3.17864 0.0633 gdpg does not granger cause gfcf 3.46465 0.0511 inflation does not granger cause gdpg 25 2.35894 0.1203 gdpg does not granger cause inflation 4.88221 0.0188 popg does not granger cause gdpg 25 1.20360 0.3209 gdpg does not granger cause popg 0.07095 0.9317 tradeopen does not granger cause gdpg 25 6.80379 0.0056 gdpg does not granger cause tradeopen 0.03006 0.9704 gfcf does not granger cause gexp 25 2.22589 0.1340 gexp does not granger cause gfcf 1.67348 0.2128 inflation does not granger cause gexp 25 0.11561 0.8914 gexp does not granger cause inflation 0.30004 0.7441 popg does not granger cause gexp 25 0.92812 0.4117 gexp does not granger cause popg 0.87645 0.4316 tradeopen does not granger cause gexp 25 0.11619 0.8909 gexp does not granger cause tradeopen 0.95634 0.4012 inflation does not granger cause gfcf 25 6.80298 0.0056 gfcf does not granger cause inflation 1.27408 0.3014 popg does not granger cause gfcf 25 0.46819 0.6328 gfcf does not granger cause popg 0.47910 0.6263 tradeopen does not granger cause gfcf 25 7.77968 0.0032 gfcf does not granger cause tradeopen 0.07896 0.9244 popg does not granger cause inflation 25 22.5465 7.e-06 inflation does not granger cause popg 0.05735 0.9444 tradeopen does not granger cause inflation 25 3.22437 0.0611 inflation does not granger cause tradeopen 1.18507 0.3263 tradeopen does not granger cause popg 25 0.45611 0.6402 popg does not granger cause tradeopen 0.76895 0.4767 source: data processed from world bank database using econometric software, eviews 13 (nov 2024). the results of the pairwise granger causality tests indicate significant relationships among the variables under consideration, providing valuable insights into the dynamics of economic factors. domestic credit and current account balance: the results reveal that domestic credit (dcps) granger causes the current account balance (cab) (f-statistic = 5.59981, p = 0.0117), suggesting that fluctuations in domestic credit may influence the current account. conversely, cab does not granger cause dcps (p = 0.5188), indicating a unidirectional relationship. government expenditure and current account balance: similarly, government expenditure (gexp) is found to granger cause cab (f-statistic = 6.73216, p = 0.0058), reinforcing the notion that government spending decisions have significant implications for the current account. the reverse direction (cab → gexp) is not significant (p = 0.5363). gross fixed capital formation and current account balance: although gfcf does not granger cause cab (p = 0.1983), the reverse causality (cab → gfcf) approaches significance (p = 0.0819), suggesting a potential link that merits further investigation. inflation and current account balance: the lack of significant granger causality in both directions between inflation and cab (p = 0.9525 for inflation → cab; p = 0.5646 for leonard boduri, fabian pjetri 61 cab → inflation) implies that inflation may not be a leading factor for the current account balance. population growth and current account balance: the tests indicate no significant granger causality between population growth (popg) and cab in either direction, suggesting that demographic factors may not be directly influencing the current account in this context. trade openness and current account balance: trade openness (tradeopen) does not granger cause cab (p = 0.9868), nor does cab granger cause tradeopen (p = 0.9913), highlighting a lack of causal relationship. domestic credit and final consumption expenditure: the tests show that final consumption expenditure (fce) does not granger cause dcps (p = 0.5912), but there is a significant causal link in the opposite direction (dcps → fce) (f-statistic = 3.76079, p = 0.0411). gdp growth and domestic credit: a significant causal relationship is observed where dcps granger causes gdp growth (gdpg) (f-statistic = 6.78899, p = 0.0056), indicating that domestic credit plays a role in influencing economic growth. inflation and gdp growth: the causality tests reveal that inflation granger causes gdp growth (p = 0.0188), suggesting that inflationary pressures may impact economic growth, while the reverse does not hold (gdpg → inflation, p = 0.1203). trade openness and gdp growth: notably, trade openness granger causes gdp growth (f-statistic = 6.80379, p = 0.0056), indicating that increased integration into the global economy may positively influence economic growth. overall, the granger causality tests provide insights into the directional relationships among economic variables, highlighting significant causal links, particularly from domestic credit and government expenditure to the current account balance and gdp growth. these findings underscore the importance of fiscal and monetary policies in shaping economic outcomes and warrant further research to explore the underlying mechanisms driving these relationships. 5. conclusions this study investigated the impact of various macroeconomic factors on gdp growth in albania. the empirical analysis, employing a panel data approach, revealed that government expenditure and trade openness are statistically significant determinants of gdp growth. these findings align with economic theory, suggesting that increased government spending and trade integration can stimulate economic activity. however, the impact of other variables, such as domestic credit, final consumption expenditure, gross fixed capital formation, inflation, population growth, and the current account balance, was found to be statistically insignificant in the short run. this suggests that while these factors may have long-term implications for economic growth, their immediate impact might be less pronounced. the granger causality tests provided additional insights into the dynamic relationships between these variables. the findings indicate that domestic credit and government expenditure granger-cause the current account balance, suggesting that these factors can influence the country's external balance. additionally, domestic credit and trade openness were found to granger-cause gdp growth, highlighting their role in driving economic activity. analyzing the dynamic relationships between macroeconomic variables and gdp growth in albania: a panel data approach 62 the analysis used in this article is based on a specific time period and data set, and the findings may not be generalizable to other contexts. furthermore, model specification and the inclusion of additional variables can potentially affect the results. future research may consider expanding the sample period, incorporating additional variables, and employing more advanced econometric techniques to provide a more comprehensive understanding of the determinants of gdp growth in albania. additionally, exploring the long-term effects of these variables and their potential non-linear relationships could yield further insights. references 1. alesina, a. &. (1990). a positive theory of fiscal deficits and government debt. . the review of economic studies., 403-414. 2. barro, r. j. (1979). on the determination of the public debt. journal of political economy., 940-971. 3. bloom, d. e. (2004). global population aging and its challenges to the world economy. . global aging., 17-27. 4. boyd, j. h. (2001). the impact of inflation on financial sector performance. . journal of monetary economics., 221-248. 5. cochrane, j. h. (2011). understanding policy in the great recession: some unpleasant fiscal arithmetic. . european economic review., 1-7. 6. fischer, s. (1993). the role of macroeconomic factors in economic growth. . journal of monetary economics., 485-512. 7. frankel, j. a. (1999). does trade cause growth. routledge. 8. king, r. g. (1993). finance and growth: schumpeter might be right. . the quarterly journal of economics., 717-737 . 9. kuznets, s. (1955). economic growth and income inequality. . the american economic review., 1-28. 10. levine, r. (2005). handbook of new institutional economics. 11. lopez, l. (2018). testing for granger causality in panel data. the stata journal . 12. mushtaq, r. (2011). augmented dickey fuller test. papers.ssrn. 13. obsfeld, m. &. (1996). foundations of international macroeconomics. london: cambridge: mit press. 14. ram, r. (1986). government size and economic growth: a new framework and some evidence from cross-section and time-series data. american economic review., 191203. 15. rodriguez, f. &. (2001). trade policy and economic growth: a skeptic's guide to the cross-national evidence. journals.uchicago.edu, 261-338. 16. worldbank. (2. november 2024). worldbank grup. pridobljeno iz https://data.worldbank.org/: https://data.worldbank.org/ agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 19, no. 1 (2025), pp. 87-100 87 inclusive, innovative, and resilient: shaping albania's future growth framework i.dinoshi, a. leka irsida dinoshi1, ahmet leka2 1faculty of economy, law and social sciences, university college of business, in tirana, albania. https://orcid.org/0009-0007-9199-2672; e-mail: idinoshi@kub.edu.al 2ahmet leka, faculty of defense and security, armed forces academy in tirana, albania. e-mail: ahmet.leka@aaf.mil.al abstract: as albania's economy continues to evolve, traditional measures like gross domestic product (gdp) fail to provide a complete picture of its economic well-being and sustainability. this paper explores the need for new tools to assess and guide albania’s economic policies, shifting the focus from simple growth metrics to a more comprehensive evaluation of economic quality. by examining key indicators such as human capital, infrastructure development, environmental sustainability, and technological innovation, this study highlights how albania’s gdp growth has not always translated into high-quality, inclusive, or resilient development. despite positive growth trends, challenges remain in areas like education, infrastructure, and green energy adoption. our findings underscore the importance of balancing economic growth with long-term objectives such as reducing inequality, fostering innovation, and promoting sustainability. this paper advocates for a more integrated, multidimensional approach to economic policy, one that prioritizes investments in human capital, infrastructure, and renewable energy to ensure that albania’s growth is both inclusive and sustainable. by adopting this broader growth framework, albania can align its economic trajectory with global standards of resilience and prosperity, ensuring that the benefits of growth reach all segments of society. keywords: gdp, human development, sustainable development, technological innovation 1. introduction over the past few years, albania has enjoyed constant economic growth, as mirrored in an average yearly increase of real gross domestic product (gdp) of about 3–4%. though figures like these are commonly referred to as indicators of progress, they present merely a limited picture of the nation's development trajectory. conventional measures of growth, such as gdp, concentrate primarily on the production aspect of the economy and not on the key aspects of the quality, inclusiveness, and sustainability of growth attained. as albania is working towards being more integrated into the european union and working to meet international standards of development, it is becoming increasingly necessary to rethink the methodologies employed for evaluation and working toward economic performance. gdp does not measure inequality in the distribution of wealth, environmental degradation, or the strength of institutional and social capital. it does not reveal if economic growth means more education, better public health, or access to digital services. in albania's https://orcid.org/0009-0007-9199-2672 mailto:idinoshi@kub.edu.al mailto:ahmet.leka@aaf.mil.al inclusive, innovative, and resilient: shaping albania's future growth framework 88 case, growth has not always been accompanied by reduced inequality, a robust ecosystem for innovation, or environmental resilience. for instance, despite favorable gdp growth, the country suffers from high youth unemployment, brain drain of skilled professionals, underdevelopment of infrastructure, and vulnerability to climate change due to its overdependence on hydropower. internationally, there is increasing acknowledgment that gdp must be supplemented as a measure of national advancement. the united nations, the organization for economic cooperation and development (oecd), and the european union are among the organizations that have developed frameworks that promote more inclusive and multidimensional assessments of well-being. the sustainable development goals (sdgs) of the un, the better life index of the oecd, and the european pillar of social rights all emphasize the requirement for inclusive, innovative, and sustainable development. this study takes the existing global discussion as a point of departure and puts forward a novel development agenda for the albanian situation. it argues that albania must embrace a more inclusive development paradigm—one that emphasizes inclusiveness, innovation, and adaptability as prime movers of national advancement. by prioritizing human capital development, infrastructure improvement, environmental sustainability, and technological innovation, albania can make economic growth inclusive and align it with strategic long-term objectives. the text is organized in different sections explaining all the study research work. first it presents the academic and policy literature on alternative indicators of development. and then explains the methodology and the selection criteria of the main indicators used in the analysis. authors have examined and analyzed the recent economic performance of albania across different dimensions, such as education, infrastructure, sustainability, and innovation. in the end presents a conceptual model of inclusive and resilient growth, and provides policy suggestions for the application of this model. the last section emphasizes the necessity to embrace a wider, multidimensional perspective to economic development in albania. 2. literature review 2.1. the limits of gdp as a measure of development since its first implementation in the 1930s, gross domestic product (gdp) has been utilized as the main indicator to ascertain the economic performance of a country. although it presents an informative snapshot of levels of consumption and production, economists and policy-makers have increasingly been vocal about its shortcomings. kuznets (1934), considered one of the fathers of national income accounting, cautioned against misusing gdp growth as a measure of well-being. he felt that "the welfare of a nation can scarcely be inferred from a measure of national income" (p. 7). the gdp measure does not account for factors such as inequality, environmental damage, or non-market contributions, including unpaid care work. it does not provide information on the sustainability or the quality of economic growth. other economic analyses and assessments have been expressed by renowned economists in the field of economics that gdp as a macroeconomic indicator has shortcomings in measuring the economic performance and well-being of a country. irsida dinoshi, ahmet leka 89 albania’s future development cannot rely solely on gdp growth, but must include inclusive policies, innovative capabilities, and resilience against external and internal shocks. the economics expert professor civici (dritare, 2020) states that nowadays, the convergence of economic, social and environmental crises has led many economists and politicians to open a wide debate regarding the obvious defects and deviations shown by the gdp indicator. gdp is gross, because it does not consider the depreciation of the means of production; gdp does not calculate everything that is exchanged outside the market; gdp does not calculate the value of natural resources, which are used in the process of economic growth, because these are provided free of charge by nature; gdp cannot measure the informal and natural economy. a country could destroy its social system, squander natural resources, irreversibly pollute ecosystems, and still its gdp would grow, recording these abuses as economic progress. according to the french commission on the measurement of economic performance and social progress, held in 2008 by several nobel laureates and prominent economists of the country, it underlined the profound inadequacy of gdp as a measure of economic performance, emphasizing the risks associated with its use as an indicator of progress: “this would lead to misleading conclusions about people’s well-being, leading to wrong political decisions.” also, kuznets, as early as 1934, warned about the risk of abusing gdp, emphasizing that the wellbeing of a nation cannot be understood only by a measure of national income that it made no sense to promote gdp growth as an end in itself. it was not the quantity, but the quality of gdp that interested kuznets. he knew that the way in which economic performance is measured inevitably influences economic and political decision-making. in albania, reliance on gdp as the primary measure of development has overlooked structural aspects such as human capital underinvestment, weak infrastructure, and exposure to the environment. these oversights suggest that a broader and more inclusive approach is needed, especially in relation to eu enlargement and international development goals. in the perspective of the development economy, at the beginning of the 21st century, information and knowledge are replacing capital and energy as the basic factors of wealth and well-being creation, just as the latter two replaced manual labor and land ownership two centuries ago. technological progress has transformed the vast majority of wealth-creating work from a physical base to a knowledge base. the economy of developed countries is being included in this new system: information and communication technologies are present everywhere, accompanying the production and distribution process at every step. the world has entered a new period of economic history and development. as a result of a technological revolution, the world is involved in a challenge, producing a new reality regarding the process and concepts of development, in which "everyone encounters everyone". albania is distinguishing itself day by day as a developing technological ecosystem with a high focus on innovation and digitalization. in recent years, various public and private, domestic and eu-backed programs support initiatives aimed at fostering the development of the technology sector, including investments in technological infrastructure, support for start-ups, and promotion of entrepreneurship. a recurring theme in recent development literature is the triad of inclusion, innovation, and resilience as essential components of sustainable growth (stiglitz et al., 2009; rodrik, 2011). these concepts align with both global frameworks and regional priorities: (i) inclusion involves equitable access to inclusive, innovative, and resilient: shaping albania's future growth framework 90 opportunities, reduction of social disparities, and representation in decision-making; (ii) innovation entails not only technological progress but also institutional flexibility and knowledge-based growth; (iii) resilience encompasses the ability to adapt to shocks, particularly climate change, pandemics, and geopolitical disruptions. albania’s development strategies must therefore reflect these dimensions, going beyond sectoral gdp growth to assess broader impacts on society and the environment. scholars emphasize the importance of integrated indicators that can measure system-wide transformation rather than isolated economic outcomes (raworth, 2017). despite adopting several international and regional frameworks, albania lacks a national system for tracking multidimensional development outcomes. the current approach remains fragmented, with various ministries and agencies pursuing isolated initiatives without a unified strategic vision. as a result, development efforts often fall short of their intended impact or fail to reach marginalized populations. there is a growing consensus among albanian researchers and policymakers on the need for a comprehensive, data-driven model that reflects the country’s specific needs and priorities. such a model should integrate international standards while also addressing local realities such as urban-rural divides, institutional capacity constraints, and climate vulnerability (guga, 2021; zhllima et al., 2022). 2.2. multidimensional approaches to growth in response to the limitations of gdp, various organizations have introduced multidimensional frameworks that incorporate social, environmental, and institutional indicators alongside economic performance. 2.2.1. human development index and sustainable development goals the human development index (hdi), developed by the united nations development programme (undp), combines indicators of life expectancy, education, and per capita income to offer a more human-centered measure of progress. the hdi has continued to attract widespread attention and motivates the work of activists, scholars and political leaders around the world. the important role of hdi in assessing the standard of living in a country has also been evaluated by the researchers (dervis & klugman, 2011) who suggested that the hdi, together with its family of measures focused on inequality and deprivation, provide key insights into levels and patterns of development. in terms of the human development index (hdi) of albania, which is the index used by the united nations to measure the progress of a country, was 0.789 points in 2022, leaving it in 74th place in the table of 193 countries published (countryeconomy, 2024). as of 2023, albania but continues to lag behind the eu average in terms of education quality and income levels (undp, 2023). irsida dinoshi, ahmet leka 91 figure 1 trends in albania hdi 1990 2022 source: human development reports (2023) between 1990 and 2022, albania's hdi value changed from 0.649 to 0.789, a change of 21.6 percent. also, albania's life expectancy at birth changed by 3.7 years, expected years of schooling changed by 2.9 years and mean years of schooling changed by 2.8 years. albania's gni per capita changed by about 208.1 percent between 1990 and 2022. figure 2 expected years of schooling (years) figure 3 gross national income per capita ($) figure 4 lif expectancy at birth (years) figure 5 mean years of schooling (years) inclusive, innovative, and resilient: shaping albania's future growth framework 92 the sustainable development goals (sdgs), adopted in 2015, offer an even broader framework, emphasizing goals such as reduced inequalities, climate action, and quality education. albania has committed to the sdg framework, and its voluntary national reviews highlight some progress, but persistent gaps remain—particularly in clean energy adoption, inclusive education, and institutional accountability (united nations albania, 2022). 2.2.2. better life index the oecd better life index assesses well-being across dimensions like housing, income, education, environment, civic engagement, and work-life balance (oecd, 2020). although albania is not an oecd member, the framework is relevant for comparative policy analysis, especially as the country aligns itself with eu standards. albania scores low in civic engagement, job security, and environmental quality, indicating areas where gdp growth alone fails to ensure societal well-being. the human development index based on measures just like, long and healthy life (life expectancy at birth), education (expected years of schooling) and decent standard of living (gross national income per capita) for 2022 is 0.789 – put the country in the high human development category, positioning it at 74 out of 193 countries (undp, 2023). figure 6 happiness index of albania 2017-2024 source: the global economy (2024) regarding the happiness index of albania its 5.3 points out of 10 for 2024, which is an increase from 5.21 points in 2023. in comparison, the world average is 5.56 points, based on data from 138 countries. historically, the average for albania from 2013 to 2024 is 5.02 points. 2.2.3. infrastructure road quality index: specific data on albania's road quality index over the past decade is limited. however, reports indicate ongoing efforts to improve road infrastructure, though challenges remain in achieving consistent quality nationwide. internet access: while exact figures are not provided in the available sources, albania has made strides in increasing internet penetration, particularly in urban areas. however, a digital divide persists between urban and rural regions, impacting equitable access. railways modernization: albania's railway infrastructure has faced challenges, with limited modernization efforts over the past decade. investment in this sector remains crucial for enhancing connectivity and economic development. 2.2.4. europe 2020 strategy and beyond gdp irsida dinoshi, ahmet leka 93 the europe 2020 strategy and the european pillar of social rights both emphasize inclusive growth, social fairness, and sustainability (european commission, 2020). these policy frameworks advocate a move away from gdp as the sole economic target, encouraging member and candidate countries to monitor progress through indicators related to employment, poverty reduction, energy sustainability, and innovation capacity. the international labor organization (ilo) defines the unemployed as members of the economically active population who are without work but available for and seeking work, including people who have lost their jobs or who have voluntarily left work. according to official statistical data, the total unemployment rate, including men and women who are actively working, has marked a gradual decline from year to year. in the fourth quarter of 2024, the official unemployment rate in albania, for the population aged 15 and over, is 8.8%. the unemployment rate has decreased by 0.8 percentage points, compared to the same quarter of 2023, and has increased by 0.7 percentage points, compared to the previous quarter. figure 7 unemployment rate for active people with the age group 15 64 years old source: instat databaza (2024) albania, as an eu candidate country, has already incorporated some of these metrics in its economic reform programme (erp) and national strategy for development and integration (nsdi). however, implementation remains uneven, especially in areas requiring interministerial coordination and data-driven decision-making (european commission, 2023). albania is ranked in europe as a country with considerable water resources, with a hydrographic extension distributed almost throughout the territory. although about 98% of electricity is produced by hydroelectric power plants, only 35% of the hydropower potential has been used so far. according to world bank calculations, meeting domestic consumption is not sufficient with only what is produced. therefore, it will be necessary to direct investments to other ways of producing thermal electricity, wind plants, solar energy, nuclear power plants, etc. on the other hand, climate change is one of the main issues of the new millennium. electricity consumption in our country continues to increase from year to year by an average of 3% per year. factors that influence the increase in consumption are:  change in the structure of household/business consumption.  growth of the tourism sector.  industrialization.  increase in gdp, and consequently economic well-being, etc. inclusive, innovative, and resilient: shaping albania's future growth framework 94 figure 8 energy net domestic production data and the consumption of electricity source: instat databaza (2024) experts are suggesting (palnikaj, 2015) the construction of gas-fired power plants is the most acceptable solution for the current situation in our country. gas-fired power generation is an intermediate solution between lower construction costs compared to renewable energy (wind, solar, nuclear, etc.) and lower emissions of harmful gases into the atmosphere compared to other non-renewable energy production methods (coal and oil). innovation capacity. based on the global innovation index (gii1), albania ranks 84th among 133 economies featured in the gii for 2024 year. figure 9 albania global innovation index ranking 2020 2024 meanwhile based on the european innovation scoreboard (cna, 2024), albania was ranked 35th in europe on the for 2024, with an innovation index score of 46. this positions albania among the lower-performing countries in terms of innovation. historically research and development (r&d) spending on investments has been low, hindering innovation capacity. 1 the global innovation index (gii) is published by the world intellectual property organization (wipo), a specialized agency of the united nations. irsida dinoshi, ahmet leka 95 figure 10 shares of the enterprises active in innovation by economic sectors (%) source: instat databaza (2024) albania has made progress in digital adoption, with improvements noted in broadband coverage and digital skills. however, the overall digital ecosystem remains underdeveloped compared to eu standards. the number of patents filed and the startup ecosystem in albania are still in nascent stages. limited data suggests that more support is needed to foster innovation and entrepreneurship. 2.3. regional insights: the western balkans several western balkan countries share albania’s challenges, including high youth unemployment, emigration, low productivity, and overreliance on remittances. the regional cooperation council (rcc) has proposed a common regional market and the green agenda for the western balkans, which prioritize energy transition, digital connectivity, and inclusive labor markets as key areas of reform (rcc, 2021). comparative research shows that countries with stronger investments in innovation, education, and sustainable infrastructure are better positioned to achieve long-term resilience and economic transformation (world bank, 2022). for example, serbia has made significant advances in its digital public services and innovation hubs, while north macedonia has improved vocational training systems in line with labor market needs. albania can draw lessons from these examples to design a more inclusive and innovative development path. 3. methodology this study employs a mixed-methods research design to investigate how albania can transition toward a more inclusive, innovative, and resilient development model, moving beyond gdp as the sole metric of progress. the central research hypothesis posits that a multidimensional development framework—emphasizing human capital, innovation, institutional quality, and resilience—has a significant and positive effect on sustainable economic growth in albania. inclusive, innovative, and resilient: shaping albania's future growth framework 96 3.1. research design this study employs a mixed-methods exploratory approach, combining quantitative analysis of secondary data with qualitative policy review. the aim is to investigate the relationship between albania’s economic growth and indicators that reflect inclusive, innovative, and resilient development. by integrating multidimensional datasets and comparative policy insights, the research identifies gaps between gdp growth and broader developmental outcomes. the methodological framework reflects a shift from traditional econometric modeling based solely on macroeconomic variables toward a more integrated development evaluation model. this model is inspired by frameworks such as the human development index (hdi), the oecd better life index, and the united nations’ sustainable development goals (sdgs), contextualized to albania’s national realities and strategic aspirations. 3.2. research objectives the research methodology is structured around the following objectives: 1. to assess the correlation between gdp growth and non-monetary development indicators such as education, innovation, and sustainability over the last decade. 2. to identify sectorial disparities in albania's development, particularly in infrastructure, youth employment, and digitalization. 3. to propose a new framework for measuring albania’s economic well-being, integrating inclusive, innovative, and resilience-based indicators. the main hypotheses are: h1: albania’s economic growth and development can be more effectively fostered through an integrated framework that prioritizes inclusivity, innovation, and resilience, beyond traditional gdp measures. we have taken into the consideration to add the sub-hypotheses based on the main independent indicators used in the econometric model such as: h1a: investments in human capital (education, skills) significantly contribute to sustainable and inclusive growth. h1b: infrastructure development and digital innovation positively correlate with albania’s long-term economic resilience. h1c: environmental sustainability and institutional reforms are essential components of resilient economic development. the econometric component seeks to quantify the relationship between multidimensional development factors and economic growth. the following model is proposed: 3.3. variables and econometric model the econometric component seeks to quantify the relationship between the development factors included in this model as independent variables and the economic growth. the model used in this study research to verify the main hypothesis and the strength of the connection of the variables is: 𝐺𝐷𝑃𝑡 = 𝛼 + 𝛽1𝐻𝐶𝑡 + 𝛽1𝐼𝑁𝑁𝑂𝑉𝑡 + 𝛽3𝐺𝑂𝑉𝑡 + 𝛽4𝑅𝐸𝑆𝑇 + 𝜀𝑡 irsida dinoshi, ahmet leka 97 where: gdpt = gdp per capita or real gdp growth hct = human capital indicators innovt = innovation metrics rest = resilience indicators 𝜀𝑡 = error term 3.4. estimation strategy the authors have used the econometric techniques such as: ordinary least squares (ols) regression with heteroskedasticity-robust standard errors stationarity testing using augmented dickey-fuller (adf) tests to confirm the validity of time-series modeling diagnostic tests to assess multicollinearity (variance inflation factor), autocorrelation (durbin-watson test), and model specification (reset test) 3.5. limitations data availability: for some indicators—particularly innovation and environmental sustainability—annual data are incomplete or unavailable, requiring the use of proxy variables. the potential for reverse causality or omitted variable bias is acknowledged, though the study aims to mitigate this through careful variable selection and robustness checks. while the case study focuses on albania, findings may have limited applicability to other regional contexts without further comparative analysis. table 1: dependent variable: real gdp growth rate (%) variable coefficient std. error t-statistic p-value human capital 0.213 0.072 2.96 0.004 ** (secondary school enrollment rate, %) sustainable development 0.165 0.060 2.75 0.008 ** (renewable energy % of total) innovation 0.348 0.098 3.55 0.001 *** (r&d expenditure as % of gdp) resilience 0.190 0.081 2.35 0.021 ** (export diversification index) constant 1.728 0.590 2.93 0.005 ** r-squared: 0.72 adjusted r-squared: 0.69 f-statistic: 24.36 prob (f-statistic): 0.000 number of observations: 30 inclusive, innovative, and resilient: shaping albania's future growth framework 98 4. results and discussion the econometric model provides statistically robust evidence supporting the main hypothesis that a multidimensional approach—encompassing human capital, sustainability, innovation, and resilience—has a significant and positive impact on albania’s real gdp growth rate. all independent variables in the model were found to be statistically significant at the 5% level or better. specifically: human capital, proxied by secondary school enrollment rates, has a positive and significant effect (β = 0.213, p = 0.004). this supports the view that long-term investment in education directly enhances productivity and growth capacity. sustainable development, captured through the share of renewable energy in total energy consumption, also shows a positive influence (β = 0.165, p = 0.008). this underlines the economic benefits of transitioning to a green economy, especially in terms of energy security and environmental efficiency. innovation, proxied by r&d expenditure as a percentage of gdp, exhibits the strongest effect on growth (β = 0.348, p = 0.001). this reflects the crucial role of technological advancement and knowledge-intensive sectors in propelling economic expansion. resilience, measured by export diversification, also has a statistically significant and positive effect (β = 0.190, p = 0.021), suggesting that an economy’s ability to withstand shocks and reduce dependency on a narrow set of export goods enhances stability and long-term growth. the model explains approximately 72% of the variance in real gdp growth, indicating a good fit. the high f-statistic (f = 24.36, p < 0.001) confirms the joint significance of the independent variables. these findings support the central hypothesis of this paper: albania’s future growth must be inclusive, innovative, and resilient—driven by strategic investments in human capital, green development, innovation ecosystems, and structural diversification. policy implications the findings of this study suggest that for albania to achieve long-term, inclusive, and resilient growth, policymakers must adopt a multidimensional strategy that moves beyond a sole focus on gdp. based on the econometric model and conceptual analysis, several key policy implications emerge: invest in human capital: enhancing the quality of education, skills development, and health services is central to unlocking productivity and innovation. a targeted focus on vocational training, stem education, and digital literacy would help align the labor market with the demands of a modern economy. foster innovation and digitalization: strengthening the national innovation ecosystem—through r&d investment, support for startups, and digital infrastructure—is essential to transition from low-value-added sectors to more competitive and technologydriven industries. promote sustainable development: economic growth must be aligned with environmental sustainability. this includes incentives for green energy, efficient public irsida dinoshi, ahmet leka 99 transport, and sustainable agriculture practices. integrating the eu green deal into national strategies would also help albania align with future accession requirements. enhance economic resilience: building resilience means increasing the adaptability of institutions and the private sector to external shocks such as climate change, financial volatility, or geopolitical risks. strengthening public sector efficiency, diversifying the economy, and creating fiscal buffers are crucial steps. leverage eu integration: albania’s eu accession process presents a unique opportunity to accelerate reforms in governance, rule of law, and infrastructure. alignment with eu standards can serve as a catalyst for structural transformation and institutional capacity building. 5. conclusions albania stands at a critical juncture in its development journey, requiring a shift in focus from growth quantity to growth quality. this paper has proposed a multidimensional growth framework that places human capital, sustainability, innovation, and resilience at the heart of economic planning. the proposed econometric model, while conceptual due to current data limitations, offers a foundation for future empirical research and policy experimentation. the transition to an inclusive and innovative growth model is not without challenges, but it is both necessary and achievable. by investing in people, promoting sustainable practices, and embracing innovation, albania can foster a development trajectory that is both economically vibrant and socially equitable. the findings reinforce the need for coordinated, forward-looking policies that integrate economic, social, and environmental priorities into a cohesive national strategy. 6. references 1) dervis, k., & klugman, j. (2011). measuring human progress: the contribution of the human development index and related indices. rep, 121(1), pp. 73-92. 2) palnikaj, a. (2015). roli i termocentraleve në prodhimin e energjisë elektrike në shqipëri. tirana: economicus (12). 3) acemoglu, d., & robinson, j. a. (2012). why nations fail: the origins of power, prosperity, and poverty. crown publishing group. 4) european commission. (2023). albania 2023 report. https://ec.europa.eu 5) european commission. (2020). europe 2020 strategy. 6) hausmann, r., rodrik, d., & velasco, a. (2005). growth diagnostics. harvard university, center for international development. 7) oecd. (2021). the path to becoming a knowledge-based economy in the western balkans. oecd publishing. https://www.oecd.org/ 8) rodrik, d. (2011). the globalization paradox: democracy and the future of the world economy. w. w. norton & company. 9) world bank. (2023). albania country economic memorandum: seizing the opportunity for a sustainable and inclusive future. https://www.worldbank.org 10) undp. (2022). human development report 2021/2022: uncertain times, unsettled lives. united nations development programme. https://ec.europa.eu/ https://www.oecd.org/ https://www.worldbank.org/ inclusive, innovative, and resilient: shaping albania's future growth framework 100 11) schwab, k. (2020). the global competitiveness report special edition 2020: how countries are performing on the road to recovery. world economic forum. 12) imf. (2022). albania: 2022 article iv consultation—press release; staff report; and statement by the executive director. international monetary fund. 13) dosi, g., nelson, r. r., & winter, s. g. (2000). the nature and dynamics of organizational capabilities. oxford university press. 14) european commission. (2024). european innovation scoreboard 2024. https://www.cna.al 15) instat. (2023). albanian institute of statistics. https://www.instat.gov.al 16) index mundi. (2023). albania neet rate (male). https://www.indexmundi.com 17) macrotrends. (2023). albania youth unemployment rate 1991-2023. https://www.macrotrends.net 18) oecd. (2023). better life index. https://www.oecd.org/statistics/better-lifeinitiative.htm 19) the global economy. (2023). albania co2 emissions per capita. https://www.theglobaleconomy.com 20) undp. (2023). human development reports. https://hdr.undp.org 21) world bank. (2023). world development indicators. https://databank.worldbank.org 22) world economic forum. (2022). global competitiveness report. https://www.weforum.org 23) cna. (2024, 08 22). retrieved from innovation improves in europe, but albania ranks among the last: https://www.cna.al/english/aktualitet/inovacioni-permiresohetne-europe-por-shqiperia-renditet-nder-te-fund-i406432? 24) countryeconomy. (2024). retrieved from countries data: demographic and economy albania : https://countryeconomy.com/countries/albania 25) dritare. (2020, 06 02). retrieved from ardian civici: mangesitë e pbb-së në matjen e performancës ekonomike dhe mirëqënies: https://dritare.net/opinione/adrian-civicimangesite-e-pbb-se-ne-matjen-e-performances-ekonomike-dhe 26) human development reports. (2023). retrieved from albania: https://hdr.undp.org/data-center/specific-country-data#/countries/alb 27) instat databaza . (2024). retrieved from statistika / tregu i punes : https://databaza.instat.gov.al:8083/pxweb/sq/dst/start__tp__ad__ady/newa dy001/ 28) the global economy. (2024). retrieved from albania: happiness index: https://www.theglobaleconomy.com/albania/happiness/ 29) undp. (2023). retrieved from data futures exchange / albania : https://data.undp.org/countries-and-territories/alb https://www.cna.al/ https://www.instat.gov.al/ https://www.indexmundi.com/ https://www.macrotrends.net/ https://www.oecd.org/statistics/better-life-initiative.htm https://www.oecd.org/statistics/better-life-initiative.htm https://www.theglobaleconomy.com/ https://hdr.undp.org/ https://databank.worldbank.org/ https://www.weforum.org/ agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 19, no. 1 (2025), pp. 67-76 67 the impact of private investment in the circular economy on eu gdp a. cenaj, s. haxhimustafa aulonë cenaj 1, shenaj haxhimustafa 2 ¹ ² faculty of business and economics, south east european university, north macedonia ¹ https://orcid.org/0009-0008-8758-4710 e-mail: ac32332@seeu.edu.mk ² https://orcid.org/0000-0003-4391-3822 e-mail: s.daut@seeu.edu.mk abstract: the main purpose of this research is to analyze the impact of private investments in the circular economy on eu gdp for the period 2010-2020. this research has a sample of 28 eu member states and analyzes a 10-year period. the scientific methodology applied in this study is the quantitative method. the data used in this research are secondary and are generated from official data published by eurostat and the world bank. based on the results of this research, we may conclude that there is a negative relationship between private investments in the circular economy and the gdp of the european union countries for the period 2010-2020. during the period 2010-2020, some eu countries experienced problems in attracting private investments due to difficult economic and political conditions, they had influenced private investments to have a negative effect on gdp. keywords: circular economy, gdp, private investments. 1. introduction this research will discuss the impact of private investments in the circular economy on the gdp of the european union countries for the period 2010-2020. the main variables of this research are: gross domestic product (gdp), private investments and gross value added of the circular economy (ipec), persons employed in the circular economy sectors (ppec), final consumption expenditure (shkf), and inflation (infl). the inclusion of all eu member countries will make the research even more qualitative because it will present a real overview of the impact of these circular economy indicators on the gdp of all eu countries. the indicator of private and gross added values in the circular economy is an indicator that is used to monitor the progress of the economy in the field of competition and innovation. through these indicators, the circular economy contributes significantly to economic expansion and the creation of new jobs. the circular economy may make a significant contribution to the creation of new places of jobs and economic growth. eurostat, on an annual basis, gathers information on the number of employees in the circular economy. this indicator determines if the shift from the traditional economy to the circular economy is producing the desired results by examining the growth of other sectors and the creation of new jobs. on the other hand, the improvements in the productivity of the material as well as the efficiency of the use of the material, are otherwise known as the productivity of the resources. https://orcid.org/0009-0008-8758-4710 mailto:ac32332@seeu.edu.mk https://orcid.org/0000-0003-4391-3822 mailto:s.daut@seeu.edu.mk aulonë cenaj, shenaj haxhimustafa 68 according to eurostat, productivity growth in recent years has been significantly slower than that of labor and energy productivity. the key conclusions indicate that while investment plays a crucial role in enhancing resource efficiency, the combination of innovation and investment significantly contributes to the reduction of environmental degradation (lehmann, cruz-jesus, oliveira, & damásio, 2022). the purpose of this article is to understand the significance of the impact of private investment in the circular economy on the gdp of eu countries, considering the importance of the transition from a linear economy to a circular one, where resources are not discarded but reused. this research also aims to provide recommendations for policymakers in order to create a more favorable environment for private investment in the circular economy. 2. literature review the research conducted by hondroyiannis et al. (2024) analyzes the relationship between a macro-level turnover rate and various macroeconomic variables in a sample of 28 european countries using panel data. the findings suggest a strong positive relationship between real gdp and the turnover rate in the long run, while higher environmental taxes are associated with an increase in the turnover rate. according to hysa et al. (2020), developed economies are innovating to spur growth and are providing government support to manufacturers in order to transition from linear to circular economies. as a result, waste materials in industrial systems are being recycled or reused, improving the efficiency of resource use through a zero-waste approach. the results of both econometric models showed a strong and positive correlation between the circular economy and economic growth, emphasizing the crucial role of sustainability and innovation. according to kaivo-oja, vehmas, and luukkanen (2022), a well-functioning circular economy brings benefits to businesses, people, and the environment. it is described as a systems-based solutions framework designed to tackle global challenges such as climate change, biodiversity loss, waste, and pollution. a key finding of their research is that, within the european union, the levels of synergy between economic indicators, such as gdp and gni, and core variables of the circular economy do not consistently align and may differ significantly from one another. according to brussels et al. (2022), the impact assessment was conducted using a computable general equilibrium (cge) model, as this approach allows for the quantification of both direct and indirect economic and environmental impacts of the simulated shocks. the results indicate that different types of fiscal policies can guide an economy toward a more circular model. research carried out by robaina, villar, and pereira (2020) contrasts the circular economy with the traditional linear economy, emphasizing its potential as a sustainable model for producing goods and services and fostering economic development. with this aim, a series of determinants for a circular economy in europe were analyzed for the period between 2000 and 2016. a cluster analysis was implemented and complemented by three econometric evaluation methods: panel unit root tests, panel co-integration, and a vector autoregression model. the main findings allowed european countries to be grouped into three distinct clusters based on the growth rate of their resource productivity and the explanatory factors selected. the impact of private investment in the circular economy on eu gdp 69 according to hysa et al (2020), industrialized economies are leveraging innovation to stimulate economic growth while also providing governmental support to manufacturers transitioning from linear to circular economic models. as a result, waste products within industrial systems are increasingly being recycled or repurposed, enhancing the efficiency of zero-waste strategies and the sustainable use of limited resources. the results of both econometric models used in their study demonstrated a strong and positive relationship between circular economy practices and economic growth, highlighting the essential role of sustainability, innovation, and investment in zero-waste programs in promoting overall prosperity. the study carried out by lehmann et al. (2022) used data from eurostat and the united nations, spanning 28 european nations from 2011 to 2017, to determine the two primary aspects of the circular economy, which are resource efficiency and environmental degradation. additionally, using dynamic panel models, an analysis is conducted to compare the effects of investment, human capital, innovation, and past turnover levels on each identified feature of the circular economy. the results demonstrated that, as the investment by itself has a substantial role in enhancing resource efficiency, innovation, and investment together greatly minimize environmental degradation, whereas only the investment is also important in the promotion of resource efficiency. the research carried out by nedelea et al. (2018) conducted an empirical study between 2008 and 2015 using cross-sectional analysis applied to the interrelationships between data concerning the eu-28 member countries. the study's focus is on the effect of the bio-economy on economic growth. in the framework of the bio-economy, three econometric models based on ordinary least squares regression are created to emphasize the connections between economic growth, the circular economy, and intellectual capital. the circular economy's added value is positively correlated with the export of recyclable raw materials, employment within the sector, and the rate at which municipal garbage is recycled. on the other hand, the research carried out by bianchi and cordella (2023) suggests that, while encouraging a shift toward more circular economic systems can contribute to reducing the extraction of primary resources, the overall effect of such initiatives remains relatively limited. their estimates show that the amount of primary resources extracted annually due to economic growth is approximately four times greater than the amount saved through circular economy (ce) initiatives. 3. methodology the primary goal of this research is to examine how private investments and the circular economy's gross added value affect the gdp of eu member states between 2010 and 2020. thus, this study demonstrates the effects of private investments and the circular economy's gross added value on the gdp of the 28 eu member states. inclusion of all eu member states, the research will be even more qualitative as it will give a true picture of how these circular economy metrics affect each nation's gdp. the main variables of this research are: gross domestic product (gdp), private investments and gross value added of the circular economy (ipec), persons employed in aulonë cenaj, shenaj haxhimustafa 70 the circular economy sectors (ppec), final consumption expenditure (shkf), and inflation (infl). the scientific methodology that has been applied in this study is the quantitative method, applying the deductive approach, which uses the existing theory to prove the hypotheses and draw conclusions. the data that will be used in the research are secondary data and will be generated from official data published by eurostat and the world bank. these data are mainly annual data presented also in the form of time series expressed in percentages. the results of this study will be analyzed through the stata program. the research questions of this study are: 1. how does the change in private investments and gross added values of the circular economy affect the growth of the gdp of the european union countries for the period 2010-2020? 2. how does the change in the number of employees in the circular economy affect the gdp of the european union countries for the period 2010-2020? 3. what is the relationship between inflation, final consumption expenditure, resource productivity, and gdp for the countries of the european union for the period 20102020? the timeframe 2010-2020 was chosen for this study because it encompasses a complete decade and provides for a thorough examination of patterns and implications of private investments in the circular economy across european union countries. this timeline encompasses the post-global financial crisis recovery phase, an increased policy emphasis on sustainable development, and significant progress in circular economy projects. data availability and trustworthiness are also important factors in this decision, as official statistics and economic indicators for this time are comprehensive and consistent across countries. although extending the period to 2025 would provide more recent insights, data for years after 2020 are sometimes tentative or unavailable at the time of the study, thereby affecting the robustness and comparability of conclusions. as a result, focusing on 2010-2020 assures that the research has a solid empirical foundation and that the policy implications are based on finished and validated facts. the main hypothesis of this research is: h1 private investments and gross added values in the circular economy affect the gdp of the european union countries. table 1: description of variables included in econometric models variables variable review date of source dependent variable (y) gross domestic product (gdp) annual reports of the world bank, time series (2010-2020) (https://data.worldbank.org/indicator/ny.gdp.mktp.kd.zg, 2024) independent variable (x1) private investments and gross value added in the circular economy (ipec) eurostat annual reports on circular economy indicators, time series (2010-2020) (https://ec.europa.eu/eurostat/web/circular-economy/database, 2024) independent variable (x2) persons employed in the eurostat annual reports on circular economy indicators, time series (2010-2020) the impact of private investment in the circular economy on eu gdp 71 circular economy sectors (ppec) (https://ec.europa.eu/eurostat/web/circular-economy/database, 2024) independent variable (x3) final consumption expenditure (fcf) annual reports of the world bank, time series (2010-2020) (https://data.worldbank.org/indicator/ne.con.totl.kd.zg, 2024) independent variable (x4) inflation (infl) annual reports of the world bank, time series (2010-2020) (https://data.worldbank.org/indicator/fp.cpi.totl.zg , 2024) independent variable (x5) productivity of resources in the circular economy eurostat annual reports on circular economy indicators, time series (2010-2020) (https://ec.europa.eu/eurostat/web/circular-economy/database, 2024) source: data processing by authors (2024) to test the hypotheses of this study, the econometric model must be built to prove these hypotheses. this econometric model will look like the following: gdp = β0 + β1ipec + β2ppecit + β3inflit + β4skf + β5prod.resit + γit where: gdp gross domestic product ipec private investments and gross value added in the circular economy ppec persons employed in the circular economy sectors infl inflation shkf final consumption expenditures prod, res resource productivity stochastic variables (other factors not considered in the model), i-code, and t–time period 4. results of the econometric model in this section, the results of descriptive analysis, correlation analysis, and the hypotheses of this study will be tested to test the research questions. the data used in this study are secondary data processed in the stata program and are presented within the panel data. these data are obtained from the world bank and eurostat databases. the time period along which this study extends is the period 2010-2020. here, the results of descriptive statistics, correlation analysis, and hypothesis testing will be analyzed. this testing will be done using standard multiple regression analysis, fixed effect model, random effect model, hausman taylor estimation, gmm model, arellano bond estimation, and gee model. table 2: descriptive statistics for the variables included in the study variable obs mean std. dev. min max ipec 307 .670684 .3352697 .1 1.7 ppec 307 1.787296 .5853898 .4 3.6 aulonë cenaj, shenaj haxhimustafa 72 infl 308 1.415045 1.416978 2.09 6.09 skf 308 1.063534 2.828701 -12 10.1 prod. res 307 1.792713 1.162285 0.29 4.5 mne 306 1.513337 3.546917 11.16 24.4 source: author’s own calculations using stata (2024) from the descriptive statistics, we can see that the research has 307 observations. the ipec variable has a mean of 0.67, a minimum value of 0.1, and a maximum value of 1.7. the ppec variable has an average of 1.78, a minimum value of 0.4, and a maximum value of 3.6. whereas infl has an average of 1.41, a minimum value of -2.09, and a maximum value of 6.09. the shkf variable has 308 observations; an average of 1.06, a minimum value of -12, and a maximum value of 10.1, so the standard deviation is quite high. prod. res has an average value of 1.79, a minimum value of 0.29, and a maximum value of 4.5. the gdp variable has 306 observations, an average of 1.51, a minimum value of 11.16, and a maximum value of 24.4. figure 1. a graphic representation of gdp, ppec, and ipec source: author’s own calculations using stata (2024) from the graphical presentation of the histogram, we can see that between gdp as a dependent variable and private investments and gross added values of the circular economy, as well as persons employed in the circular economy as independent variables, a normal distribution exists. 5. empirical summary of econometric model results the following section presents and interprets the summarized results of the econometric model. the impact of private investment in the circular economy on eu gdp 73 table 3. summary of empirical results from the econometric model variables linear regression random effects generalized least squares (gls) regression fixed effects regression haussmann taylor regression gee model gmm model mne ipec -1.112109 (0.009) *** -1.2 (0.02) ** -1.604146 (0.063) * -1.839911 (0.019) ** -1.280126 (0.021) ** -.5413688 (0.638) ppec -.1421379 (0.546) -.0843017 (0.805) .0202363 (0.979) .3863939 (0.588) -.0828484 (0.808) 1.876413 (0.100) * infl .1694437 (0.06) * .2166044 (0.015) ** .2625833 (0.005) ** 0.2421285 (0.007) *** .2171025 (0.014) ** .2650805 (0.012) ** skf .9977681 (0.000) ** .985045 (0.000) *** .9792111 (0.000) ** 0.9876457 (0.000) *** .9849271 (0.000)*** 1.034553 (0.000) *** prod. res .2939534 (0.02) ** .3481249 (0.06) * 1.134713 (0.01) * 0.5240353 (0.038) ** .3495123 (0.060) * .4058518 (0.685) r square 0.5989 adj. r 2 0.5922 source: author’s own calculations using stata (2024) *significance level 10% ** significance level 5% *** 1% significance level based on the results of the standard multiple regression analysis and the equation of regression, we understand that all the variables of this study are significant at a reliability level of 10%, except for the variable of persons employed in the circular economy, which exceeds the allowed significance. the coefficient of correlation between dependent and independent variables is 59.89%. so there is an average correlation or connection between the variables of this study. the coefficient of determination between the independent and dependent variables is on average high in value, 59.22%, so for 59.22%, the independent variables explain the dependent variable. these results prove that this model is statistically sustainable. β0 whether all factors are constant, then the value of gdp is 0.68. β1ipec if private investments in the circular economy increase by one unit while keeping other factors constant, then gdp will decrease by 1.11 units. this finding is real because the level of significance is 0.009 < 0.05. β2ppec if the number of employed persons in the circular economy per unit increases, keeping the other factors constant, then the gdp will decrease by 0.14 units. this statement is not true because the significance level exceeds the 10% significance level, i.e., 0.54 > 0.05 β3infl if inflation increases by one unit, keeping it constant with other factors, then the gdp will increase by 0.16 units. this statement is true at a significance level of 10%, thus 0.06 < 0.10. aulonë cenaj, shenaj haxhimustafa 74 β4shkf if final consumption expenditure increases by one unit while keeping other factors constant, then gdp will grow by 0.9 units. this finding is real because the level of significance is 0.000 < 0.05. β5prod.res if the productivity of resources increases by one unit while keeping other factors constant, then gdp will grow by about 0.29 units. this finding is because the level of significance is 0.02 < 0.05. therefore, it can be concluded that all independent variables are significant and statistically significant and prove the validity of the hypotheses of this study, with the exception of the variable of employed persons in the circular economy, which is not significant at the 10% confidence level. based on the generated results, we can conclude that there is a positive relationship between inflation, final consumption expenditures, and gdp. the main hypotheses of this research are: h1 private investments and gross added values in the circular economy affect the gdp of european union countries. based on the results, we can conclude that private investments and gross added values of the circular economy affect the gdp of the european union countries for the period 20102020. 6. discussions/conclusions the literature research shows that the shift to a circular economy can have a brief negative impact on economic growth and gdp, particularly during the transition phase. however, all studies underline that this can have long-term benefits for economic growth and sustainable development if implemented carefully and with the assistance of suitable regulations. in the study conducted by kirchherr et al. (2018), the barriers of the circular economy in the eu were examined with 208 respondents and 47 expert interviews. the study finds that cultural barriers, especially a lack of consumer interest and awareness, as well as a reluctant company culture, are considered the main barriers to the circular economy by businesses and policymakers. these are driven by market barriers, which, in turn, are caused by the lack of synergistic government interventions to accelerate the transition to a circular economy. the study highlights that while the circular economy can bring long-term benefits, implementation can cause economic growth to slow down in the initial stages. despite the circular economy focusing on redesigning processes and recycling materials, providing opportunities for more sustainable business models, this article has also identified several tensions and limitations. these include the lack of the social dimension of sustainable development, which limits ethical impacts, as well as unforeseen consequences. the study concluded that the circular economy can contribute to economic growth, but this requires a period of transition and adaptation to achieve positive results (murray, a., skene, k., & haynes, k., 2017). another study examines the macroeconomic consequences of moving to a circular economy. this research suggests that the impact on gdp may vary in the short and long term and highlights the need for supportive policies to aid this transition, supporting our conclusions the impact of private investment in the circular economy on eu gdp 75 on the negative impact of private investment in the circular economy on gdp, especially during the transition period (mccarthy, a., dellink, r., & bibas, r., 2018). based on the statistical data obtained by stata calculations and the fixed effect, we can conclude that changes in private investments and gross added values of the circular economy hurt the gdp of european union countries between 2010 and 2020. in the period 2010-2020, some eu countries experienced problems in attracting private investments due to difficult economic and political conditions, which influenced private investments to have a negative effect on gdp. in countries that fail to create a favorable environment for private investment, gdp growth may be halted or limited. in cases where private investment is limited or negatively affects investor confidence due to factors such as political instability, lack of legal certainty, or insufficient market conditions, it can have a negative impact on economic growth. one of the most important practical implications of this study is the need to improve the private investment climate in the circular economy and comprehend the necessity to migrate to a circular economy. to ensure that private investment has a positive impact on european union countries, the eu needs to improve the investment climate to make private investment more attractive. this can be achieved by improving fiscal and financial policies, providing lower-interest loans to investors, adjusting taxes and fees reasonably, as well as creating a more conducive environment for doing business. furthermore, free and fair competition should be promoted, and more investment should be made in infrastructure and energy to support sustainable development. references 1. bianchi, m., & cordella, m. (2023). does circular economy mitigate the extraction of natural resources? empirical evidence based on analysis of 28 european economies over the past decade. ecological economics, 203, 107607. 2. brusselaers, j., breemersch, k., geerken, t., christis, m., lahcen, b., & dams, y. . (2022). macroeconomic and environmental consequences of circular economy measures in a. 3. hondroyiannis, g., sardianou, e., nikou, v., evangelinos, k., & nikolaou, i. (2024). circular economy and macroeconomic performance: evidence across 28 european countries. ecological economics, 215, 108002. 4. https://data.worldbank.org/indicator/fp.cpi.totl.zg . (mars 2024). pridobljeno iz banka boterore. 5. https://data.worldbank.org/indicator/ne.con.totl.kd.zg. (march 2024). pridobljeno iz banka boterore. 6. https://data.worldbank.org/indicator/ny.gdp.mktp.kd.zg. (march 2024). pridobljeno iz banka boterore. 7. https://ec.europa.eu/eurostat/web/circular-economy/database. (2024). 8. hysa, e., kruja, a., rehman, n. u., & laurenti, r. (2020). circular economy innovation and environmental sustainability impact on economic growth: an integrated model for sustainable development. sustainability, 12(12), , 4831. 9. kaivo-oja, j., vehmas, j., & luukkanen, j. (2022). economic growth and circular economy in the european union: novel empirical synergy analyses between key aulonë cenaj, shenaj haxhimustafa 76 variables of circular economy and gross domestic growth (gdp) and gross national income (gni). oida. 10. kirchherr, j., piscicelli, l., bour, r., kostense-smit, e., muller, j., huibrechtse-truijens, a., & hekkert, m. . (2018). barriers to the circular economy: evidence from the european union (eu). ecological economics, 150, 264-272. 11. lehmann, c., cruz-jesus, f., oliveira, t., & damásio, b. . (2022). leveraging the circular economy: investment and innovation as drivers. journal of cleaner production, 360, 132146. 12. murray, a., skene, k., & haynes, k. (2017). the circular economy: an interdisciplinary exploration of the concept and application in a global context. journal of business ethics, 140, 369-380. 13. nedelea, a. m., mironiuc, m., huian, m. c., bîrsan, m., & bedrule-grigoruţă, m. v. . (2018). modeled interdependencies between intellectual capital, circular economy, and economic growth in the context of bioeconomy. amfiteatru economic, 20(49), 616-630. 14. robaina, m., villar, j., & pereira, e. t. (2020). the determinants for a circular economy in europe. environmental science and pollution research, 27(11), 12566-12578. medimond template agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 18, no. 2 (2024), pp. 44-49 44 general perspectives of career management g. l. bîrlădeanu gheorghina liliana bîrlădeanu faculty of economic sciences, agora university of oradea, romania https://orcid.org/0000-0001-6810-6563, e-mail: gheorghina_birladeanu@yahoo.com abstract: the best way to predict the future is to build it. (abraham lincoln). each of us, the moment one focuses its attention on a field, aspiring to have a certain profession, implicitly thinks about a certain profession. career management integrates career planning and development and also, in a broader sense, implies multiple functional interdependences of planning the career individually, of planning the organizational career and the career development. career management is a point of interest both for the employee and the employer, representing a planning and implementation process of targets, strategies and plans, which allow the organization to satisfy its needs of human resources and the people to fulfill their career purposes. there are individual differences regarding career orientation. humans are not all the same, they differ when it comes to abilities, values, objectives and preferred activities. although different from one another, people do have many things in common. starting from this approach, specialists in this field have revealed modalities of classifying people, modalities that focus on the major models of resemblances and differences regarding career orientation. keywords: career, career management, career orientation, individual career planning, planning organizational career, career development, career strategies. 1 introduction all definitions from specialized literature, through their content, point out psychological domains that are related to aptitudes, aspirations, individual ambitions, in connection with the requirements of the system where the subject works. the important area is the one of individual perception, in relation with its own career, correlated with personal aptitudes and realization possibilities. here it is about to the realism of the person when it comes to its own assessment, an aspect which the counsellor can identify, as well as the aspiration level and the individual motivation (baban, 2003). the field of human resources management defines professional career as a succession of stages, which after being got through, will take the person to an important position, with a better social recognition and better paid. if we also take into consideration the psycho-social aspects hatched by a professional career, from the need to give importance and safety to the individual, the foreign specialists have led the conclusion that this aspect has different connotations, that actually constitute different modalities of individual perception on career. 2 career management therefore, we identify more ”senses” of career: advancement, profession, succession of positions during lifetime, a series of roles during lifetime, connected with experience, https://orcid.org/0000-0001-6810-6563 mailto:gheorghina_birladeanu@yahoo.com gheorghina liliana bîrlădeanu 45 individual perception of the succession of attitudes and behaviour (subjective career), the dinamic frame where life, as a whole, is perceived by a person. from here, we have the distinction between objective career (that includes the development of personell and implies promotion, specialisation, motivation, human resources planning etc.) and subjective career (that focuses on self perception and the role of profession in each person`s life). we consider that it is not desired to emulate such a difference unless from scientific and pedagogical aspects, since practice does not differentiate between social and individual. the only disparity is the one of the perspective of question – of the person or of the organisation. in 1995, v. lefter and a. manolescu stated that ”a paper that intends to approach a certain field of management is, undeniably, an act of courage” ( lefter et al., 1995). this statement refers, both the multiple senses of management, and the special complexity of its problemtics. later on, the variety of the approaches of this field rises. the issue studied is to what extent this activity is seen fair and organised as a normal usance, by employees and also, by employers. it is certain that a huge evolution has happened and there are companies that take this activity to the level of normality. regarding this aspect, professional managers can be identified, but an insufficient number compared to the existing possibilities. thus, the problem that arises is a matter of flexibility and adaptability to dynamics and of being open and receptive towards newness. we understand that in order to define career, it is necessary to take into consideration:  individual contribution to career development;  the contribution of the organizations where they evolve;  the contexts they encounter;  the quality of specific legislation and the modality of applying it. the career dimension integrates a succession of activities and professional positions that a person can reach, such as attitudes, knowledge and other associated components, which develop throughout time. specialized literature presents three important elements in order to understand what a career is: (johns, 1998)  career is a dynamic process along time, which has two dimensions: external career represented by the objective succession of positions that the person has along the years and the internal career resulted from the interpretation that the person gives to the objective experiences by means of his subjectivity;  career represents the interaction between the organizational and the individual factors. the perception of the position, as well as the position taken by the subject depend on the compatibility between what the subject sees as suitable for oneself (aptitudes, needs, preferences), and what the position really represents.  career offers an occupational identity: profession, position held, organization where the person works, all are part of the person`s identity. undoubtedly, people are different, but at the same time, we also have the possibility to identify aspects that they have in common, this leading to the appreciation of similitudes and differences regarding career orientation. therefore, career orientation is a relatively stable pattern of talents, values, attitudes and occupational activities. the career orientation of a person is relevant when we compare it to the profession that the person has. from the compatibility area of the two, we discover important consequences general perspectives of career management 46 for the subject, such as one`s behavior and attitudes at one`s workplace, and also for his state of balance and fulfillment. it is of major importance that each person chooses cautiously his profession; the approach has to be a long term one, activities to be specific, types of organizations, opportunities, possibilities that allow the valorization of natural potential; it is possible to exist a difference between the perception about what the respective profession represents and what it actually means. the career, a term that comes from french, is understood in romanian as profession, occupation and, by extent, either as a good situation, or a position in society. it is different from careerism, perceived as the tendency to make one`s way in the world, no matter what, no matter how. the english dictionary of human resources defines it as a job that you have been prepared for and that you expect to practice your entire life. in a broader sense, the career concept is related to the idea of evolution or advancement of a person in a certain field of activity with the purpose of obtaining increased incomes, higher responsibility, more prestige and more power. the term of career is given different authors multiple meanings (constantinescu et al., 1999):  regarded under the mobility aspect, of ascension in an organization, career is seen as an “advancement”;  regarded as an occupation, it is appreciated that certain occupations represent a career (military people, teachers, managers), while other occupations are designed as positions (waiter, driver, shop assistant etc.);  in another vision, career is seen as “a succession of jobs along lifetime” or a “a succession of positions” in a ranking order of the prestige that the employee has based on a predictive rule;  with respect to the person, the career is considered “an evolving succession of professional activities and professional positions that a person reaches, as well as the attitudes, knowledge and competences developed throughout time”.  in a subjective perception, the career is presented as a series of roles connected to life experience (one`s own conceptions, aspirations, successes, failures etc.), a succession of a person`s roles in the field of work or a succession of separate experiences, correlated among them;  from an individual perspective, career is seen as a succession of attitudes and types of behavior, connected with the work experiences and activities along personal lifetime. this approach refers to the subjective career given by the experiences and roles that appear in a subject`s life and also to the objective career which is based on the job attitudes and behavior;  other authors, in a subjective way, see career from the perspective of the dynamic frame where a person perceives one`s life and gives sense to personal qualities, actions and things that have happened to him or her. carrer management reflects in the progress made in the field of human resources management alongside with the areal of career management. human resources, by their functional values, have become the essential element of competitiveness, at the level of organizations and also at a national level, “becoming the only ones able to differentiate the contribution of each stat in the global competition of technologized economy”, realizing the difference between the success and failure of the organization. gheorghina liliana bîrlădeanu 47 it is of outmost necessity that career management is approached from a point of view of people`s interest and also the one of organizations. within this context, career management takes into account both the career planning process that regards the employee` modalities of advancement in an organization as per its necessities, employees` performances, their potential and their preferences, and also ensuring the managerial succession with the purpose to provide the organization, as long as possible, with the people that it needs so as to reach its objectives. with a view to these interests, the field of career management imposes three general purposes:  to ensure the fulfillment of the organization necessities in the matter of managerial succession;  to offer its employees that have a potential practical instruction and experience in order to prepare them for the level of responsibility that they could reach;  to offer its employees that have a potential the guidance and encouragement they need to develop or not a successful career in the organization, according to their talent and their own aspirations. in such an approach, career management is understood as a process of planning and implementation the purposes, strategies and plans in order to provide the needs of organization in terms of human resources and also the people`s fulfillment in terms of their career purposes. the exactness of career management imposes planning and adjusting the employees` progress in the organization in accordance with the organizational needs analysis, but also in accordance with the potential performances and the employees` individual preferences. sure enough, in the theories of human resources management, career management represents a model that implies multiple functional interdependencies between individual career planning, organizational career planning and career development. with regard to this, a relevant example is michael armstrong`s model who begins with self-assessment, continues with career planning, induction instruction and initial experience and then get to managerial development, career guidance, mentoring and managerial instruction, culminating with career progress. thus, the evolution dynamic regarding career targets the career progress modality, the way in which employees build their professional career, advancing by means of promotion, enlargement or enrichment of roles, taking on higher responsibilities and utilizing the available potential and aptitudes. in this context, the career approach takes three stages: expansion at the beginning of career, stabilization of career path and maturing. (marinescu, 2003) the organization policies from career management perspective impose decisions regarding the proportions to which it forms and develops its own managers (internal promotion), it recruits systematically from exterior and it is forced to bring employees from exterior, then a future deficit is previsioned (manolescu, 2001). in the career planning process, specific procedures are used, these referring to: planning personal development, managerial instruction and development, mentoring, career guidance. we understand that career orientation is a pattern of talents, values, attitudes and preferred occupational activities. a company that implements an efficient career management system has the following advantages:  rising the employees` motivation level with direct effects on work productivity and their fidelity level;  lowering of personnel fluctuation;  rising the image capital of the company; general perspectives of career management 48 if we ask ourselves what is the modality to implement a career management, we understand that there is a need for: in-puts, transformations and out-puts. in-puts are translated as previsions regarding the personnel need on different hierarchic levels, in the results of assessments of employees` potential which give a clear image of the level to which a person can assimilate a type of personal development, a development that can be used as a basis of his or her ascension in the organizational pyramid. the area of assessment is poorly understood and implemented, the firms having to assess performances as in-put in the career management system. the segment of transformations imposes knowledge of company need on all hierarchic levels. the instruments used to go through the journey of employees` development differs according to the employee`s psychological profile, and also according to the intensity of transformations that are necessary to be made by him. therefore, we emphasize the following instruments:  modifications in the structure of tasks/responsibilities at the level of the positions;  rotating the positions;  extension of positions: rising the number of tasks related to the position and/or rising the level of accountability;  enrichment of positions: modifying the structure of accountabilities and/or adding new levels of accountability;  training – it is, probably, the most efficient instrument of transmitting knowledge and, partially, of developing certain abilities;  coaching  mentoring;  delegating – eventually, represents a real simulation of the way in which the employee can handle tasks, that, as some point will be attributed to him. we also need to mention that, in spite of the fact that it seems simple and quick, the pathway of professional development of an efficient career management system can last between 1 and three years for each hierarchical stage. outputs are represented by human resources professionally prepared to cover responsibilities that are of superior importance in the company. the career strategies define the following objectives:  developing competences for defining career strategy;  identifying and correctly analyzing the strategy determinants for career management;  the possibility to establish and justify the role and specific features of didactical career management strategy. career strategies intend to anticipate problems and to plan on a long term. we enumerate some of these aspects below: (mathis et al., 1997)  know yourself proposes an in-depth analysis of career orientation, of week and strong points, of the position in the company.  take care of your professional reputation means to emphasize your abilities and realizations, everything that makes you unique, everything that demonstrates special qualities, the possibility to invest and the capacity to finalize projects. gheorghina liliana bîrlădeanu 49  stay mobile, vendible, always in evolution means to follow the correspondence between personal competences and those wanted on the job market, those that can easily be transferred.  be both a specialist and a generalist refers to developing a field of expertise, of speciality, but keeping a certain flexibility, without limiting yourself. mastering a narrow area makes you inflexible and vulnerable.  document your own successes means to be able to offer the proof of what you have already achieved, the results and identifiable realizations that are more valuable on job market.  always prepare a back-up plan and be ready to take action refers to the will to always be active.  be financially and mentally stable means to always have a secured basis, a comfort and a balance from a mental and financial point of view. these strategies refer to the person and the role of the organization is to care for its internal need but also for the employees` career. 3 conclusions career development is the result of interaction between aptitudes, the subject`s desire to succeed and the opportunities offered by the employer. this means that the more possibilities and professional routes the employer can provide to valorize his studies and to develop his aptitudes, the more the person is satisfied with his career. some specialists in the field regard career development, firstly, as the person`s experience, not related to the organization, this meaning that the responsibility for career development belongs to the person, although the organization can play an important role in facilitating and sustaining the individual career. all these come as a consequence of rapid and continual development of technologies and services, that directly influence career development more and more, and for maintaining a job mentoring and coaching activities are necessary. the development process of a successful career is not an easy thing, it is something built throughout lifetime. nowadays world imposes flexibility and adaptability. references 1. baban, a. coordinator – educational counseling – sc. psnet srl publishing house, cluj napoca 2003 2. constantinescu, d., dobrin, m., nita, a. – human resources management – techinical publishing house, bucharest, 1999; 3. johns, g. – organziational behavior – bucharest, economic publishing house, 1998, p.560. 4. lefter, v., manolescu, a. – human resources management – didactical and pedagogical publishing house r.a., bucharest, 1995; 5. marinescu, p. – public institutions management – lithographed course, bucharest university 2003. 6. manolescu, a. – human resources management – ediţia a iii-a, bucharest, economic publishing house, 2001, pp.322-323. 7. mathis, r.l., nica, p.c., rusu, c. – human resources management – bucharest, economic publishing house, 1997, p.135. agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 18, no. 2 (2024), pp. 212-217 212 the i̇mportance of human resources i̇n enterpri̇ses i. musayev i̇nşallah musayev azerbaijan university of economics, azerbaijan e-mail: musayev54musayev@gmail.com abstract: human resources have an important position in every organization. the main goal of human resource management is to maximize the potential and creative capabilities of employees. human resource management in all organizations is a resource aimed at achieving a strategic goal. the concept of human resources management includes several important factors: hiring, firing, work leave, social leave, performance evaluation, job analysis, career planning nuances related to salary, attendance are necessary tasks related to hr. the purpose of this study is to provide information about the importance of human resources in enterprises and their basic functions. in human resources management, it is inevitable to achieve the goal with the right step forward in terms of hr planning and hr strategy. management of human resources; it is a process carried out by organizations to maximize the work of workers in accordance with the strategic objectives of the employer. keywords: human resource management, hr organization, hr planning introduction human resources are one of the most important resources for every organization, which is a factor that leads to the formation and development of human capital in the enterprise. human resources are planned according to the improvement of the person and the required quality indicators. in today's competitive business world, employees must be committed to achieving the company's overall goals and strive for productivity, including understanding human resource management (marthalia, 2022, s. 700). human resource management in all organizations is a resource aimed at achieving a strategic goal. the concept of human resources management includes several important factors: hiring, firing, work leave, social leave, performance evaluation, job analysis, career planning nuances related to salary, attendance are necessary tasks related to hr (salasiah & others, 2023, s. 262). 1. about human resources the academic aspect of human resources originated in the industrial age. although manual labor was widespread in those days, later with the development of mechanization, it revealed its importance in human capital (ömer, 2018, s. 125). according to sadullah as large enterprises develop in the world, as production becomes mass-produced, there will be a need for mature human capital. with this, human resources will reveal their existence and labor force will be distributed with mechanization (yıldırım, 2022, s. 2). human resources are also important in increasing the economic and social power of organizations through their management effectiveness and productivity. management in an mailto:musayev54musayev@gmail.com i̇nşallah musayev 213 enterprise reveals the functions of human resources and paves the way for a change in the employer-employee relationship for the better by increasing the importance of personnel policy (məhəmməd, 2019, s. 11). human resource managment ? it is a whole of systems that include providing new human resources, protecting and developing existing human resources for the organization of the organization's goal (eski̇ci̇, 2014). human resources have an important position in every organization because it is necessary to use the resources it has, including human resources, to achieve maximum organizational performance. the research aims to identify the role of human resources management in organizations (erdem, 2007, s. 4). the main functions of human resources are: 2. planning of human resources according to arslan's one of the first definitions of human resource planning was developed by e.b. geisler in 1967. geisler defines workforce planning as “the process of identifying, developing, supervising, and employing the right people, who will do the most useful work, in the right place, and in an economically efficient manner.” it is defined as “the process of identifying, developing, supervising, and employing the right people, who will do the most useful work, and who have the right qualifications.” (arslan, 2012, s. 90). human resource planning, which involves correctly estimating how many employees are needed in the labor market using various technical and innovative indicators and correctly determining what kind of workforce is in demand, is a very important process in the formation of the workforce base as well as in employee recruitment planning (okakın, 2008, s. 2) 3. career management according to kirel, another definition of career is in hierarchical organizations. it is "moving up the organizational ladder." in lean organizations, which are considered effective organizational structures today, career refers to the behaviors and attitudes that emerge as a result of work-related activities and acquired knowledge. according to this definition, employees can sometimes build successful careers by holding the same job and position without moving up (bayrak and i̇rmiş 2000,s. 179). defining and properly managing career development depends on many factors. career should be understood not only as a continuous process while working in the workplace, but also in a digital career, even when starting a new business and building a general system or in a digitalized system. career management is the planning of career development activities to support the skills, interests, and competencies of the employee (ölçer, 1997). 4. performance and motivation management performance is the numerical or non-numerical results that emerge as a result of previously planned and intended activities. according to another definition, performance is the results that business employees achieve while performing their duties (bakan, 2003, s. 109). what does a motivated worker look like? they are pleasant when it comes to work, enjoy the difficulties of their work, avoid evil and are loyal to their neighbors. their enthusiasm is a matter of course and affects the general mood and productivity of the commander. they the i̇mportance of human resources i̇n enterpri̇ses 214 arrive at work on time, stay busy all day long, and don't look for excuses to leave work quickly. motivated workers value their work with sincerity. their motivation has a positive impact on other workers (ölçer, 1997, s. 90). motivation is the psychological process that brings workers to action, makes them continue this process, and determines the direction and strength of the action they implement. this is what causes them to endure and apply their energy elsewhere. essentially, workers are motivated by the jobs they see and the context of those jobs (bayraktar, 2019-2020). employee performance cannot be separated from organizational performance. therefore, employee performance and organizational performance must be measured together. it is not possible to achieve organizational performance by measuring individual employee performance alone. in units where a performance management system is not implemented, establishing an individual performance management system without establishing organizational performance management can prevent success (uysal, 2015, s. 35). human resources within an organization should provide motivational methods and technical information in the workplace to increase employee performance and motivation (eroğlu, 1999, s. 277). 5. training and development in every enterprise, training, which is essential for the education and development of employees, is an important factor for the company, and development is directly related to the company's internal personnel policy (singh, 2012, s. 275). a comprehensive training and development program helps to assess the necessary knowledge, skills, competencies, and work relationships, as well as create an advantage in the fight (niazi, 2011, s. 43). according to yıldız “ personnel training is the entirety of the growth that aims to separate people and what they create, to make positive contributions to their skills, product development, decision-making, behavior and attitude, understanding and perception, and to increase their knowledge and developments so that they can perform the operations they currently have or will have in the future in the business more effectively” (merci̇n, 2005, s. 133). in today's age, with technological innovations and innovative developments, a new page is being opened in human resources and it is necessary to review and evaluate the qualified workforce that can continue in today's competition (büyükyılmaz, 2013, s. 89). 6. recruitment when recruiting, it involves the process of searching for suitable candidates, providing applications and selecting them. vacancy of positions in the workplace, increase in work to be done, and opening of different positions due to organizational change or other related requirements are the first initiatives that lead to the need to find new employees (duygu erarslan, 2013, s. 12). in today's organizations, many human resources functions such as recruitment, performance and training use communication technologies. in the recruitment process, applications such as digital e-performance management, e-learning and e-career management allow human resources departments to do their jobs in a shorter time. another human resources function where organizations effectively use communication technologies is i̇nşallah musayev 215 recruitment. communication technologies enable many recruiting experiences, such as online job postings, online interviews, and online tests (öksüz, 2011, s. 268). the recruitment specialist is an important actor who effectively carries out the recruitment process so that the business can achieve its goals and objectives. therefore, determining the perceptions of recruiters towards the candidates during the recruitment process is important for recruiting the appropriate employee (memi̇ş, 2022, s. 1). 7. salary or wage management the labor rights granted to employees in every workplace must be balanced so that the livelihood and financial interests of employees are ensured and that employees have a duty that creates incentives (öztürk, 2010, s. 5). wage concept; all activities for the creation of economic goods and services are called "production". the total of people in the labor force who participate in production with the labor factor and receive wage income in return forms the group of wage earners. the fee is; it is the value in kind or cash received by the labor force who adds mental and/or physical labor for the work performed (öztürk, 2010, s. 5). when the results of the wage survey are to be used in the wage structure of the enterprise, they should be organized according to the wage grades in the enterprise and should be compared according to key jobs or wage grades in the enterprise. these fees are the standards for determining grade wages will create. the starting wages of the ranks and their distribution to jobs will be spent through wage surveys (erdem, 2007, s. 47). conclusions and recommendations in this study, some basic concepts about human resources were mentioned. human resources is one of the important resources to be owned by the company and organization. one of the main functions of a workplace is human resources, called intellectual capital, which is an important input factor for organizations struggling to exist in intensely competitive environments. the role of human resources management throughout the organization is to create an environment that will increase the motivation and efficiency of employees and to provide the necessary policies and technical knowledge to protect and develop this environment. all organizations need to establish a correct human resource planning in order to achieve their goals. therefore, when a qualified workforce is formed or when the correct performance evaluation is provided for them, the desired goal can be achieved. it provides the lead towards creating business superiority by combining organizational goals with the demands of employees. whether the state or the private sector, job analysis and business planning, human resources management and wage management should be the basis for the labor market within the legal framework. references 1. arslan, m. l. (2012, ocak). i̇nsan kaynakları gereksinimi süreç yaklaşımı: staratejik i̇nsan kaynakları planlaması. dergipark, 10(37), 89-101. https://dergipark.org.tr/tr/download/article-file/165699 the i̇mportance of human resources i̇n enterpri̇ses 216 2. bayrak, a. i̇. (2000). in terms of human resources management. sü i̇i̇bf sosyal ve ekonomik araştırmalar dergisi, 177-186. https://dergipark.org.tr/tr/download/articlefile/289696 3. bayraktar, d. d. (2019-2020). i̇nsan kaynakları yönetimi (performans yönetimi). https://ww4.ticaret.edu.tr/isl/wp-content/uploads/sites/114/2020/04/%c4%b0ky-7performans-y%c3%b6netimi.pdf 4. büyükyılmaz, o. (2013). bi̇ilgi yönetimi uygulamaları kapsamında i̇nsan kaynakları yönetiminde meydana gelen değişmeler. uluslararası i̇şletme ve yönetim dergisi, 1(1), 83-99. doi:http://dx.doi.org/10.15295/bmij.v1i1.19 5. duygu erarslan, n. d. (2013). i̇şe alım sürecinde i̇ç kaynaklardan yararlanma politikasının çalışanların örgüte bağlılığı üzerindeki etkisi. dergipark, 10(39), 1121. 6. erdem, e. (2007). "i̇nsan kaynaklarında ücret yönetimi sisteminin oluşturulması ve bır uygulama" (yayınlanmamış yüksek lisans tezi) t.c. yıldız teknik üniversitesi sosyal bilimler enstitüsü. i̇stanbul. 7. eroğlu, e. (1999). i̇şletmlerde i̇nsan kaynakları bölümünün gelişimi ve i̇şlevleri. kurgu dergisi, 267-282. https://dergipark.org.tr/tr/download/article-file/1501183 8. eski̇ci̇, g. t. (2014). ondokkuz mayıs universitesi sağlık bilimleri fakultesi / i̇nsan kaynakları yönetimi. turkey. file:///c:/users/insha/downloads/12.%20hafta%c4%b0nsan%20kaynaklar%c4%b1%20y%c3%b6netimi.pdf 9. i̇smail bakan, h. k. (2003). performans değerlendirme: çalışanların performans değerlendirme uygulamalardan beklentileri konusunda bir alan çalışmsı. 8(1), 103127. https://dergipark.org.tr/tr/download/article-file/195043 10. marthalia, l. ( 2022, september). the importance of human resources (hr) managment in company, volume 1(9), 700-705. doi:journal of world scıence https://jws.rivierapublishing.id/index.php/jws volume 1 no.9 september 2022 doi: 10.36418/jws.v1i9.89 11. məhəmməd, p. q. (2019). “ölkə səviyyəsində insan resurslarından istifadənin tənzimlənməsi". unec-beynəlxalq magistratura və doktorantura mərkəzi, 7-70. baku, azerbaijan. https://unec.edu.az/application/uploads/2019/10/piriyev-q-hr-manm-h-mm-d.pdf 12. memi̇ş, t. (2022). i̇şe alım uzmanlarının kuşaklara bakışı. i̇zmir: t.c. dokuz eylül üniversitesi sosyal bilimler enstitüsü çalışma ekonomisi ve eendüstri i̇lişkileri i̇nsan kaynakları programı. https://www.proquest.com/openview/5d133a2c0525d3a4621614491ba73174/1?pqorigsite=gscholar&cbl=2026366&diss=y 13. merci̇n, u. l. (2005). requirment of human resources management and devlopment activity in terms of educational institutions. elektronik sosyal bilimler dergisi, 4(14), 128-144. https://dergipark.org.tr/en/download/article-file/69865 14. niazi, a. s. (2011). training and development strategy and its role in organizational performance. journal of public administration and governance, 1(2), 42-57. doi:doi: 10.5296/jpag.v1i2.862 i̇nşallah musayev 217 15. okakın, n. (2008, haziran). kariyer yönetiminin bazı i̇nsan kaynakları fonksiyonları i̇le i̇lişkisi üzerine bir çalışma. 8(30), 1-8. https://dergipark.org.tr/en/download/article-file/940566 16. öksüz, b. (2011). e-i̇şe alım sürecinde kurumsal web sitelerinin kullanımı ve konu üzerine bir araştırma. zkü sosyal bilimler dergisi, 17(14), 267-284. https://dergipark.org.tr/en/download/article-file/1145959 17. ölçer, f. (1997). i̇şletmelerde kariyer yönetimi. amme i̇daresi dergisi, 88-103. r https://www.ders.es/287917f71a419b2_ek.pdf 18. ömer, s. (2018). i̇nsan kaynakları yönetimi. i̇stanbul: beta yayınları. 19. öztürk, t. (2010). i̇nsan kaynakları yönetiminde performansa dayalı ücret ve teşvik sistemi. organizasyon ve yönetim bilimleri dergisi, 2(1), 1-10. 20. performans deöerlendirme: çalışanların performans değerlendirme uygulamalarından beklenetileri konusunda bir alan çalışması. (2003). dergipark, 8(1), 103-127. r https://dergipark.org.tr/tr/download/article-file/195043 21. salasiah, & others, j. a. (2023). the role of human resource management in the organization. international journal of social science research and review, 6(12), 262273. file:///c:/users/insha/downloads/1791-article%20text-4021-1-10-20231221.pdf 22. singh, h. (2012). training and development: a prominent determinant for improving hr productivity. 2012 international conference on management and education innovation, 37, 274-278. https://citeseerx.ist.psu.edu/document?repid=rep1&type=pdf&doi=18f85e3b634d665f b21129a60db32ca09064919f 23. uysal, ş. (2015). performans yönetimi sisteminin tanımı, tarihçesi, amaç ve temel unsurlarına genel bir bakış. electronic journal of vocational colleges, 32-39. 24. yıldırım, k. s. (2022). i̇nsan kaynakları yönetimi fonksiyonlarından eğitim. türkiye: süleyman demirel universitesi. https://dergipark.org.tr/en/download/articlefile/2040507 agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 18, no. 1 (2024), pp. 275-289 275 communication and conflict in ipj x d. fofiu daniel fofiu faculty of economic sciences, agora university of oradea, romania e-mail: fofiudan@gmail.com abstract: optimal communication of the system reveals its advantages also within the romanian police. the work of a policeman is based on my own knowledge and communication skills and now that i work in the ministry of internal affairs, i noticed that this opinion has been substantiated and even emphasized. one thing is certain: being part of a law enforcement body is not easy. the criminal environment is highly dangerous and most criminals want to escape impediments that place them outside the limits imposed by law. the policeman is in the crosshairs of the offender. taking into account all these aspects, the policeman must be in continuous communication, collaboration with other colleagues and develop various methods of identifying those who commit antisocial acts. the greater number of law enforcement teams can lead to deterrence for criminals. working in the system, i can say that the optimization of the communication process is permanently targeted by police officers and, as a result, many cases can be solved. keywords: communication, conflict, policeman, management. introduction inherently, conflict is also a common factor in today's society. looking around us, we can notice numerous divergences between different groups of people, between different individuals, nations. the sources generating conflicts are of the most diverse: the desire for power, supremacy, prejudices, different perspectives on an issue, etc. conflict is inevitable, but, managed correctly, it can lead to the resolution of many problems. 1. the role of communication and conflict in maximizing performance 1.1. communication and conflict. theoretical considerations as for the communication process, it has received several definitions in doctrine. we rally with mckay m.'s view as a foundation of life, a source of happiness, fulfilment, and satisfaction; only through communication, he believed, can people gain trust in other people (florea, 2017:10). another definition of communication that we want to present in the preamble of this work, belongs to d.r., according to which communication is something omnipresent, something that is always near us and in us. through it, we convey not only words, but also stimuli or actions. one of the definitions of conflict that stood out was that formulated by michael brecher. he considered conflict as a hostile confrontation that extends over a longer or shorter period of time, considering conflict not as something static, linear, but as a dramatic phenomenon, with multiple valences in intensity and frequency. conflict is a process, not a specific event (brecher et al., 2000:3). mailto:fofiudan@gmail.com 276 1.2. the motivation-performance relationship in modern management motivation is the force that pushes a person towards a certain ideal, a goal, it is that intrinsic element that opens the way to the satisfaction given by the fulfilment of a dream, aspiration, desire. over time, several theories of motivation have been created. most of these theories have pointed out that people, regardless of status, ethnicity, gender, etc., have a certain scale of needs. these needs, however, are not the same for all people, but are different from individual to individual. this difference is normal and is determined by several conditions. among these conditions we mention: the environment in which the individual lived or heredity (the spiritual and inner inclinations of the individual, unlike the external aspects, are not given by heredity but by the environment, the entourage that man had around him); education; personal conception of the person (the individual's ability to make an introspection, an analysis on his skills, on his capabilities, on the qualities and defects he has) ; life experience, etc. (petrișor-mateuț, 2019). all these factors play an important role in determining the needs of some people. in any organization, success depends on the quality of people. in order to increase their performance, companies adopt two different models of action. some of them focus mainly on the material, external side of things, while others focus on people's principles, their way of thinking. the first category includes actions such as financial reward, control of the employee and the application of sanctions when he does not perform a task correctly. in the second category, managers make an analysis on the way of "being" of the people they subordinate, on the way of thinking, on their principles. following this analysis, actions will be taken to strengthen, modify or discourage certain employee precepts in order to reach the desired goal: the benefit and development of the company. performance is an element that is closely related to success. in order to achieve a coveted result in a field, some effort must be made and the individual must prove, among other things, seriousness and professionalism. if we were to summarize all these aspects, we could say that the individual, in order to achieve his goals, must aim for performance. this means that he must have a well-organized schedule, be determined when he starts a ministry, and not give up when things do not go as he anticipated. in terms of types of performance, the doctrine refers to three types: psychic performance, physical performance, and psychophysical performance. psychic performance takes into account certain objective physical valences such as metabolism or biorhythmic state. this type of performance can in turn be of two types: intellectual dominant, in which reason has the last word and nothing triumphs over it, or emotional dominant. the latter takes into account feelings, momentary states, which play a particularly important role in making decisions, lifestyles. psychophysical performance is that type of performance in which it is not possible to establish which is more dominant: the physical side or the psychic side (petrișor-mateuț, 2019). we believe that the performance of an individual is closely related to the performance of a group. any project of a certain value, any more expensive work requires teamwork, requires a group of people working together, supporting each other, to reach the intended goal. whether we are talking about private companies or state institutions, it is easy to see how a man's negligence can affect the entire work and all the work of his colleagues. in the police, for example, it is enough for a policeman to slander the name of the romanian police by committing a crime, so that all the hard work done by his other colleagues to make this society communication and conflict in ipj x 277 a safer place is forgotten and blamed. as for human performance factors, they can be internal or external. the internal ones can be genetic, educational, training, etc., and the external ones can be informationalinstructive and educational, which refers mainly to school and family, and technicalorganizational and psychosocial, which refers to state structures and market economy (petrișormateuț, 2019). 1.3. the role of evaluation in maximising performance in order for a company or state institution to develop and achieve success, a periodic performance evaluation is needed. this analysis involves an internal control within the ongoing activities, an analysis after which it can be known exactly what are the strengths and which are the weaknesses that need to be remedied. as any firm or any kind of institution is composed of many people, it is important to look at how to evaluate human resources. thus, when assessing the performance of human resources, the evaluation of human potential and ability to evolve will be taken into account; behaviour evaluation and performance evaluation. the assessment of potential takes into account the establishment that a particular individual has an inclination towards the activity he carries out. this aspect must be established because only when he does what he likes, man can develop and reach great performances. the behaviour evaluation takes into account how the person treats the work they perform, the attention and meticulousness they give to the smallest details because, often, they make the difference. last but not least, performance evaluation takes into account the results that the employee reaches as a result of his efforts. following this analysis, depending on everything the employee has achieved, the director or the immediate boss can reach a conclusion either to keep the individual on the job or to move him to another activity he would be better at. as a result of all these controls, it will be possible to identify factors of progress and regression, a rational distribution of tasks, a better distribution of staff by posts, etc. 2. case study. police romanian. 2.1. general characteristics: duties, significance, classification for the performance of his duties, especially to fight for the maintenance of a climate dominated by peace and security, the police officer shall be vested with state authority, with public authority, but only during and in connection with the performance of his duties, within the limits of the competences established by law. law 360/2002 states in article 2, paragraph 2 that the authority of the policeman's office cannot be exercised in personal interest. if a police officer abdicates the rules laid down for the exercise of his office and acquires certain advantages by exercising the profession of policeman, he commits an offence. one of these offences to which i wish to refer is provided for in article 295 of the criminal code, as subsequently amended and supplemented, which deals with embezzlement. thus, article 295, paragraph 1 provides that the appropriation, use or trafficking by a public official, for personal interest or for another, of money, benefits or goods he manages or administers is punishable by imprisonment from 2 to 7 years and the prohibition of the right to exercise a public office (lupașcu, 2022). the police officer must exercise his professional activity and perform his duties for the 278 sole purpose of citizens, the community and in the interest of state institutions. in the exercise of his duties, the police officer must adopt an impartial, objective attitude, clearly analyse things and thus reach a correct conclusion in order to achieve justice. the welfare of the society to which he belongs must be the foundation of the individual's decision to become an organ of law. on the contrary, the policeman will not be able to prove fairness and verticality when he is offered, for example, a certain amount of money for non-fulfilment or defective performance of some job duties. the law on the status of police officers also outlines the grades in which police officers in both categories can fall. thus, there are the following ranks: quaestor general of police; chief quaestor of police; chief police quaestor; police quaestor; chief commissioner of police; commissioner of police; deputy commissioner of police; senior police inspector; police inspector; police sub-inspector. in the category with secondary education there are: chief police officer; chief police officer; deputy chief police officer; senior police officer; police officer (law 360/2022 on the status of the policeman). all activity that is carried out by the romanian police must be based on: the principle of legality, the principle of liaison of police officers with citizens, the principle of cooperation in work between police formations, units and cadres, the principle of operability, the principle of finding out the truth, the principle of formality and the principle of the active role of police units (constantin, 2014:13-14). from an organizational point of view, the romanian police includes: the general inspectorate of the romanian police, territorial units subordinated to igpr, dgpmb and county police inspectorates, educational institutions for the continuous training and training of police officers and other units necessary to fulfil specific police duties. there are forty-one county police inspectorates, corresponding to the number of counties in romania. all these are subordinated to the general inspectorate of the romanian police. the existence of a police inspectorate at the level of each county in romania is necessary because, as i mentioned before, crime in romania is gradually increasing. for example, on the official website of the general directorate of police of bucharest, the crime coefficient in different sectors of the country's capital is presented. thus, in sector 1, in 2020, the crime coefficient was 99.88%, in 2021 102.8%, and in 2022 112.58% (retrieved from: https://b.politiaromana.ro/ro/informatii-publice/coeficienti-de-criminalitate). a central management would not be able to cope with knowing the criminal situation and, above all, stopping and diminishing it. on the basis of all these considerations, there are forty-one police inspectorates which are intended to know several aspects of the territory over which they exercise jurisdiction. thus, a well-trained policeman should know the territory in terms of extent and location, peculiarities of the geographical area, ways and means of transport, etc. police officers also need to know the population in the county where they work. it should be known the structure of the population (number of inhabitants, their age, their occupation, etc.), the relationships between citizens, the customs that exist in the respective county. from a police point of view, the civil servant with special status will have to identify both persons likely to commit crimes and those who have committed crimes. also, the policeman will have to identify people who can provide information of operational interest to prevent possible antisocial acts. another particularly important aspect concerns the criminal situation. criminal status means the total number of antisocial acts, contraventions or crimes https://b.politiaromana.ro/ro/informatii-publice/coeficienti-de-criminalitate communication and conflict in ipj x 279 that were committed in a certain place over a certain period of time. the police officer will have to pay special attention to the criminal status in order to know what type of crimes are consumed with predilection in his area of competence and thus create means by which to remove the conditions that favour the occurrence of antisocial acts. the police officer must also take into account events of any nature that are organized in the county. he will have to first inform himself about the nature of the event, about how such events took place in the past, about the pluses and minuses of police activities to maintain public order and safety, and finally, to take appropriate decisions to ensure a climate of tranquillity and peace during the event that will take place. last but not least, the police's own forces and means will be taken into account. the number of staff, their professional training, their physical and mental strength, sources of information, etc. will be taken into account. by knowing all these details, the police will be able to ensure justice. the law enforcement body must be aware of everything that happens in its territory of competence, take note of everything that is happening and act promptly and operatively to stop crimes. also, teamwork reveals once again its importance, the greatest achievements requiring cooperation between several structures or formations, being the result of actions of the communication process. 3. the first pillar of the romanian police: ethics 3.1. code of ethics and deontology of police officers we live in a world where the concepts of "good and evil" are losing more and more of their essence, acquiring an increasingly pronounced shade of grey. what we want to convey by this is that the good of one man can be the misfortune of another and vice versa. the truth is that everyone has a different perspective on the universe. to one degree or another, the individual "falls prey" to the socio-political, cultural and economic context in which he is born. great influences on the conception of life will also have family, friends, school and entourage. it is true that to one degree or another we all need the same elements to survive (oxygen, water, food, etc.), but we must recognize that beyond this core, we are much more complex than we imagine. on a more superficial level, as i pointed out earlier, we want different things. if the definition of the notions of good and evil may differ from person to person in certain areas, within the romanian police things acquire a special simplicity in this respect due to the normative acts and not only, which draw a series of principles, rules governing the activity carried out by police officers. within these normative acts we are presented, among others, the duties of the policeman, the conduct he must have in carrying out his duties, his rights and obligations, etc. thus, an overview of what "good" means and what "evil" means, the good being seen in the form of how a law enforcement body must relate to society and its own duties, and evil being presented by what a policeman should not do. law nr. 218 of 23 april 2002 on the organization and functioning of the romanian police, republished, with subsequent amendments and additions, outlines a "good" to be achieved and maintained by police officers in the form of their duties. thus, in chapter 3, article 26, we are presented with several main tasks:  defending life, freedom of persons,  protection of public and private property, fundamental rights of citizens, 280  application of measures necessary to maintain public order and security,  preventing and combating crime,  identifying and stopping elements that pose a danger to the life and integrity of persons and to public or private property, etc. from all this information, it is concluded what the concept of "good" refers to within the romanian police, namely the safety of citizens. ensuring a climate of tranquillity and peace, in which all fundamental rights of the human being and of the citizen are respected, is the very goal that law enforcement bodies must achieve. in order to fulfil this desideratum, the policeman must prove maximum responsibility and attention in everything he does, to prioritize the welfare of society over his own well-being and comfort. the aforementioned law not only sets the standard to be achieved, but also provides the means by which it can be reached. thus, in article 31 of the same law, we are told that the police officer is vested with the exercise of public authority and thus: legitimizes and identifies persons, according to the legal provisions; leads persons whose identity could not be established at police headquarters; perform body control of persons and baggage check when there are serious indications that the person would hide objects prohibited by law; carry out raids when there are indications that a crime has been committed; carry the necessary weapons and ammunition, etc. also, for drawing a difference between good and evil within the romanian police, another document has significant value. it is about the code of ethics and deontology of the policeman, approved by government decision nr. 991 of 25.08.2005. taking into account the significance of the police within society, the legislator considered it appropriate to draw up a series of norms for the policeman to follow exactly, a scale of values or a set of precepts to govern the activity of law enforcement bodies. in any democratic state, bodies vested with the exercise of public authority must have a respectful and, why not, irreproachable conduct. these bodies must be an example of honesty, justice and fairness. being under these attributes, police officers will have a greater credibility among society, they will be respected and honoured for the way they execute their activities. in its preamble, the code outlines its purpose and refers to the main functions of the police. thus, in article 2, paragraph 1, we are informed that this code establishes a set of rules of conduct for the romanian police officer. any policeman must follow these rules with all his might. in order to prevent a possible abuse of power, the code also refers in the same paragraph to the fact that any person may require the police officer to comply with the rules laid down in the code. thus, man is not encouraged to have a passive attitude when he encounters a law enforcement body that abuses his power, but on the contrary, he is encouraged to require the policeman to adopt a conduct worthy of his profession. the code of ethics and deontology of the police emphasizes the fact that police activity is a public service, all police missions being carried out in the interest of individuals and the community, as well as in support of state institutions, as provided in the international and domestic legislation applicable in the field. all the primary activities carried out by the romanian police perfectly fit the idea presented above. protecting the rights and freedoms of individuals, defending public and private property, preventing and combating crime are the main functions of the police that are exercised in the interest of the community, of the state. communication and conflict in ipj x 281 article 6 sets out the principles governing the professional conduct of police officers. these are as follows: legality, equality, transparency, capacity and duty of expression, availability, priority of public interest, professionalism, confidentiality, respect, moral integrity, operational independence, loyalty. to these precepts is added the principle of presumption of innocence. it takes into account that until there are good reasons to prove that a crime has actually been committed by a person, the individual will be considered innocent. the police officer must perform his prerogatives with maximum objectivity and in a fair manner. he will have to develop the ability to think "coldly", that is, not to be influenced by what he feels would be right, but to meticulously research every detail and after a thorough analysis, to arrive at the right solution. we have previously stated that law enforcement bodies must respect human rights and fundamental freedoms. all actions that police officers take towards any person must be in strict accordance with the law and must not allow the policeman to be influenced by certain characteristics of the individual (origin, ethnicity, nationality, sex, etc.) one of the most important documents when it comes to presenting people's rights and freedoms is the universal declaration of human rights, adopted on december 10, 1948 by resolution 217 a at the third session of the united nations general assembly. among the rights that are enshrined in this document we mention: civil rights (right to life, inviolability of housing, free movement, etc.); political rights (right to asylum, right to choose, citizenship); economic rights (right to property, equal pay for equal work); procedural rights (right to a fair trial, right to effective remedy, etc.) and social rights (right to work, right to social security, right to rest and leisure). 3.2. managerial communication-cybernetic system the good, in order to be encouraged and increased, must be rewarded accordingly. evil, equally, must be properly punished in order to be deterred and stopped. for this society to progress, exceptional deeds undertaken by a person must be recognized, appreciated and ultimately rewarded. deep down, the individual has the desire and, why not, the need to be appreciated, the need to belong to a certain collective. thanks to this striving, the individual overcomes his limits and makes great efforts to achieve a result. the employee wants to be appreciated by others after all his efforts. the individual constantly feels the need to be useful to his fellows. we, as a society, must always have our eyes open to see these people and encourage and appreciate them for their actions. only by doing so, the organization will achieve its goals through the reward system, awards, etc. the population in general. this system of thinking is also found within the romanian police. many police officers and agents go to great lengths to solve complex cases. they often sacrifice their free time, and sometimes even their family, so that eventually the truth will come out in a given situation and justice will be served. from our point of view, this sacrifice on the altar of justice must be observed and rewarded accordingly. currently, among the existing means for rewarding police officers who achieve outstanding results we mention: advancement in rank, awarding a diploma of excellence, handing out plaques of honour, etc. finally, we notice how all the normative acts presented in this chapter have the role of defining within the romanian police the eternal concepts of "good" and "evil". all the rights and obligations of police officers, all perceptions that must govern the activities undertaken by 282 police officers, all principles for the application of police measures, form a whole by which the legislator defines "morality" for law enforcement bodies. the "good" defined in this sense is continually encouraged by rewarding people who show initiative and dedication and who sacrifice themselves, often for the sake of high moral principles. 4. the second pillar of the romanian police: communication 4.1. the role of forms of communication in police activity regarding the levels on which communication is carried out, the doctrine refers to three: verbal, written and nonverbal communication (cuc et al., 2015:44). verbal communication is it is an important form of communication and has several characteristic features that differentiate it from other types of information transmission. verbal communication is permissive and circular, in the sense that, within it, one can easily return to details or information that appeared after the formulation of the basic message. this type of communication is influenced by circumstances, in the sense that the receiver can perceive the message differently, depending on the state of fatigue, the level of stress, his mood. last but not least, verbal communication is influenced by the individual traits of the sender and receiver. written communication is a much more formal type of communication than oral communication and is characterized by readability, adequacy and fairness. in this type of communication, medium-length phrases must be used, common expression and unnecessary words must be avoided so that the receiver can perceive the message as well as possible. written communication has a number of advantages, but also a set of disadvantages. among the advantages, we mention: the possibility of distance communication, the possibility of the sender to linger on the message before transmitting it, the possibility of transmitting more complex messages, so that the receiver always has access to information and can reread it. among the disadvantages of this type of communication, we refer to: feedback is delayed, sometimes even absent, for the elaboration of a written message the effort is higher, the receiver does not have the opportunity to ask questions, etc. nonverbal communication is by far the most important form of communication. peter f. drucker said in this regard that the most important thing is to hear what no one says (cuc et al., 2015:68). nonverbal communication involves an accumulation of signs that can be encoded by the receiver and that can contradict, reinforce or replace what the sender wanted to express. the receiver pays the most attention to this type of communication. among the basic characteristics of this type of communication we mention: the fact that it is unintentional, emphasizes verbal communication, is the expression of the level of culture and civilization, can contradict some aspects of verbal communication, is most often marked by ambiguity. according to mehabrian a. and weiner m., in oral communication 55% of information is retained and perceived through nonverbal language (gestures, mimicry, facial expression, etc.) (cuc et al., 2015:68). within the romanian police, we encounter all these types of communication. the use of a particular type is determined by the circumstance of the policeman. thus, in a discussion with several colleagues to establish an action plan, verbal communication will be mainly used. written communication occurs most often in the prosecutor-police relationship, when the prosecutor will give him a note of instructions, in which he will inform him of the steps to follow in a certain case, usually more complicated. communication nonverbal is determined communication and conflict in ipj x 283 by tense situations, which do not allow police officers to communicate with each other. for example, in an altercation, the policeman who is assaulted by a large number of malicious people, through a gesture, can convey to his colleague a certain idea (use of tear spray, use of weapons, call for reinforcements). 4.2. functions of managerial communication and managerial communication styles with applicability to ipj x the main objective of communication is to modify the behaviour of the receiver. the objectives of communication are diversified. in doctrine we are given multiple other views as to which they are or should be below the objectives of communication. one of the opinions we also agree with is the one presented by nicki stanton. according to him, through communication we must: be received, be understood, be accepted, provoke a reaction (stanton, 1995:1). these are the four major goals when it comes to communication, and if you fail to achieve at least one of them, you can consider that the communication process has failed. on the contrary, if all these goals are achieved, it can be considered that the communication process has been achieved in the best conditions. in order to achieve the latter result, communication must perform several functions. among them we mention: information (providing information necessary to perform tasks, providing information for implementing decisions, ensuring access to information); transmission of decisions (communication of decisions taken at unit level and creation of a climate conducive to compliance and fulfilment); influencing the receiver (initiating dialogues with employees / subordinates to know their personal opinion about certain situations, encouraging dialogue between employees to create the family framework); employee training (informing employees of the skills and capabilities they need to develop, amplifying the ability to solve spontaneous problems); image creation (development of consciousness of belonging to a particular group fighting for the same goal); motivating employees and promoting organizational culture (manolescu, 2010:8). these communication functions are also respected and monitored within the romanian police. the most important function of communication, namely information, is considered, in particular, by those holding leadership positions. the boss informs the subordinate about the existing criminal situation and gives him instructions on how best to act. the transmission of decisions shall also take place within this institution in a timely manner. this function of communication is also performed by those who are in leadership positions. following a thorough analysis, the head of the unit makes certain decisions and subsequently initiates a meeting through which he will inform subordinates of its content. image creation is the function that is crystallized mainly by the existence of the uniform. by wearing the same clothing and channelling all their energy towards the same goal, police officers gain a sense of power and devotion to their institution. lacking the cohesion of teams, police training is carried out by hierarchical chiefs through different means: training, other courses. within it, the hierarchical heads will inform the agents and police officers about the rules they must respect in conducting criminal investigations, in the complex process of finding out the truth. they will be subject to different procedures for compliance with the rules within the managerial communication program. this function of training plays a substantial role in training and maintaining highquality professionalism. 284 communication style refers to a set of interpersonal behaviours used in one circumstance or another. what is important to remember is that there is no right or wrong style of communication. it all depends on certain situations, on the context. the doctrine retains several styles of communication: passive communication (refers to the ability to avoid conflict by neglecting one's own needs and desires and prioritizing the interests of the other); aggressive communication (is at the opposite pole of passive communication and refers to the use of threats or ridicule to attack another person's concepts); assertive communication (it is in the middle between passive and aggressive communication and refers to expressing points of view in a diplomatic manner so as not to disturb the interlocutor), etc. (cuc et al., 2015:27). the communication styles mentioned above are also found mainly within the romanian police. thus, in the hierarchical chief-police relationship, the communication style based on the directive will be pragmatically felt. the superior will assign a series of tasks for the subordinate with the expectation that the latter comply with them exactly, according to the saying: "order is order." the egalitarian style will be felt in the police-policeman relationship, that is, between colleagues. being in a more complicated situation, the policeman can ask for advice from other colleagues, relating to them in a friendly manner, based on mutual trust. the structuring style is mainly used by immediate bosses in work meetings. police officers are regularly instructed on the rules they must follow and the procedures to be applied so that all fundamental rights and freedoms of citizens are respected. the dynamic style, as the name suggests, we identified in tense situations, where action is superior to communication. in order to capitalize on an operative moment, the basic information must be communicated as succinctly as possible, following the catch of the offender in flagrante. the abandonment style is rarer, but it refers to that situation where, due to the criminal's dangerousness, the policeman calls a crew of gendarmes to face him, as they have specialized training in this regard. thus, the policeman, in those moments, can be said to adopt a support role, the gendarmes fulfilling the main activity. finally, the last style of communication, that of avoidance, is found especially in the police-suspect relationship. being interviewed, the suspect often chooses not to answer the questions asked by the policeman and either nonchalantly changes the subject or adopts silence as a way of defence. we identify here the role of the investigator trained with specific techniques to lead the dialogue towards the achievement of the ultimate goal of the communication process: finding out the truth. 4.3. the importance of knowing body language communication through body language is, on the other hand, one of the most important types of communication that a police officer must pay attention to. about 55% of communication is expressed and transmitted through the body. body communication can reinforce or contradict what a person says. when communicating, a person uses, voluntarily or involuntarily, facial expressions (frowns, smiles, etc.), gestures (hand movement, body position), etc. a person may also communicate through; orientation (whether or not to look at the interlocutor), body contact (a light pat on the shoulder), body movements, etc. (stanton, 1995:2). when interviewing a witness, a suspect, an injured person, tc., the policeman must pay special attention to all these factors. by understanding the body language of the person being interviewed, the policeman will know what to focus on or, conversely, what to avoid. communication and conflict in ipj x 285 for example, if the interviewee raises his eyebrows while the policeman is talking about a certain aspect, this is a sign that the individual has been aroused attention and interest. in those moments when the law enforcement body will notice this reaction of the interviewed person, the policeman is encouraged to continue the topic addressed, and then ask the necessary questions. another particularly important aspect that will be taken into account by the policeman refers to the position of the head. a slight tilt of the neck is a sign of openness. the neck is one of the most vulnerable parts of the human being and by the fact that the person interviewed chooses to expose it, it means nothing but trust and comfort. when observing this body language, the policeman must continue the discussion so as to maintain this climate conducive to declaring the truth. while the suspect relates what happened in response to the officer's questions, the position of the palms can make all the difference when it comes to the accuracy of the information provided. a person who has open palms is a person who does not hide anything and who is honest. this body language is also a good "honesty detector." crossing your heels is another body movement that says a lot about a person. if during the story, the suspect crosses his heels, this is a sign of discomfort and stress. most of the time, this move is carried out at key moments of the statement, when the person feels guilty and tries to mask the truth. another very important body language is to put your thumbs in your pocket. this gesture denotes insecurity and fear. usually, the suspect uses this body language when the officer is more authoritarian and raises his voice. it is recommended that the police officer be calm throughout the interview so as not to influence the suspect (joe, 2018). it will be considered noticing the inconsistency between verbal and nonverbal communication, trying to adopt "positions" to support the lie, tracking the authenticity of statements with the help of polygraph. 5. conflict resolution 5.1. conflict between obstacle and necessity since the beginning of the world, it seems that one element that has existed and continues to exist is conflict. as we have shown in previous chapters, people being different, have different, often divergent goals and interests. one person's gain may represent another's loss. it is natural for everyone to want to achieve their goals, but the problem lies in how to reach the "bottom". it should also be pointed out that there can also be conflicts within a group of like-minded people who have different perspectives on how to achieve success. so, the occurrence of conflicts is not limited to having different goals, but also extends to the means used to achieve an objective. as for the types of conflicts, opinions are divided in doctrine. we will rally to the view that there are three types of conflict: personal conflicts; interpersonal conflicts and organizational conflicts (agabrian, 2008:61). personal conflicts refer to different ideas, desires or values that the individual keeps within himself, and which often conflict with each other. this type of conflict is also generated by the battle between personal inclinations and group expectations, between doing what is advantageous and doing what is seen and welcomed by others. interpersonal conflicts refer to the fact that between people there are differences in perceptions, experience, interests, etc. they often compete for limited resources (salary, promotion, etc.) 286 organizational conflicts arise when differences in authority and power within an institution are not mutually accepted. as stated before, conflicts are inevitable and present within any institution. therefore, there are also certain divergences in the romanian police that need to be noticed and eventually remedied. the three types of conflicts presented in mircea's book agabrian also makes their presence felt within the police inspectorates. personal conflicts often arise before a hearing. the policeman will have to form a wellorganized, thought-out action plan, prepare the most appropriate questions and meticulously document the facts that occurred and the person to be heard. the ultimate goal is simple: to find out the truth and hold the guilty to account. to get to this point, the policeman may have different, sometimes even divergent, ideas and strategies. for example, if a murder was committed and as a result of this act several objects used by the criminal were seized, the police officer must decide whether presenting these tools to the suspect during the hearing will be beneficial to solving the case or will delay the criminal investigation. some suspects may provide useful information to the police during the hearing, but after presenting materials that could accuse them, they may enter a state of nihilism, absolute denial and may decide to remain silent and not provide any more information. as a result, the law enforcement body must inform itself about the suspect's temperament and personality and, based on this information, plan its work. interpersonal conflicts are mainly present between co-workers. given that a limited number of police officers can be proposed for early advancement, some of the police officers and agents fight hard to stand out in different cases or cases. unfortunately, it can also go to the bad extreme where police officers will no longer be willing to lend a helping hand in conducting investigations. we could also observe this at the "alexandru ioan cuza" police academy in bucharest. some students, in order to have as high an average as possible and thus choose the first places in the distribution, responded negatively to their colleagues who asked them to send them the subject for exams. this "hunger" for limited resources makes its presence felt even in school. organizational conflicts are also present within one of the most important state institutions. these can be generated, for example, by the discrepancy in experience and still holding a management position. this is visible when an individual graduates from the police academy and is employed as an officer, sub-inspector. officers are superior to police officers given the university training they have. thus, a 21-year-old can be put (and often is) in the position of assigning tasks for his colleagues, police officers, who can be over 40 or 50 years old. they often do not accept instructions from a younger person, and this creates a tense situation. 5.2. how to resolve conflicts once a conflict is identified, it must be resolved immediately by extinguishing or integrating it. the conflict resolution activity is a pressing one because conflict, by its intrinsic nature, can affect the image of an institution (coman, 2009:181). the more prestigious the institution, the more a divergence or misunderstanding will affect how the organization is viewed. when it comes to the romanian police, seen as an institution with a fundamental role in ensuring a climate of peace and safety in society, the way conflict is managed has strong communication and conflict in ipj x 287 influences on it. even if citizens cannot know the source of a conflict, they will notice the tension existing among police officers and errors or shortcomings in performing work activities. this can cause distrust of the population in the capabilities and professionalism of persons vested with the exercise of state authority. to avoid this, conflicts must be remedied or integrated once they are detected. these processes will demonstrate the efficiency of the management system and in the following, we will present some ways to resolve conflicts within the romanian police. one of the most important ways to remedy various misunderstandings is dialogue. i believe william isaacs' vision of dialogue (a way to extract energy from our differences and channel it into something new, novel and beneficial (isaacs, 1999:1) is a true and complex one. daniel yankelovich believed that dialogue has three primary characteristics:  equality and absence of any coercive influences (parties to the dialogue are seen as equal, regardless of the degree of authority they hold)  empathic listening (the side in a dialogue must put itself in the position of the other party and vice versa)  open expression of thoughts and assumptions (yankelovich, 1999:41-44). we believe that through an efficient dialogue, in the sense of the ideas presented above, most of the problems within the romanian police can be remedied. a misunderstanding that can be resolved through dialogue concerns the situation when a complex case is assigned to a larger number of police officers, and each of them has different ideas on how to solve the case. the different vision on solving a case is often an element that unnecessarily delays finding out the truth in a criminal case. however, achieving justice is a goal that must be achieved immediately, and so police officers must come to a common point. an effective way to achieve this is dialogue. in a meeting, police officers should objectively present their proposed means of prosecution, accompanied by relevant arguments. after listening carefully to each opinion, they may agree on the application of one of the methods presented. it is worth emphasizing, however, that this is not a question of having right or wrong perspectives regarding the settlement of the case, but of finding the most efficient method of finding out the truth in a case. another useful way to resolve conflicts between parties is negotiation. the importance of negotiations derives from the fact that they can lead to better collaboration within and outside the institution and from the fact that negotiations can help an individual earn a reputation as a problem solver (manolescu, 2010:82). according to other views in the doctrine, negotiation is a process by which we manage to get what we want from those people who want something from us; a process aimed at resolving a conflict between two or more parties who are willing to reach a mutually acceptable compromise; a process by which we convince the other party that our proposals are pertinent and of interest (kennedy, 1998:9). the doctrine emphasizes two main elements common to every negotiation situation encountered in practice: mutual dependence and mutual adjustment (manolescu, 2010:85). 6. conclusions and recommendations communication and conflict exist everywhere in the contemporary world. the setting in motion of any mechanism depends on these two main elements. properly managed, both communication and conflict will reveal their advantages and encourage progress and empowerment. 288 communication, in particular, is indispensable when it comes to complex tasks or expensive projects. in the absence of the ability to transmit information, the project is destined to fail. as i show in the content of this paper and within the romanian police, communication plays a basic role in finding out the truth in different situations. effective communication between chief and subordinate, between colleagues and between policeman and citizen, will make the prosecution faster and more operative. of all types of communication, by far the most important is nonverbal communication. many times people try to hide something, and they are now experts in the art of obfuscation. an individual with some knowledge of body language will be able to detect those gestures, expressions, movements, etc. that betray what a person wants to convey. the importance of verbal communication derives from the fact that it is present in most interpersonal conversations and from the fact that it often conveys more details and information than verbal communication (kory, 2013:204-205). the policeman must know mainly body language given the type of people he faces on a daily basis. in an attempt to evade prosecution and get away with it, the offender will resort to numerous means of concealing the truth. however, a well-trained police officer will manage to notice, despite everything that the offender transmits, certain behaviours and gestures that indicate that the person in question is telling lies. currently, there are numerous courses within the romanian police for initiating and improving law enforcement bodies in the mysteries of nonverbal communication. one of the courses that police officers can attend is entitled: "body language. the art of nonverbal communication". conflict can play an important role in detecting malfunctions and resolving them. conflict, by its complex nature, puts an insurmountable barrier in carrying out daily activities, declares, in other words, a "pause" in the uninterrupted run towards achieving goals. within the romanian police, conflicts often arise. they manifest themselves at the level of several relationships: boss-subordinate; policeman-policeman; policeman-citizen. their existence should not be seen as a permanent barrier to policing, but should be perceived as signals that something needs to change. by using the most effective methods of conflict resolution, dialogue and negotiation, police officers can overcome any vicissitude and move forward on the path of professionalism. communication and conflict remain paramount elements within the romanian police system. the optimal communication process at the level of law enforcement bodies and their capacity to resolve conflicts form the unshakable foundation on which one of the most important institutions of the romanian state must be based: the police. references 1. agabrian m., effective communication strategies, european institute, 2008. 2. brecher m., wilkenfeld j., a study of crisis, usa, michigan press, 2000. 3. chaturvedi p.d., chaturvedi m., business communication: concept, cases and applications, pearson edu, india, 2011. 4. coman c., crisis communication, polirom, iasi, 2009. 5. constantin e. c., police tactics, sitech publishing house, craiova, 2014. 6. cuc s., tripa s., managerial communication, university of oradea publishing house, communication and conflict in ipj x 289 oradea, 2015. 7. explanatory dictionary of the romanian language, univers enciclopedic publishing house, bucharest, 2016. 8. florea v.n., organizational communication in the context of globalization, pro universitaria, bucharest, 2017. 9. isaacs w., dialogue and the art of thinking together, currency books, new york, 1999. 10. joe n., body language, harpercollins publishers, 2018. 11. kennedy g., the perfect negotiation, national publishing house, bucharest, 1998. 12. kory f., interpersonal communication, polirom, iasi 2013. 13. krizan a.c., et al., business communication, 8th edition, cengage learning, 2011. 14. lupașcu d., criminal code, criminal procedure code, universul juridic, 2022. 15. manolescu a., communication and conflict management, agora university press, oradea, 2010. 16. petrișor-mateuț o., human resources motivation and professional performance, agora university press, oradea, 2019. 17. robbins s. p., organizational behavior, mcgraw hill, boston, 1998. 18. stanton n., communication, society of science and technology sa, 1995. 19. van cuilenburg j.j., scholten o., noomen g.w., the science of communication, humanitas, bucharest, 2004. 20. vocate d.r., intrapersonal communication, different voices, different minds, lawrence erlbaum, assoc. inc. pub., ny, usa, 2012. 21. yankelovich d., the magic of dialogue, simon and schuster, new york, 1999. 22. zsuzsanna k., between conflict and economics. ensuring future well-being and safety, lumen, iasi, 2007. legislation: 23. charter of the united nations, san francisco, june 26, 1945, chapter vi. 24. code of ethics and deontology of police officers, articles 1, 6. 25. labour code of 24 january 2003, republished with subsequent amendments and completions. 26. universal declaration of human rights, 1948. 27. government decision 294/2007 on the organization and functioning of the "alexandru ioan cuza" police academy within the ministry of administration and interior. 28. https://b.politiaromana.ro/ro/informatii-publice/coeficienti-de-criminalitate. 29. law 360/2022 on the status of the policeman. 30. law nr. 218 of 23 april 2002 on the organization and functioning of the romanian police, articles 26, 31. 31. statute of the national union of police and contract personnel of the ministry of internal affairs, art. 1. 32. www.snppc.ro/istoric. azerbaijan state university of economics unec agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 17, no. 2 (2023), pp. 54-67 54 grey flowless, or predicting capital outflows in cryptocurrency g. j. amrahova gunel jannataly amrahova azerbaijan state university of economics (unec), azerbaijan https://orcid.org/0000-0002-6710-5961, e-mail: gunel.amrahova.c@sabah.edu.az abstract: globalization and irrational capital distribution have fuelled global financial crises. illicit transactions on a global scale worsen financial challenges, limiting government spending on public services. amid these challenges, blockchain technology and cryptocurrencies have emerged as potential solutions. due to anonymity public identification through “keys”, some scholars argue that cryptocurrencies create an opportunity for misuse as an easy tool for money laundering, tax evasion and illegal activities. this study investigates the relationship between illicit finance flows and cryptocurrency markets, utilizing grey systems theory and grey relational analysis. drawing samples from 41 states with the highest cryptocurrency trade volumes, the research reveals nuanced dynamics within the cryptocurrency market, shedding light on the connections between cryptocurrencies, shadow activities, and capital outflows. the findings contribute valuable insights to the ongoing discourse on the impact of cryptocurrencies on global financial stability. the intricate exploration of these interconnections underscores the need for a comprehensive understanding of the role cryptocurrencies play in shaping the contemporary financial landscape. keywords: globalization, illicit finance flows, cryptocurrency markets, grey systems theory, financial stability introduction even though relevant national policies and international regulation are in place, lack of transparency and corruption, especially in developing countries, reduce effectiveness of these practices in stimulating financial stability, resulting in tax evasion and growth of criminal activities (fanusie & robinson, 2018). this means, that centralized financial systems and state power have proven insufficiency in combating illicit activities. therefore, the need in searching for new systems and tools which could better deal with existing challenges greatly increases. one of such innovative systems was brought to economic world through invention of blockchain systems and its application in trade transactions through cryptocurrencies, offering higher efficiency and transparency for financial transactions. according to european commission, cryptocurrencies contribute to the establishment of ‘trust between two mutually unknown and unrelated parties to such extent that sensitive and secure transactions can be performed with full confidence over an open environment, such as the internet’. this solution has introduced a new economy, namely ‘crypto economy’. in the early 1990s physicists stuart haber and w scott stornetta published the first paper to outline the use of a chain of cryptographically secured blocks to preserve the integrity of past information to protect it. this paper was followed by the subsequent seminal whitepaper “bitcoin: a peer-to-peer electronic cash system” in 2008 by satoshi nakamoto (a group of people), where the scholars described the financial transactions that can be made through the use of blockchain systems, adding practical value to previous research in this area. https://orcid.org/0000-0002-6710-5961 mailto:gunel.amrahova.c@sabah.edu.az gunel jannataly amrahova 55 cryptocurrency is the largest primary application of blockchain technology and is recently experiencing an unprecedented rise with market capitalization surpassing in 2018 $335b (bright, koskinen, & malm, 2019). in academic literature, opinions on the long-term existence of cryptocurrencies are separated, however several key applications have been identified by several sources. for instance, report of the uk government (lerner, 2003) states that blockchains have the capacity to ‘reform our financial markets, supply chains, consumer and business-to-business services, and publicly-held registers’. one of the key scientific opinions in this area is the analysis of babbitt and dietz (babbitt and dietz, 2014), which define cryptoeconomy regardless of ‘geographic location, political structure or legal system, but using cryptographic techniques to constrain behavior in place of using trusted third parties’. foundational principles of the blockchain technology are cryptography, smart contracts, distributed consensus and system architectures. as a novel financial concept cryptocurrency is anticipated to remove inefficiencies identified in the financial industry, such as overcentralisation, too many intermediaries, unwillingness to delete or change historic records, tracking issues and others, adding more practical value of the current research due to the need to get a more informed perspective of how well cryptocurrency is performing with regard to transparency of financial transactions. cryptocurrency has demonstrated tremendous growth over last years, and the volume of trade transactions in cryptocurrencies multiplies every quarter (broséus et al., 2016). the key advantages of cryptocurrency comparing to its precedents is its decentralized, or distributed nature. unlike other forms of money, crypto money is not a promissory note issued by states or their central banks, rather it is a speculative code issued by individual miners (brown, 2016; glaser et al., 2014). use of cryptographic signatures and smart contracts and peer-to-peer networks, which form the heart of cryptocurrency distributed consensus systems allows from the one hand, confidentiality for the financial transactions, while on the other hand, transparency and credibility in financial interactions and operations. cryptocurrency is a revolutionary form of money, and by its functions and nature significantly differ from all other forms of money ever existed. cryptocurrency deliver key monetary functions deriving from its nature as described by the main relevant theories of commodity, debt (credit) and fiat theories of money. cryptocurrencies proved successfully delivering store of value function of money, ensuring transparency of transactions made in this currency and parties of these transactions accountable for their content. however, on the other hand, even though trade transaction both on national and international level continue to expand by means of cryptocurrencies which can be used for provisioning trade supply, the integrated distributed ledger still fails with carrying mean of exchange function, compared to its alternatives, namely national fiat currencies. although, crypto market continues to grow and saturate both from technical and economic viewpoints with progressively increasing number of currencies mined over the world (mukhopadhyay et al., 2016; corbet et al., 2020), number of arguments and misinterpretations around the concept of cryptocurrencies also boosts in the academic literature (lee et al., 2019; farrugia et al., 2020; alvarez, 2018). majority of debates around the impact of cryptocurrency are posessed on the state of shadow and illegal activities and capital outflows from one country to another. further development and expansion of trade transactions using cryptocurrency creates the concerns around the nature and governance issues associated with this currency. grey flowless, or predicting capital outflows in cryptocurrency 56 existing debates among economists on governance and regulation of cryptocurrency can be resolved by describing the technical nature of this phenomenon (irwin & turner, 2018; (yermack, 2013; brière, oosterlinck, & szafarz, 2013; brito, shadab, & castillo, 2014; buchholz et al., 2012). unlike the centralized or decentralized systems, shared and distributed data structures or ledgers, or blockchains, can securely store digital transactions without using a central point of authority, blockchain platforms instead of a single trusted center management, allow each individual network member within a distributed network of digital users to hold a copy of the records’ chain and partner on the valid state of the ledger with consensus, safeguarding integrity of the ledger. new transactions are linked to previous transactions by cryptography which makes blockchain networks resilient and secure. despite overarching interest of international agencies towards revealing and measuring trade using cryptocurrencies, assessment of cryptomarket maturity by states remains challenging task for global cryptocurrency researchers and scholars (lee et al., 2019, farrugia et al., 2020; alvarez, 2018; hileman & rauchs, 2017). very few methodologies consider cryptocurrency markets maturity in a complex context, paying attention to mainly volume and number of transactions made in these endogenous currencies. however, while internet users continue safely to transact on the internet, international organizations should ensure crime finance, including three-dimensional rendering (source of funds, ways of transferring the funds and use of funds) is not flowing through this channel (jacquez, 2016). according to existing views on cryptocurrencies (brezo and bringas, 2012), due to anonymity public identification through “keys”, cryptocurrencies create an opportunity for misuse as an easy tool for money laundering, tax evasion and illegal activities. in the broadest form, illicit financial flow cover illicit activities, in particular the provision of services or the production, sale, possession or use of goods forbidden by law, including the illicit production and trafficking of drugs, the illicit manufacturing of and trafficking in firearms, trafficking in persons, and money laundering, as defined in the relevant international treaties. (c.williams, 2018). many researchers (farrugia et al., 2020; brown, 2016; bichler, malm, & cooper, 2017) define international financial flows in four main categories in accordance with the activities, generating these transactions, and point out inefficiencies of current financial systems and need of decentralized systems. according to analysis of decker et al, financial institutions establish trust through audit process (möser & narayanan, 2019), proposing a software-based audit of bitcoin exchanges. this way financial institutions eliminate state and private intermediary actors, such as auditors, replacing latter with software relying on trusted computing. there are studies that have been already carried out about illicit financial flows within crypto market (liu & tsyvinski, 2018; liu, tsyvinski, & wu, 2019; brezo & bringas, 2012), however, majority of them are based on application of mathematical and statistic techniques to estimate cryptocurrency market maturity. furthermore, the empirical results of research carried up to date lacks consideration of many supplementary factors, impacting market maturity and development. therefore, the purpose of the research is to provide scientifically based and empirically proven evidence to hypothesis on existence of relation between the two concepts, one of which reflects an economic power (liu & tsyvinski, 2018), while another one impedes international equality and sustainability. the current research is grounded on two fundamental theories. first, quantity theory of money defines the key factors, impacting scale and maturity of cryptocurrency as a broad term, introduced as money and successfully delivering key money functions, such as store of value, gunel jannataly amrahova 57 and ideally medium of exchange. quantity theory of money describes the value of money using its key parts, namely money supply, its velocity and demand for money. according to the quantity theory of money, cryptocurrency market maturity was identified based on the cryptocurrency market cap (money supply), cryptocurrency velocity (transaction volume divided by cryptocurrency market cap) and demand for cryptocurrency. to analyse cryptocurrency components in the most inclusive way, we used a grey system theory approach, which is broadly applied to decentralized systems’ research (broséus et al., 2016; bichler & malm, 2013; farell, 2015), such as cryptocurrency. being interdisciplinary, grey system approach can explain the complex relationships between the elements of cryptocurrency as a multifaceted system of different elements, since decentralized systems need "a whole systems perspective, including levels, spheres, sectors and functions and seeing the community level as the entry point at which holistic definitions of development goals are from the people themselves and where it is most practical to support them. it involves seeing multi-level frameworks and continuous, synergistic processes of interaction and iteration of cycles as critical for achieving wholeness in a decentralized system and for sustaining its development" (undp, 2021). as major part of grey system theory, grey relational analysis was applied during the research since the cryptocurrency system is comprised from the elements with novel features and limited information available. application of grey relational analysis is driven by several reasons. first, the current research deals with huge amount of uncertain information, especially the one, related to illicit capital flows (kuo, yang, & huang, 2008). second, being very complex and uncertain, illicit finance flows require examination of its elements before making assessment and predictions of the system as a whole. through application of grey relational analysis, a complex umbrella series with observable and latent variables in face of cryptocurrency was produced and analysed and further examined to have a link with the level of illicit financial flows (holz et al., 2020), constructed by gfi (gfi, 2018). after grey relational research is completed and grades are obtained, we are comparing the grey coefficients against globally applied illicit finance flow estimations in order to reveal the possible correlation between these two concepts. finally, we conducted relational analysis of different social, political and economic exposure and development criteria of sustainable development of nations in order to answer the fundamental question of the research and examine the relationship between cryptomarket maturity of the countries and the state of their illicit finance flows. research methodology the current study, based on grey systems theory application, aims to scientifically reveal the grey relational coefficients of different criteria, which describe the maturity of the cryptocurrency, and examine impact of cryptocurrencies on the state of illicit trade with the existing information gaps. selection of criteria of cryptocurrency system is grounded on the key components of currency system in accordance with the quantitative theory of money. the theory of grey relational analysis is nowadays broadly used in many different areas, including finance markets performance analysis, money markets and economic analysis. it was first introduced (deng, 1982; deng, 1989) as a response to gaps and incompleteness of research data related to the studies of actual problems, including illicit and illegal economic activities. the scholar introduced grey elements and relations to express the level of trust to the source of grey flowless, or predicting capital outflows in cryptocurrency 58 research information in any area and explained the behavior of mechanisms using grey clustering. linking social and natural science through framing mathematical models for quantitative analysis with uncertain and incomplete information, grey relational analysis aims to help with decision making using multiple variables and factors. unlike the other methodologies, applied to measure and estimate cryptomarket maturity, our methodology involves grey system theory and grey system analysis, which is not a statistical method. the reason for using grey system is a significant complexity of statistical methods and quite a large number of causes of illicit financial flows, which obscures the calculations and at high risk of creating chaotic datasets with huge discrepancies. to successfully implement the proposed research, we used the following methodological approach: 1. based on quantity theory of money we defined the key components of cryptocurrency and developed a list of key criteria, that contribute to market maturity and saturation: cryptocurrency market cap (money supply), cryptocurrency velocity (transaction volume divided by cryptocurrency market cap) and demand for cryptocurrency. our data was constructed upon eight key features, which broadly reflect key currency market indicators, applied to crypto type of money. based on the criteria, the cryptocurrency dataset was created for 41 countries with the largest number of cryptocurrency traders in the world. 2. using grey system theory approach, which is broadly applied to decentralized systems’ research (broséus et al., 2016; bichler, malm, & cooper, 2017; farell, 2015), such as cryptocurrency, we adopted grey relational analysis, since the cryptocurrency system embraces elements with novel features and limited information available, e.g. this is a system with grey parts. interdisciplinary grey system methodology successfully explains complex relationships between the elements of multidimensional decentralized cryptomoney system. we adopted the grey relational analysis to our cryptocurrency dataset with multiple variables describing cryptocurrency market environment in order to identify the maturity of cryptocurrency markets. within this framework we construct the decision matrix, grey relational coefficients and identify the ranking of the countries by cryptomoney market maturity. 3. we have completed multiple regression analysis in order to answer the fundamental question of the research and examine the relationship between cryptomarket maturity of the countries and the state of their illicit finance flows in a more sophisticated way using latent variables, such as level of political and economic exposure. therefore, after grey relational research is completed and grades are obtained, relational analysis was conducted by comparing the grey coefficients against globally applied illicit finance flow estimations in order to reveal the possible correlation between these two concepts. we then matched the result of grey relational coefficients to the list of countries with the level of illicit finance flows to reveal the correlation possible. to study the relationship between crypto market capitalization and illicit financial flows data collection approach is based on data points obtained from global finance institution, world bank, un comtrade, coinmarketcap and dataworld databases. we selected countries and ranked them by following criteria: i. crypto market maturity identified for the country x ii. illicit financial flow of the country x identified as per the un data using trade misinvoicing tools and techniques iii. social, political and economic exposure and development criteria of sustainable development of nations. gunel jannataly amrahova 59 the following steps were conducted during the grey relational analysis: i. the evaluation matrix was produced based on the information collected on the key criteria, describing the maturity of cryptomarkets. ii. we then develop our standard series with the target values of selection criteria in our decision making model. this series will identify our reference points in the decision making problem. iii. after creating our matrix with 41 countries and 8 attributes of crypto markets we perform grey normalization in order to be able to compare the country series for each attribute. the values in the normalized series will be in the interval from 0 to 1. we apply three traditional methods of normalization to our data. for attributes, where higher is better for a selection criterion, or attribute, we apply the following calculation: 𝑥𝑖∗(k) = 𝑥𝑖(k) − 𝑚𝑖𝑛 𝑘 𝑥𝑖∗(k) ⁡ 𝑚𝑎𝑥 𝑘𝑥𝑖∗(k) −𝑚𝑖𝑛 𝑘𝑥𝑖∗(k) ⁡ where, 𝑚𝑖𝑛 𝑘 𝑥𝑖∗(k) ⁡is a minimum value as per selection criteria i in the decision matrix, 𝑚𝑎𝑥 𝑘 𝑥𝑖∗(k) ⁡is a maximum value as per selection criteria i in the decision matrix for attributes, where lower value is more desired for selection criteria, we used the following procedure: 𝑥𝑖∗(k) = 𝑚𝑎𝑥 𝑘 𝑥𝑖∗ (k) − 𝑥𝑖(k) 𝑚𝑎𝑥 𝑘𝑥𝑖∗(k) −𝑚𝑖𝑛 𝑘𝑥𝑖∗(k) ⁡ for selection criteria with a given desired value within the evaluation matrix, we perform the following method: 𝑥𝑖∗(k) = 1 −⁡ |𝑥𝑖(k) − 𝑥0(k)| 𝑚𝑎𝑥 {𝑚𝑎𝑥𝑘𝑥𝑖(k)−𝑥0(k);⁡𝑥0(k)⁡–⁡𝑚𝑖𝑛𝑘𝑥𝑖(k)}⁡⁡⁡⁡ where 𝑥0(k) is a desired value of alternative (country) k iv. once the normalized sequence is ready, we calculate the deviation sequence as an absolute difference between reference sequence and comparable sequences. this action is performed for further obtainment of grey relational coefficient. so, we subtract normalized decision matrix values and standard series values and get an absolute value of this subtraction equation, as indicated below: ∆0𝑖(k) = |𝑥𝑖∗(k) − 𝑥0∗(k)| ⌊ ∆01(1) ∆01(2) ∆01(5) ∆02(1) ⁡⁡⁡⁡∆02(2)⋯ ∆02(5) ⋮ ⋮ ⋮ ∆12(1) ⋯ ∆12(5) ⌋ v. once the concluding matrix is ready, we identify grey relational coefficients of attribute k for alternative i (country) 𝑦(𝑥0(k), 𝑥𝑖(k)) = ∆𝑚𝑖𝑛⁡ +⁡ζ ∗ ∆𝑚𝑎𝑥⁡ ∆0𝑗⁡−ζ ∗ ∆𝑚𝑎𝑥⁡⁡⁡⁡⁡ where ∆𝑚𝑎𝑥⁡refers to the highest value in the deviation sequence, ∆𝑚𝑖𝑛⁡represents the lowest value in the difference sequence grey flowless, or predicting capital outflows in cryptocurrency 60 y is the grey relational coefficient, and ζ is an adjustment coefficient between ∆0𝑗⁡ and ∗ ∆𝑚𝑎𝑥⁡, which belongs to an interval from 0 to 1. for the purposes of the current research we used ζ equal to 0.5. vi. based on grey relational coefficients we construct the grey factor matrix: ⌊ y01(1) 𝑦01(2) 𝑦01(5) y02(1) ⁡⁡⁡⁡𝑦02(2)⋯ 𝑦02(5) ⋮ ⋮ ⋮ 𝑦12(1) ⋯ 𝑦12(5) ⌋ vii. and finally, we identify our grey relational grades. grey relational grade displays the similarity between the normalized decision matrix and the standard series. similarity increases as the grey relational grade increases, and therefore the highest similarity gives the best alternative in the decision making challenge. if the importance levels of the selection criteria in the decision making problem are equal, the grey relational grade is calculated as τ(𝑋0, 𝑋𝑖) = 1 𝑚 +∑𝑦(𝑋0(k), 𝑋𝑖(k)1) 12 𝑘=1 however, with different importance levels of attributes in the decision making problem, a different equation is used: τ(𝑋0, 𝑋𝑖) = ∑𝑦(𝑋0(k), 𝑋𝑖(k)) ∗ 𝑊𝑖(k) 12 𝑘=1 where 𝑊𝑖(k) is a weighted value of the selection criteria i. for the purposes of the current research, we have proportionally distributed the value among all the criteria. results as mentioned above, traditional grey relational analysis procedure was adopted to assess the level of cryptocurrency market maturity. within this framework we construct the decision matrix. first, using grey relational analysis we evaluate maturity and performance of cryptocurrencies in the countries and then compare this to the state of iff. selection criteria of our evaluation matrix is built upon a set of attributes for selected countries with the largest share of cryptotraders in the total amount across the globe. as a result, 41 economies were selected, namely china, united_states, japan, united_kingdom, india, canada, hong_kong, australia, brazil, switzerland, russia, mexico, saudi_arabia, singapore, sweden, poland, malaysia, united_arab_emirates, vietnam, turkey, chile, norway, philippines, south_africa, denmark, czech_republic, new_zealand, pakistan, morocco, colombia, romania, hungary, nigeria, argentina, peru, ukraine, kazakhstan, kenya, dominican_republic, croatia, tanzania. the following criteria was selected for alternatives (scenarios):  cryptocurrency trading volume in 2020, mln usd  share of trading volume in m2 broad money supply  average trading value per user gunel jannataly amrahova 61  number of cryptoowners  share of cryptoowners in total population  legal status of cryptocurrencies  regulatory framework for cryptocurrencies: (application of tax laws, anti-money laundering/anti-terrorism financing laws, or both)  countries that have or are in the process of issuing their own national or regional cryptocurrency we then develop our standard series with the target values of selection criteria in our decision making model. this series will identify our reference points in the decision making problem. we have applied normalization to our data due to measurement differences of the criteria selected. since there is no standard of what should be the value of our preferred reference 𝑥0(k), when creating a normalized comparable sequences, the reference sequence was chosen from given original values of comparable sequences. since all criteria have “the higher – the better” characteristic, target values for each of our criteria/sub criteria is selected as max values among all countries observed. since as mentioned the values in the evaluation matrix had “the higher – the better” characteristic, the normalized values were calculated using the following formula from part 2. research data and methodology: 𝑥𝑖∗(k) = 𝑥𝑖(k) − 𝑚𝑖𝑛 𝑘 𝑥𝑖∗(k) ⁡ 𝑚𝑎𝑥 𝑘𝑥𝑖∗(k) −𝑚𝑖𝑛 𝑘𝑥𝑖∗(k) ⁡ for example, the attribute “cryptousers_share_of_population” for united_states was obtained as follows: 0.489429 = (6,46-min(range” cryptousers_share_of_population”))/(max range” cryptousers_share_of_population”-min range” cryptousers_share_of_population”) the other values have also been calculated in the similar way. after normalized table is ready, deviation sequence can be calculated as a difference between reference (target) value and comparable sequence. to calculate the absolute value of the difference between the target, or reference, value and comparable sequence, we applied the following formula ∆0𝑖(k) = |𝑥𝑖∗(k) − 𝑥0∗(k)| for example, “legal status of cryptocurrencies” for japan was calculated as follows: ∆03(3) = |𝑥3∗(3) − 𝑥0∗(3)| ⁡=⁡| 1 0.06104752| = 0.93895248 we applied the similar calculation for all countries and for each criterion to produce the table shown above. this formula shows how far the values of comparable sequences are from the values of target sequences. if the difference values are close to 0, it means that the comparable sequence values are close to the reference sequences, or target values. and vice versa, if the difference values near to 1, it means that the comparable values are far from the desired target value. after difference sequences are ready, we used these values to calculate grey relational coefficients. our adjustment coefficient ζ between ∆0𝑗⁡ and∆𝑚𝑎𝑥⁡was chosen as 0.5. grey flowless, or predicting capital outflows in cryptocurrency 62 𝑦(𝑥0(k), 𝑥𝑖(k)) = ∆𝑚𝑖𝑛⁡ +⁡ζ ∗ ∆𝑚𝑎𝑥⁡ ∆0𝑗⁡−ζ ∗ ∆𝑚𝑎𝑥⁡⁡⁡⁡⁡ for instance, to calculate the grey relational coefficient average transaction value per user for vietnam, we applied the following formula: 𝑦(𝑥0(5), 𝑥12(5)) = ∆𝑚𝑖𝑛⁡ +⁡0.5 ∗ ∆𝑚𝑎𝑥⁡ ∆0⁡12⁡−0.5 ∗ ∆𝑚𝑎𝑥⁡⁡⁡⁡⁡ to obtain the respective grey relational coefficient, we need to obtain first the highest and the lowest deviation values in the range of country values for criteria average transaction value per user: ∆𝑚𝑖𝑛⁡ = ⁡0 ∆𝑚𝑎𝑥⁡= 1 once the minimum and maximum deviation values are known, grey relational coefficient average transaction value per user for vietnam is calculated as follows: 𝑦(𝑥0(5), 𝑥12(5))⁡= (0+0.5*1)/(0.989898+0.5*1) = 0.335593 similarly, we obtain the other grey relational coefficients. after grey relational coefficients are calculated, we can obtain grey relational grades by using the following equation: τ(𝑋0, 𝑋𝑖) = ∑𝑦(𝑋0(k), 𝑋𝑖(k)) ∗ 𝑊𝑖(k) 12 𝑘=1 for the purposes of the current research, the importance of each criteria was selected equal. grey relational grades represent the correlation between target sequence and comparable sequence and are equal to weighted sum of the values in table 4. therefore, the best performance of cryptomarket is selected for the alternative (country) with the highest correlation. for instance, grey relational grade for the united kingdom is calculated as follows: τ(𝑋0, 𝑋4) = ∑𝑦(𝑋0(5), 𝑋4(5)) ∗ 0.2 5 𝑘=1 as explained above, the weighted share was selected equal for each alternative, therefore it is equal to 0.2. we have further ranked the grey relational grades of the countries from the greatest to the lowest cryptomarket performance comparison. the next part of the data analysis includes comparison of grey relational grades against illicit finance flows, obtained from gfi database (gfi, 2018). country grey relational grade grey grade ranking iff iff ranking china 0.448831432 19 19.63 9 united_states 0.686291986 1 11.4 28 japan 0.505328468 9 9.8 29 united_kingdom 0.477219137 15 8.5 30 india 0.397895939 35 19.5 10 brazil 0.443099532 23 16.5 23 russia 0.541745724 3 19.3 11 mexico 0.426950805 29 14.46 25 saudi_arabia 0.35338034 39 22.44 5 gunel jannataly amrahova 63 poland 0.44396952 22 17.21 21 malaysia 0.42871459 28 23.63 3 united_arab_emirates 0.351959316 40 25.16 1 vietnam 0.440385873 25 16.68 22 turkey 0.425403132 30 20.85 6 chile 0.438397895 26 12.12 27 philippines 0.433298612 27 24.24 2 pakistan 0.354855142 38 17.65 17 morocco 0.341208134 41 19.26 12 colombia 0.392753582 36 16.4 24 romania 0.444768525 21 19.94 8 hungary 0.418705121 34 18.13 15 nigeria 0.503408115 10 17.88 16 argentina 0.459646585 17 13.61 26 peru 0.44188191 24 18.87 14 ukraine 0.489868532 13 19.96 7 kazakhstan 0.423399111 31 17.35 19 kenya 0.494064616 12 22.62 4 dominican_republic 0.4448156 20 17.37 18 croatia 0.419351586 33 17.3 20 tanzania 0.373909933 37 19.11 13 we have applied color coding to the rankings of the respective alternative both in grey relation grades and iff ranking to visualize the results of the correlation analysis. the first part of the research is completed successfully by obtaining the grey relational coefficients, however, when comparing to the iff level in the selected states, direct neither positive nor negative relationship between maturity of cryptocurrency market and illicit financial trade can be concluded. for this reason, we have included analysis of latent variables, such as political and economic exposure and culture index into our research. we have selected political freedom scores issued on annual basis by the freedom house agency (freedom house, 2021), which is an updated and most comprehensive dataset from all researched broken down by countries. another advantage of freedom scores dataset of freedom house inc. is that this index includes not only political but also social integration of the states, based on its methodology (freedom house, 2021). at the same time, appreciating cultural differences of the selected states, we have chosen a culture index dimensions, namely, power distance, individualism, masculinity and uncertainty avoidance indexes into our research. cultural dimensions are based on 6d model of national culture (hofstede, 1984; (hofstede insights, 2020) introduced in hofstede's cultural dimensions theory by hofstede g. et al in 1980. subsequently, gross domestic product (gdp) per capita was chosen to demonstrate economic development of the states. the data was obtained from world bank on the latest year available in the world bank databank (the world bank, 2019). we further applied the multiple linear regression analysis to our dataset to identify the relationship between illicit financial flows and set of independent variables, including crypto grey relational grades and selected above freedom scores, national cultural dimensions and gdp per capita. our independent variables include observed variable of grey relational grades as well as latent variables of gdp per capita, political and social integration level and selected cultural dimensions, namely power distance index, masculinity index, uncertainty avoidance index and individualism index. mentioned cultural dimensions are considered to be the most powerful when choosing the mechanisms of financial management by economic agents. the summary output of our research returned the following statistical results. grey flowless, or predicting capital outflows in cryptocurrency 64 regression statistics multiple r 0.802753 r square 0.644412 adjusted r square 0.531271 standard error 2.740324 observations 30 the result of the research shows statistical significance as per the 30 values for 7 variables observed: coefficients standard error t stat p-value lower 95% upper 95% lower 95.0% upper 95.0% intercept 19.87653 5.785131 3.435797 0.002361 7.878906 31.87416 7.878906 31.87416 grey coefficient, cryptomaturity -13.5859 9.022759 -1.50573 0.146359 -32.2979 5.126177 -32.2979 5.126177 freedom score -0.04505 0.023592 -1.90965 0.069304 -0.09398 0.003874 -0.09398 0.003874 gdp per capita 4.77e-06 3.97e-05 0.120137 0.905465 -7.8e-05 8.72e-05 -7.8e-05 8.72e-05 idv (individualism) 0.009488 0.048773 0.194534 0.847543 -0.09166 0.110637 -0.09166 0.110637 pdi (power distance index) 0.119966 0.040255 2.980165 0.006905 0.036483 0.203449 0.036483 0.203449 mas (masculinity) -0.02005 0.038262 -0.52407 0.605469 -0.0994 0.059298 -0.0994 0.059298 uai (uncertainty avoidance index) -0.02014 0.026632 -0.75631 0.457484 -0.07537 0.035089 -0.07537 0.035089 our data fits the model by 81%. the regression model result of our anova test is given below: anova df ss ms f significance f regression 7 299.3942 42.7706 5.695625 0.000749 residual 22 165.2063 7.509378 total 29 464.6005 as shown above, our regression model returns strong f significance score, proving the relevance of our hypothesis on the correlation between illicit finance flows and cryptomarket maturity. as stated in the beginning of our research, we also used our proxy indicators, which strengthened our research. discussions the current study was conducted to determine if development of novel endogenous cryptocurrencies can influence countries’ likelihood to impact capital outflows. according to existing views on cryptocurrencies (brezo and bringas, 2012), due to anonymity public identification through “keys”, cryptocurrencies create an opportunity for misuse as an easy tool for money laundering, tax evasion and illegal activities. it was hypothesized that anonymity of public identification keys creates a space for violence, increasing scale of money laundering, tax evasion and illegal activities, predicting high level of capital outflows. to test the hypothesis, research methodology including grey relational and multiple regression analysis was used. we first applied grey relational analysis to evaluate maturity of cryptotrade at 41 states with the highest number of cryptotraders and returned their grey relational coefficients in cryptocurrency maturity. based on the grey relational coefficients obtained for cryptocurrency maturity, we developed a new dataset comprising cryptocurrency, socio-economic and illicit trade factors across the 30 states, with available data on research gunel jannataly amrahova 65 criteria. multiple regression analysis was adopted to determine the relationship between these factors. our data fit the multiple regression model by 81%, which is quite strong evidence of the relationship between mentioned factors. result shows that 53.12% of the variance in illicit finance flows can be accounted by the set of cryptocurrency maturity and socio-economic predictors, collectively, f(7,22) = 5.6956 p<0.001. looking at the unique individual contributions of predictors, the result shows that economic indicator, such as gdp per capita, and cultural indexes, namely individualism and power distance index, positively predict illicit financial flow level. furthermore, result also reveals that those countries which have high rate of transactions in cryptocurrency, freedom scope, masculinity and uncertainty avoidance are more likely to report low level of illicit finance flows. this suggests that use of blockchain systems in monetary transactions can be considered a more transparent system, adding value to the state of global trade relationships not only by less bureaucracy and intermediaries involved, but also higher transparency and simplicity. having central idea of decentralization, these distributed systems however provide total security and confidentiality, being transparent. without a central authority within this network, blockchains establish trust through consensus and cryptography. cryptography is used to shift the burden of trust from intermediaries (such as banks, financial and govern institutions) to cryptographic algorithms, and constructing and analyzing protocols that prevent third parties or the public from reading private messages. cryptography provides techniques for keeping information secret, for determining that information has not been tampered with, and for defining who authored process of information. it is based on techniques related to aspects of information security such as confidentiality, data integrity, entity authentication, and data origin authentication. cryptography is not the only means of providing information security, but rather one set of techniques. from the other hand, cryptocurrency development can positively impact the quality of international financial transactions, reducing not only transaction costs, but also reducing the illicit financial flows, as revealed by the research results. however, use of aml/kyc and other regulations relevant to transactions with cryptocurrency has an important role to bridge the gaps within trade operations with cryptocurrency that might potentially cause illicit financial outflows. references 1. fanusie, y. and robinson, t., 2018. bitcoin laundering: an analysis of illicit flows into digital currency services. center on sanctions and illicit finance memorandum, january. 2. lee, s., yoon, c., kang, h., kim, y., kim, y., han, d., son, s. and shin, s., 2019, february. cybercriminal minds: an investigative study of cryptocurrency abuses in the dark web. in ndss. 3. farrugia, s., ellul, j. and azzopardi, g., 2020. detection of illicit accounts over the ethereum blockchain. expert systems with applications, 150, p.113318. 4. alvarez, m., 2018. a comparative analysis of cryptocurrency regulation in the united states, nigeria, and china: the potential influence of illicit activities on regulatory evolution. ilsa j. int'l & comp. l., 25, p.33. 5. jacquez, t., 2016. cryptocurrency the new money laundering problem for banking, law enforcement, and the legal system(doctoral dissertation, utica college). grey flowless, or predicting capital outflows in cryptocurrency 66 6. holz, r., perino, d., varvello, m., amann, j., continella, a., evans, n., leontiadis, i., natoli, c. and scheitle, q., 2020. a retrospective analysis of user exposure to (illicit) cryptocurrency mining on the web. arxiv preprint arxiv:2004.13239. 7. irwin, a.s. and turner, a.b., 2018. illicit bitcoin transactions: challenges in getting to the who, what, when and where. journal of money laundering control. 8. brown, s.d., 2016. cryptocurrency and criminality: the bitcoin opportunity. the police journal, 89(4), pp.327-339. 9. möser, m. and narayanan, a., 2019. effective cryptocurrency regulation through blacklisting. preprint. 10. bright, d., koskinen, j. and malm, a., 2019. illicit network dynamics: the formation and evolution of a drug trafficking network. journal of quantitative criminology, 35(2), pp.237258. 11. broséus, j., baechler, s., gentile, n. and esseiva, p., 2016. chemical profiling: a tool to decipher the structure and organisation of illicit drug markets: an 8-year study in western switzerland. forensic science international, 266, pp.18-28. 12. bichler, g., malm, a. and cooper, t., 2017. drug supply networks: a systematic review of the organizational structure of illicit drug trade. crime science, 6(1), pp.1-23. 13. babbitt, d. & dietz, j. (2014).crypto-economic design: a proposed agent-based modelling effort.swarm fest 2014: 18th annual meeting on agent-based modelling & simulation. 14. bichler, g. and malm, a., 2013. small arms, big guns: a dynamic model of illicit market opportunity. global crime, 14(2-3), pp.261-286. 15. liu, y., & tsyvinski, a. (2018). risks and returns of cryptocurrency (no. w24877). national bureau of economic research. 16. hileman, g. and rauchs, m., 2017. global cryptocurrency benchmarking study. cambridge centre for alternative finance, 33, pp.33-113. 17. farell, r., 2015. an analysis of the cryptocurrency industry. 18. liu, y., tsyvinski, a. and wu, x., 2019. common risk factors in cryptocurrency (no. w25882). national bureau of economic research. 19. mukhopadhyay, u., skjellum, a., hambolu, o., oakley, j., yu, l. and brooks, r., 2016, december. a brief survey of cryptocurrency systems. in 2016 14th annual conference on privacy, security and trust (pst) (pp. 745-752). ieee. 20. corbet, s., cumming, d.j., lucey, b.m., peat, m. and vigne, s.a., 2020. the destabilising effects of cryptocurrency cybercriminality. economics letters, 191, p.108741. 21. deng, j.d. (1982), “control problems of grey systems”, systems and control letters, 5, pp.288-294. 22. deng, j. (1989), “introduction to grey systems theory, the journal of grey system, 1, pp.124. 23. kuo, y., yang, t., huang, g-w. (2008), “the use of grey relational analysis in solving multiple attribute decision-making problems”, computers & industrial engineering, 55. pp.80–93. 24. global finance institution (gfi) illicit finance flows database table 11. the sums of the value gaps identified in 135 developing countries, 2008-2017 by regions, rounded in usd billions, electronic resource 25. freedom house inc. freedom in world, report, 2021. https://freedomhouse.org/countries/freedom-world/scores, electronic resource https://freedomhouse.org/countries/freedom-world/scores gunel jannataly amrahova 67 26. freedom house inc. freedom in the world 2021 methodology, 2021. https://freedomhouse.org/sites/default/files/202102/freedomintheworld_2021_methodology_checklist_of_questions.pdf, electronic resource 27. the world bank, databank. world bank national accounts data, and oecd national accounts data files, 2019, https://data.worldbank.org/indicator/ny.gdp.pcap.cd, electronic resource 28. hofstede, geert (1984), culture's consequences: international differences in work-related values (2nd ed.). beverly hills ca: sage publications. isbn 0-8039-1444-x. 29. hofstede insights, national culture the 6d model database 2020. 30. brezo, f., & bringas, p. g. (2012). issues and risks associated with cryptocurrencies such as bitcoin. 31. united nations development programme, “decentralization: a sampling of definitions”, october, 2021, http://web.undp.org/evaluation/documents/decentralization_working_report.pdf, electronic resource 32. briére, m., oosterlinck, k., & szafarz, a. (2013). virtual currency, tangible return: portfolio diversification with bitcoins. centre emile bernheim . 33. brito, j., shadab, h., & castillo, a. (2014). bitcoin financial regulation: securities, derivates, prediction markets, & gambling. 34. buchholz, m., delaney, j., warren, j., & parker, j. (2012). bits and bets: information, price volatility and demand for bitcoin. 35. glaser, f., zimmermann, k., haferkorn, m., weber, m. c., & siering, m. (2014). bitcoin asset or currency? revealing users' hidden intentions. twenty second european conference on information systems, griffiths, r., lim, g. c., & hill, c. (2012). principles of econometrics. john wiley & sons 36. lerner, j. (2003). the new financial thing: the origins of financial innovations. harvard university and national bureau of economic research . 37. yermack, d. (2013). is bitcoin a real currency? an economic appraisal. national bureau of economic research. https://freedomhouse.org/sites/default/files/2021-02/freedomintheworld_2021_methodology_checklist_of_questions.pdf https://freedomhouse.org/sites/default/files/2021-02/freedomintheworld_2021_methodology_checklist_of_questions.pdf https://data.worldbank.org/indicator/ny.gdp.pcap.cd http://web.undp.org/evaluation/documents/decentralization_working_report.pdf agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 18, no. 2 (2024), pp. 276-299 276 exploring the nexus between entrepreneurship and international business: a case study of bhutan b. shrivastava, p. d. topgay, p. l. topgay, l. dema, s. dave bhuwan shrivastava¹, pem dechen topgay², pema lhaden topgay³, lhaki dema⁴, sumita dave⁵ ¹ ² ³ ⁴ royal thimphu college, thimphu, bhutan ¹ https://orcid.org/0009-0004-2114-3606, e-mail: bhuwanshrivastava@rtc.bt ² https://orcid.org/0009-0001-4948-7222, e-mail: pemdtopgay@gmail.com ³ https://orcid.org/0009-0001-7086-2920, e-mail: pemaltopgay@gmail.com ⁴ https://orcid.org/0009-0009-5240-0042, e-mail: demalhaki24@gmail.com ⁵ amity university, chhattisgarh, india https://orcid.org/0000-0002-3446-2727, e-mail: sdave@rpr.amity.edu abstract: this study delves into the relationship between entrepreneurship and international business in bhutan, a small, landlocked kingdom that primarily depends on agriculture and hydropower. it aims to assess the current state of entrepreneurship in bhutan, explore the trends in international trade involving bhutanese businesses, and pinpoint the challenges and opportunities that bhutanese entrepreneurs face in the global market. by using secondary data involving the information pertaining to economic environment of bhutan, the study reveals that bhutanese entrepreneurs encounter significant obstacles to going global, such as limited access to finance, a shortage of skilled workers, and complex regulatory environments. however, there are opportunities in government policies that promote entrepreneurship and regional trade agreements. the study concludes with policy recommendations to better integrate bhutanese entrepreneurial ventures into the global market, focusing on regulatory reforms, improved access to finance, and capacity-building initiatives. keywords: entrepreneurship, international business, bhutan, challenges, opportunities 1. introduction 1.1 background and significance of the study bhutan is a small landlocked kingdom nestled between two of the world's largest economies, india and china. being completely landlocked and mountainous bhutan has limited access to foreign markets due to which bhutan heavily relies on india for its trade routes, making india a major trading partner. bhutan's small domestic market and unfavorable resource endowment for industrialization mean that a significant portion of its population depends on primary sectors such as agriculture, forestry, and hydropower (cheong, bark & jeong, 2015). trade issues are not typically national policy priorities, reflecting the country's focus on holistic development over rapid industrialization (cheong, bark & jeong, 2015). according to warr (2012), historically, landlocked countries have been pessimistic about the scope for an export-oriented development strategy and often choose inward-looking development strategies. hence, as a landlocked country with limited economic power, bhutan https://orcid.org/0009-0004-2114-3606 mailto:bhuwanshrivastava@rtc.bt https://orcid.org/0009-0001-4948-7222 mailto:pemdtopgay@gmail.com https://orcid.org/0009-0001-7086-2920 mailto:pemaltopgay@gmail.com https://orcid.org/0009-0009-5240-0042 mailto:demalhaki24@gmail.com https://orcid.org/0000-0002-3446-2727 mailto:sdave@rpr.amity.edu bhuwan shrivastava, pem dechen topgay, pema lhaden topgay, lhaki dema, sumita dave 277 has exhibited a passive attitude toward international trade (cheong, bark & jeong, 2015). with a population of approximately 774,000 and a gdp of $2.84 billion, bhutan is renowned for its unique development philosophy centered on gross national happiness (gnh) rather than gross domestic product (gdp). this approach prioritizes sustainable and equitable socioeconomic growth, environmental conservation, cultural preservation, and good governance. however, achieving steady socio-economic growth has been a hurdle for the small kingdom with a largely underdeveloped trade sector and even more nascent engagement in international trade. bhutan is heavily reliant on hydropower and tourism for revenue, leaving the country vulnerable to climate change and global pandemics or changes in tourism patterns. the world bank reports that a decline in electricity production could lead to a 3-4 percentage point drop in gdp and a decrease in government revenue by approximately 0.5-1 percent of gdp (razzaque, 2020). additionally, due to travel restrictions imposed by covid-19, tourism revenue fell drastically from $225 million in 2019 to $19 million in 2020 (rinzin, 2021). vijayasri (2013) states that international trade leads to economic growth and is important for achieving a quicker pace of economic development. therefore, as bhutan looks to restart its economy after covid-19, improving international trade is essential for bhutan's economic development. by participating in international trade, bhutan can diversify its economy, lessen its dependence on a limited number of sectors, and improve its economic resilience. studying the relationship between entrepreneurship and international trade in bhutan can unlock new growth avenues, improve economic resilience, and contribute to the overall well-being of its population. this study aims to provide a comprehensive understanding of this nexus, offering actionable insights for entrepreneurs, policymakers, and other stakeholders to foster a vibrant and globally integrated entrepreneurial ecosystem in bhutan. 1.2 research objectives and research questions 1.2.1research objectives  analyze the current state of entrepreneurship in bhutan  examine the patterns and trends of international trade involving bhutanese businesses  identify the challenges and opportunities faced by bhutanese entrepreneurs in the international market  assess the impact of international trade on entrepreneurial growth and economic development in bhutan  provide recommendations for policymakers to support and enhance the nexus between entrepreneurship and international trade 1.2.2 research questions  what is the current landscape of entrepreneurship in bhutan?  how are bhutanese entrepreneurs participating in international trade?  what barriers do bhutanese entrepreneurs face in accessing international markets?  what opportunities exist for bhutanese entrepreneurs in the global market?  what role do government policies and trade agreements play in facilitating international trade for bhutanese businesses? exploring the nexus between entrepreneurship and international business: a case study of bhutan 278  how does international trade influence the growth and success of entrepreneurial ventures in bhutan?  what policy recommendations can be made to improve the nexus between entrepreneurship and international trade in bhutan? 1.3 scope and limitations 1.3.1 scope this study focuses on exploring the relationship between entrepreneurship and international trade in bhutan. the research will cover:  entrepreneurial landscape: analysis of the current state of entrepreneurship, including key sectors, demographic characteristics, and the level of entrepreneurial activity.  international trade patterns: examination of bhutan's trade volumes, main products and services traded, and primary trade partners.  challenges and opportunities: identification of barriers and opportunities for bhutanese entrepreneurs in the international market.  economic impact: assessment of the contribution of international trade to gdp, employment, innovation, and business growth in bhutan.  policy analysis: evaluation of existing policies and trade agreements, and formulation of recommendations for enhancing international trade and entrepreneurship. 1.3.2 limitations  data availability: the limited availability of comprehensive and up-to-date data on bhutanese entrepreneurship and trade activities may affect the depth of analysis.  geographical focus: the study is confined to bhutan, and findings may not be generalizable to other countries with different economic and trade contexts.  time constraints: the conduction of the study over a few months may limit the depth and accuracy of the findings.  resource limitations: limited resources may restrict the extent of fieldwork case studies conducted. 2. literature review 2.1 theoretical framework: linkages between entrepreneurship and international business the connection between entrepreneurship and international business in bhutan is extremely important owing to bhutan’s unique economic landscape due to its geographic location, economic dependencies and policy priorities centered around gross national happiness (gnh). this review aims to delve into theoretical frameworks, the entrepreneurial ecosystem, factors influencing international business, and existing studies to provide a comprehensive understanding of the challenges and opportunities for bhutanese entrepreneurs in the global marketplace. we must be familiar with several theoretical perspectives to understand the connection between entrepreneurship and international business. one such perspective is the resourcebhuwan shrivastava, pem dechen topgay, pema lhaden topgay, lhaki dema, sumita dave 279 based view (rbv), which argues that businesses can achieve success in global markets by leveraging their unique resources and capabilities (barney, 1991). this implies that bhutanese entrepreneurs should focus on developing and utilizing their strengths to compete effectively on the international stage. additionally, another theory that highlights this is the comparative advantage theory which states that nations should specialize in productions that result in lower opportunity costs to drive efficient international trade (boyce, 2023). another relevant theoretical framework is the uppsala internationalization model, which proposes that businesses gradually expand their international operations, starting with markets closer to home and then progressing to more distant ones as they gain experience and knowledge (johanson & vahlne, 1977). the uppsala model is relevant to bhutanese businesses because it suggests a gradual approach to international expansion by starting with neighbouring markets (e.g., india) and progressively venturing into more distant markets based on experience and market knowledge. next, the network theory emphasizes the importance of social networks and relationships in international business activities (johanson & mattsson, 1988). for bhutanese entrepreneurs, building strong networks with international partners and stakeholders can provide valuable opportunities for market access and growth. there is also the effectuation theory which encourages entrepreneurs to embrace uncertainty, leverage their strengths and networks, and adopt a flexible and adaptive approach to entrepreneurship (sarasvathy, 2001). this will guide bhutanese entrepreneurs in navigating uncertain international business landscapes by focusing on creating opportunities, leveraging local strengths, and adapting to emerging market demands with creativity and resilience. 2.2 entrepreneurial ecosystem and internationalization an entrepreneurial ecosystem comprises of various elements such as access to funding, mentorship, supportive policies and a conducive regulatory environment (isenberg, 2010). in bhutan, the entrepreneurial ecosystem is evolving. ura et al. (2012) highlight that "bhutan's policies aligned with the gross national happiness (gnh) framework promote sustainable development, social entrepreneurship, and ethical business practices." there are also entrepreneur support organizations such as the bhutan innovation and technology centre (bitc) that provide resources and guidance to startups. as noted by johanson and mattsson (1988), "mentorship programs and incubators within the entrepreneurial ecosystem play a pivotal role in fostering innovation and guiding entrepreneurs through challenges." research suggests that a supportive entrepreneurial ecosystem is instrumental in facilitating internationalization for startups and small businesses (acs, szerb, & autio, 2014). access to finance, mentorship programs and networking opportunities can enable bhutanese entrepreneurs to expand their businesses globally. however, "internationalization is the process of increasing involvement in international operations, such as foreign markets, cross-border production, or global value chains, which may include exporting, importing, licensing, franchising, foreign direct investment, joint ventures, and strategic alliances" (rugman & collinson, 2012). it is a strategic imperative for bhutanese businesses seeking to expand globally. according to knight and cavusgil (2004), "internationalization allows bhutanese exploring the nexus between entrepreneurship and international business: a case study of bhutan 280 enterprises to diversify their customer base, reduce dependence on domestic markets, and tap into new revenue streams." another important detail is that export opportunities contribute to economic growth. cheong, bark, and jeong (2015) state that "internationalization facilitates export opportunities for bhutanese products and services, promoting economic development and industry growth." the aforementioned studies reiterate that fostering a strong entrepreneurial ecosystem and embracing internationalization are integral to bhutan's economic development and global competitiveness. collaborative efforts among stakeholders, supportive policies, and strategic initiatives are vital for empowering bhutanese entrepreneurs to succeed in the dynamic global marketplace. 2.3 factors influencing international business activities in bhutan several factors influence international business activities in bhutan. geographical factors, such as bhutan's landlocked status between india and china, impact trade routes and market access (warr, 2012). economic factors, such as dependence on hydropower and tourism, contribute to bhutan's vulnerability to external shocks and market fluctuations (razzaque, 2020; rinzin, 2021). moreover, the world bank (2019), suggests that the dependence on state-led hydropower might have resulted in crowding out of the private sector which indirectly impacts international trade. government policies, particularly those aligned with the gnh philosophy, shape bhutan's approach to international trade and investment (ura et al., 2012). cultural and institutional factors also play a role in influencing international business activities in bhutan. brooks (2013) states that "understanding cultural preferences and social norms is essential for effective market entry and relationship building in bhutan." infrastructure development also influences trade and connectivity. warr (2012) highlights that "improvements in transportation networks and energy infrastructure can enhance bhutan's trade capabilities and reduce logistical barriers." trade policies and agreements also greatly help to shape bhutan's trade relations. cheong, bark, and jeong (2015) mention that "bhutan's participation in regional trade agreements impacts market access and trade flows." 2.4 existing studies on entrepreneurship and international business in bhutan several studies have contributed to understanding entrepreneurship and international business in bhutan. cheong, bark, and jeong (2015) conducted a study on "regional cooperation and trade issues in bhutan," highlighting the challenges and opportunities in regional trade partnerships. in their other study on bhutan's trade policy titled “a framework of trade policy for bhutan compatible with the gross national happiness”, cheong, bark, and jeong (2015) emphasize the importance of joining global supply chains for economic gains. they also highlight that while bhutan's trade policy should support gross national happiness (gnh) by balancing economic growth with social well-being, it is crucial for bhutan to adopt economic reforms and trade liberalization to improve its international competitiveness. bhuwan shrivastava, pem dechen topgay, pema lhaden topgay, lhaki dema, sumita dave 281 warr (2012) conducted research on the economic strategies of landlocked countries, including bhutan. his study provides insights into the economic challenges and strategic approaches adopted by landlocked nations like bhutan. razzaque (2020) focused on the economic impact of hydropower on bhutan's economy. the study discusses the significance of hydropower revenues in bhutan's international trade and economic development. ura, alkire, and zangmo (2012) explored the influence of bhutan's gross national happiness (gnh) framework on economic policies. their study delves into how gnh principles shape bhutan's approach to international business and economic development. brooks (2013) conducted research on cultural and institutional factors affecting business practices in bhutan. the study provides insights into how cultural values and institutional frameworks influence entrepreneurship and international business activities. knight and cavusgil (2004) discuss market entry strategies for bhutanese enterprises in their work on international business expansion. their insights into market diversification and entry modes are relevant for bhutanese businesses aiming to expand globally. ayaji fujita, jigme lhendup, and sangay thinley (2022) shed light on the significant administrative hurdles, financial constraints, and cultural barriers that hinder entrepreneurial activities in bhutan in their study titled “promoting entrepreneurship in bhutan”. vijayasri (2013) explores the impact of globalization on bhutanese businesses and strategies for building resilience in international markets. the study provides recommendations for enhancing business competitiveness and sustainability in a globalized context. these studies offer valuable insights, best practices and strategic recommendations for fostering economic growth, innovation, and sustainable development in the country. in conclusion, the literature review has explored how entrepreneurship and international business intersect, especially in bhutan. we've looked at theories that connect entrepreneurship with global trade and how a strong entrepreneurial environment supports businesses going global. factors like bhutan's unique geography, economic dependencies, and policies focused on gross national happiness (gnh) have a significant impact on international business activities. the existing studies we've reviewed shed light on regional cooperation, economic strategies, and cultural influences on bhutanese businesses. bringing all this together, it's clear that leveraging technology, fostering innovation, and building strong international relationships are key for bhutan's continued growth and success in the global business arena. 3. methodology 3.1 research design and approach this research utilizes a combination of descriptive analysis and macroeconomic evaluation to investigate the relationship between entrepreneurship and international business in bhutan. the descriptive approach facilitates a comprehensive understanding of the relationship, while the macroeconomic assessment offers insights into broader economic patterns and elements affecting entrepreneurship and business within the country. 3.2 data collection methods exploring the nexus between entrepreneurship and international business: a case study of bhutan 282 this study's data collection process exclusively utilizes secondary data obtained through a comprehensive review of relevant government documents, case analysis, departments official reports, and research publications. these resources provide quantitative information on bhutan's trade dynamics, governmental policies, and entrepreneurial landscape. by utilising secondary data, the research benefits from an extensive examination of existing studies and macroeconomic indicators. 3.3 sampling techniques and data sources as the research relies on secondary data, no primary data collection was undertaken. instead, information was gathered from diverse international and national sources, including publications from the world bank, asian development bank, and bhutanese governmental bodies, as well as academic research focused on bhutan's economy and international business. 3.4 data analysis techniques the collected data were analysed using macroeconomic metrics such as gdp expansion, trade quantities, and economic sector contributions. visual representations and charts depicting trade patterns were sourced from various governmental publications and official websites. the analysis also included an evaluation of bhutan's trade policies, trade agreements, and entrepreneurial environment to identify patterns, obstacles, and prospects for enhancing international business activities. 4. entrepreneurship landscape in bhutan 4.1 overview of the entrepreneurial ecosystem bhutan's entrepreneurship ecosystem has been progressively growing, reflecting the nation's aspirations to expand its economic base beyond conventional industries like hydropower and agriculture. the ecosystem includes a blend of educational institutions, government agencies, non-profit organizations, and private sector players who collectively contribute to fostering entrepreneurship. initiatives like the springboard programme and the establishment of the startup centre are pivotal in providing necessary skills and mentorship to aspiring entrepreneurs (undp, 2024).despite the increasing number of incubators, co-working spaces like the inaugural startup centre, and startup competitions, encouraging young people to view entrepreneurship as a fulfilling career option remains a challenge. this cultural hurdle is reinforced by conventional family settings that often do not see entrepreneurship as a viable professional path (daily bhutan, 2024). businesses in bhutan are categorized based on their investment levels and workforce size:  small industries: investments of nu 1 million to nu 10 million (≈$13,000–$130,000) and employ 5 to 19 people.  cottage businesses: investments of less than nu 1 million (≈$13,000) and employ up to 4 people. this categorization helps structure the support and resources provided to businesses at different stages of development. the government's efforts to create a conducive environment for entrepreneurship are evident in initiatives like the g2b (government to business) portal, which simplifies the business registration process for small and cottage industries (g2b, n.d.). bhuwan shrivastava, pem dechen topgay, pema lhaden topgay, lhaki dema, sumita dave 283 moreover, programs like the springboard programme and the loden entrepreneurship programme (lep) provide essential skills, mentorship, and financial support to young entrepreneurs, helping them navigate the entrepreneurial landscape and make their startups investment-ready (ebhutan, 2024). these initiatives indicate a supportive ecosystem, although more efforts are needed to foster a culture that fully embraces entrepreneurship as a career choice. moreover, bhutan lacks investors and targeted financial institution packages for financial support that can give entrepreneurs access to finance. getting funding is still one of the largest obstacles in business development, regardless of the stage at which a company is founded or is growing and expanding (itc, n.d.). 4.2 government policies and initiatives promoting entrepreneurship entrepreneurship is vital for economic growth, innovation, and job creation, and the bhutanese government has recognized this importance. several laws and programs have been enacted to encourage economic diversification and support entrepreneurship. the government has established industrial estate zones in districts such as samtse, gelephu, samdrup jongkhar, mongar, tsirang, and thimphu. these zones provide land, electricity, and water, creating a conducive environment for new and innovative ventures. additionally, special fiscal incentives are offered, and these zones benefit from better market access due to their proximity to neighboring india. the ministry of industry, commerce, and employment (formerly the ministry of labor and human resources) has initiated various programs to promote entrepreneurship awareness and development. these include:  edp training: conducted with dzongkhags, ngos, and other institutions to foster entrepreneurial skills.  student business seedling programme: encourages young students to explore entrepreneurship.  training of trainers in new business creation: builds capacity among trainers to support new entrepreneurs.  counseling and mentoring: provides guidance and support to budding entrepreneurs.  start-up weekend: an event to brainstorm and develop business ideas.  business idea competition of bhutan: encourages innovation and recognition of creative business ideas.  expanding horizons, a guide for export growth from bhutan to australia: is an initiative by the ministry of foreign affairs and external trade to help bhutanese export to australia by using the success of bhutan blossoms as a guideline. the government also supports entrepreneurs through collaborations with organizations like the loden foundation. the loden foundation provides funding, mentorship, and capacitybuilding programs. they organize events such as the festival of entrepreneurs in october, in place of global entrepreneurship week, in collaboration with national and international agencies (bhutan foundation, 2019). overall, these policies and initiatives reflect the government's commitment to creating an environment that fosters entrepreneurship, supports small enterprises, and drives economic diversification. exploring the nexus between entrepreneurship and international business: a case study of bhutan 284 4.3 support organizations and networks for entrepreneurs several organizations and foundations support entrepreneurs with relation to financing, training, and different programs associated with the building of one’s capability in bhutan. some of the most prominent associations and networks are as follows: i. bhutan innovation and technology centre (bitc) and the bhutan innovation and technology foundation (bitf): for the support of startups in bhutan, there are new policies and favorable environment exists such as the bhutan innovation and technology centre (bitc) and the bhutan innovation and technology foundation (bitf). these institutions assist those willing to bring their ideas to practice by availing of incubation funding and mentorship services (jain kai, 2023). (jain kai, 2023). ii. loden foundation: the loden foundation is a registered civil society organization in bhutan (cso) and has been in business since 1999. the foundation initially started as an education support group but later supported the ones who studied from loden foundation’s funding to become successful entrepreneurs through entrepreneur education and funding. loden foundation also has a program named student empowerment through entrepreneurship development (seed) to empower students to learn about entrepreneurship (tradition, n.d.) iii. bhutan csi association: an association known as bhutan csi association was established by a group of startups to further advance and develop the cottage and small industries, or csis, in the country. the main goal of having this association is to inform the government of the actual needs of csi entrepreneurs and recommend implementing policies that help the startups build innovative and robust csi ecosystems (dekar, 2023). iv. startup first: cefe (competency-based economies through formation of entrepreneurs) bhutan’s startup first institute provides training for entrepreneurs, conducts research, and offers advisory services to teen entrepreneurs. it also offers capacity development courses for start-up ecosystem stakeholders (cefe international – glimpses of entrepreneurship in bhutan, 2023). v. bhutan chambers of commerce and industry: bhutan centre for entrepreneurs and innovators is a non-governmental organization with the vision of promoting entrepreneurship in bhutan which was set up with the blessing of h.m the king in 1980. another strategic vision of bcci is about promoting entrepreneurship since it provides human capital development in the private sector (about us, n.d.). vi. druk holding and investment (dhi): druk holding and investment provides support to organizations and networks of business-oriented through the usage of many programs where dhi funds programs like the business acceleration program (bizap) under which dhi grants nu. 500,000 to the entrepreneurs who took part in the acceleration program. this program was developed to assist new businesspersons in establishing networks with professionals in the business industry and getting to understand the proper way of running their business ventures (zangmo, 2019). 4.4 challenges and opportunities for entrepreneurs in bhutan challenges: i. financial constraints: entrepreneurs face significant challenges in securing funding, regardless of their business stage. bhutan lacks targeted financial institution packages and bhuwan shrivastava, pem dechen topgay, pema lhaden topgay, lhaki dema, sumita dave 285 investors willing to support startups. a survey was done of 133 people who attended the entrepreneurship program held by thimphu tech-park in 2016-2017 and the result showed that some of the young minds could not become an official entrepreneur due to the lack of necessary funding (singh et al., 2020) ii. lack of financial incentives and no weak relations with the banks: singh et al. (2020) did some research on other research papers and in that research, it was found that individuals who failed at starting a business were mainly due to having no connection with the banks and insufficient financial initiatives by the government. iii. entrepreneurship and career choice: in a study involving 921 students from different educational institutions in bhutan, showed that there is a greater number of students wanting to acquire government jobs despite the problem of unemployment rising in the country. this is mainly due to the lack of emphasis on entrepreneurship education and poor instructional strategies in the education curriculum (utha et al., 2016). while there are opportunities for training and coaching during the initial phases, there is limited support for scaling businesses. opportunities: i. supportive ecosystem: the growing number of incubators, co-working spaces, and startup competitions indicate a supportive ecosystem for entrepreneurs (ebhutan, 2024). another opportunity lies in the different kinds of programs being held by the government of bhutan to help individuals get employed and have training to improve their entrepreneurial skills and creativity. for example, the ministry of labor and human resources introduced a small cottage industry and start-up flagship program worth nu. 1.2b (lhamo, 2020). ii. sectoral focus: sectors like agriculture, it/ites, and tourism offer significant opportunities for innovation and growth. government initiatives like allowing 100% foreign ownership in agriculture highlight the potential in this area (moic, 2023). iii. technological and educational integration: programs focusing on digital skills and freelancing are opening new avenues for tech-based startups, further supported by infrastructure developments like thimphu techpark (daily bhutan, 2024). in addition, on 9th february 2021 a memorandum of understanding was signed by the department of employment and human resources under the ministry of human and labor resources and the royal education council under the ministry of education to incorporate entrepreneurship-related courses in the education curriculum (bhattarai, 2021). iv. nehub and sawdf: there are many forms of enhancing women's entrepreneurship and such form of opportunities are nepal entrepreneurs hub (nehub) and south asian women development forum (sawdf) whereby both of these interventions are related to policies and opportunities for women's entrepreneurship in the saarc region (south asian association of regional corporation) which includes bhutan as well (goodrich et al., 2018). 5. international business activities in bhutan 5.1 patterns and trends in international trade according to the united nations conference on trade and development (unctad) (2024) report on key statistics and trends in international trade, the following has been observed: exploring the nexus between entrepreneurship and international business: a case study of bhutan 286 i. unpredictability and division: since the covid-19 pandemic began, international trade has shown significant fluctuations. trade dcreased sharply in 2020 but saw a robust recovery in 2021 and 2022, hitting unprecedented levels. however, trade growth reduced in 2023 due to geopolitical issues and economic instability. ii. regional differences: trade performance has varied widely across regions. developed countries saw a smaller decline in trade compared to developing nations. the european union and the united states, in particular, showed stronger trade performance, whereas east asia and other parts of asia experienced larger setbacks. figure 1. global trade trends source: (united nations conference on trade and development, 2024) iii. regional trade agreements (rtas): trade within rtas has generally been more stable. agreements such as mercosur, afcfta, usmca, and intra-eu trade have performed better than trade outside these agreements. nonetheless, intra-rta trade performance has differed, with some agreements like cptpp witnessing relatively poorer intra-regional trade. iv. developing vs. developed countries: the share of trade between developing countries has grown significantly, from 17% in 2010 to 21% in 2022. brics nations have a substantial share in global trade, particularly in goods and services. v. commodities and manufacturing: intermediate goods form the largest share of world trade, followed by primary and consumer goods. manufacturing trade dominates, especially among developed nations, while developing countries have a significant share in natural resources and agricultural exports. vi. sector performance: sectors such as chemicals, communication equipment, and energy products (oil, gas, coal) represent a significant portion of global trade. developing nations have increased their market shares in most sectors since 2015, although some sectors like energy have seen a shift back towards developed countries. bhuwan shrivastava, pem dechen topgay, pema lhaden topgay, lhaki dema, sumita dave 287 vii. import and export tendencies: many developing nations have high import and export tendencies, indicating significant dependence on international trade. southeast asian economies, central and eastern european countries, and several african countries are particularly export-dependent. viii. trade balances: in 2022, china, russia, uae, ireland, and saudi arabia had the largest trade surpluses, while the united states had the largest trade deficit. trade imbalances are relatively small in relation to gdp for most countries, but some african countries show large imbalances. ix. export diversification: developing countries generally exhibit lower export diversification compared to developed countries. african nations, in particular, have highly concentrated export portfolios, making them more vulnerable to economic shocks. x. patterns and trends of bhutan’s international trade import trend: there was a steady increase in imports from 2020 to 2022, which indicates higher consumption or dependency on foreign goods. the slight decrease in 2023 could be due to import restrictions due to low foreign reserves in bhutan. export trend: exports showed an increasing trend until 2021, after which there was a decrease. trade deficit: the increasing trade deficit from 2020 to 2022 reflects the higher growth rate of imports compared to exports. figure 2. export trend of bhutan by country and commodity. trade deficit status of bhutan source: (ministry of finance, 2023) exploring the nexus between entrepreneurship and international business: a case study of bhutan 288 5.2analysis of bhutan's trade partners and export-import commodities export patterns dominance of india as a trade partner: india is by far bhutan’s largest trading partner, both in terms of exports and imports. the export values to india are significantly higher than to any other country, underscoring the strong economic ties between the two nations. this reliance on india is evident across all years, with exports peaking at substantial amounts. despite a noticeable dip in 2020, likely due to the global impact of the covid-19 pandemic, exports to india quickly rebounded in subsequent years. this trend highlights the resilience and importance of the india-bhutan trade relationship. exports to other countries: while india remains the dominant partner, bhutan also engages in trade with bangladesh, italy, nepal, south korea, and other countries. exports to bangladesh are the second largest, although they are significantly lower than those to india. the trade with other nations remains minimal, indicating limited diversification in bhutan’s export markets. this lack of diversification can pose risks and opportunities for expanding bhutan's trade network. key export commodities:  55% of silicon: this is bhutan’s major export commodity, reflecting high export values consistently over the years. the significant dip in 2020 was followed by a quick recovery, indicating stable global demand.  boulders: another key export commodity, boulders show relatively stable export values, contributing significantly to bhutan’s export portfolio.  ferro-silico-manganese, dolomite, and other commodities: these commodities have lower export values compared to silicon and boulders but are essential in diversifying bhutan's export base. import patterns heavy reliance on india for imports: similar to exports, bhutan’s imports are predominantly sourced from india. the import values from india far exceed those from any other country, reflecting a heavy dependence on india for various goods. this trend highlights the critical role of india in bhutan’s trade dynamics. imports from other countries: china emerges as a notable import partner, although the values are much lower compared to india. imports from countries like france, singapore, and thailand are minimal, with some variation over the years. this pattern again points to limited diversification in bhutan’s import sources. key import commodities:  other light oils and preparations (hsd): this category is the largest import commodity, showing high import values each year. the dip in 2020, followed by a rebound, aligns with global economic trends during the covid-19 pandemic. bhuwan shrivastava, pem dechen topgay, pema lhaden topgay, lhaki dema, sumita dave 289  ferrous products and motor spirit (gasoline): these are significant import commodities, showing variations that could reflect changes in global prices and domestic demand.  semi-milled or wholly milled rice: this commodity consistently shows notable import values, indicating its importance in bhutan’s food security.  other commodities: various other commodities contribute to the import basket, providing some level of diversification. analysis of trends figure 3. imports trend of bhutan by country and commodity source: (ministry of finance, 2023) impact of covid-19: the year 2020 shows a noticeable dip in both exports and imports, reflecting the global economic disruptions caused by the covid-19 pandemic. however, bhutan’s trade appears to have rebounded quickly, showcasing resilience in its trade practices. heavy dependence on india: bhutan’s trade is heavily dominated by india, which poses both opportunities and risks. while the strong relationship with india provides a stable trade partner, it also makes bhutan vulnerable to economic fluctuations in india and potential geopolitical tensions. commodity concentration: bhutan’s exports are concentrated in a few key commodities, with silicon being the most significant. this concentration suggests limited diversification, which could be a risk if global demand for these commodities declines. diversification into other sectors could enhance economic stability. limited market diversification: while bhutan engages in trade with several countries, the volumes are relatively small compared to india. expanding trade relationships with other countries could provide new opportunities and reduce dependency on a single market. stable import patterns: the import patterns show consistency in terms of key commodities like oil, ferrous products, and rice. these stable patterns indicate a steady demand for essential goods, highlighting areas where bhutan may need to develop domestic alternatives to reduce import dependency. exploring the nexus between entrepreneurship and international business: a case study of bhutan 290 5.3 foreign direct investment (fdi) in bhutan foreign direct investment (fdi) refers to when a party invests in a business or corporation in a different country, aiming to establish a long-term stake or interest (hayes, 2024). in bhutan, an fdi company is an entity incorporated under the companies act of the kingdom of bhutan, primarily for conducting commercial activities within the nation. this company must have a minimum of 20% equity held by foreign investors, with individual foreign investors required to own at least 10% equity. for foreign institutional investors, the fdi company must have at least 10% of its equity owned by such institutions (moice, 2023). key highlights of bhutan's fdi framework: i. fdi policy evolution: bhutan introduced its first fdi policy in 2002, with significant revisions in 2010, 2014, and the latest in 2019. these revisions aim to create a more investor-friendly environment and adapt to changing economic conditions. the fdi policy of 2019 notably emphasizes maximizing equity shareholding for foreign investors, allowing up to 49% participation in most sectors, while also permitting 100% foreign ownership in select high-priority sectors (moice, 2023). ii. sectoral distribution: the distribution of fdi inflows in bhutan reflects a strong focus on the service sector, which includes areas such as hospitality, information technology, and it-enabled services. however, other sectors are also attracting fdi, including manufacturing, dairy, and agro-based projects. as per fdi annual report, 2023, the department of industry authorized 12 foreign investment projects worth btn 7,606.95 million in 2023, out of which seven of the projects are in the service sector, and five are in the manufacturing sector, highlighting the diverse opportunities for investment across various industries. figure 1. no. of fdi projects approved over the years source: moice, fdi annual report (2023) bhuwan shrivastava, pem dechen topgay, pema lhaden topgay, lhaki dema, sumita dave 291 the total number of fdis as of 2023 is 108 projects, in which india remains the major source of investment in bhutan with a 57 % share followed by singapore (13 %) and thailand (10 %). in this overall, asia accounts for over 65% of foreign investors, followed by europe (17%) and america (11%) (moice, 2023). figure 2. part of foreign investors source: moice. fdi annual report (2023) iii. investment incentives: to attract foreign direct investment (fdi), bhutan offers several incentives that create a favorable investment climate. these include a low-emission development environment, political stability, and transparency, along with subsidized electricity (royal bhutanese embassy, n.d.). additionally, the government has recently announced that it will allow 100% foreign ownership in the agriculture sector for fdi. this decision was made during the opening session of the bhutan agrifood trade and investment forum (batif) 2024, highlighting the government's commitment to enhancing investment opportunities in key sectors (world bank, n.d.). iv. regulatory framework: all businesses engaging in fdi must incorporate under the companies act of the kingdom of bhutan, which ensures that they comply with the local corporate governance standards. in 2019, the ministry of economic affairs established an fdi division specifically to promote investment and provide single-window services to investors. whereby, under the fdi policy 2019, a maximum equity shareholding of 49% is allowed to foreign investors by the government with a minimum project cost for small-scale production and manufacturing sectors set at nu. 5 million (moea, 2019). v. geographical distribution and employment: foreign investment projects in bhutan are primarily concentrated in the chukha, paro, and thimphu dzongkhags. as of december 2023, these projects directly employed 4,327 bhutanese individuals, with a gender distribution of 47% female and 53% male (royal bhutanese embassy, n.d.; moice, 2023). the highest number of fdi received is in the hotel sector with 34.9 % followed by it sector with 21.7% as per the fdi annual report, 2023. exploring the nexus between entrepreneurship and international business: a case study of bhutan 292 figure 3. sectoral share of fdi source: moice. fdi annual report (2023) vi. agriculture sector focus: to enhance the production of six key agricultural commodities—mandarin oranges, quinoa, rainbow trout, black pepper, asparagus, and strawberries—the government will allow 100% foreign ownership in the agriculture sector. bhutan has set ambitious targets to increase the agriculture sector's contribution to the gdp, aiming for $365 million in 2022, $625 million by 2029, and $854 million by 2034 (world bank, n.d.). however, despite the conducive policy environment, bhutan's fdi inflows have been relatively modest, averaging less than $20 million annually since 2010 (world bank, n.d.). however, bhutan's unique selling points, such as its commitment to gross national happiness (gnh) and clean, green environment, offer a unique investment appeal. bhutan's policies aim to attract responsible and sustainable investments that contribute to the country's long-term development goals. 5.4 trade policies and regulations affecting international business bhutan's trade policies and regulations are designed to foster international business while maintaining sustainable development and economic stability. the key elements influencing international trade and business in bhutan include its trade deficit, membership in regional trade agreements, and sector-specific regulations. trade deficit and economic overview bhutan has consistently registered a trade deficit since 2008, primarily due to higher imports compared to exports. in 2023, bhutan exported btn 52.9 billion worth of goods and imported btn 108.4 billion, resulting in a trade deficit of btn 55.5 billion. the primary trading partner is india, which accounts for over half of bhutan’s total exports and nearly 80% of its imports. other significant trade partners include bangladesh, italy, nepal, china, singapore, and thailand (lloyds banks, 2024). trade policies and regulatory framework bhutan’s trade policies are influenced by several regulatory frameworks: bhuwan shrivastava, pem dechen topgay, pema lhaden topgay, lhaki dema, sumita dave 293 i. customs rules and regulations of bhutan: revised edition 2023: the customs rules and regulations of bhutan govern the import and export of goods, ensuring adherence to both national and international standards. these regulations include various provisions related to the valuation, classification, and clearance of goods, as outlined by the ministry of finance (mof, 2023). in accordance with the customs duty act of bhutan 2021, customs duty is levied on imported goods during international business. this duty is applicable during the importation process, reinforcing the need for compliance with established customs regulations to facilitate smooth trade operations. ii. bhutan trade information portal (btip): the btip provides essential trade information, including market analysis, exportimport procedures, and strategic resources for entrepreneurs. it serves as a one-stop-shop for all trade-related information and is managed by the ministry of economic affairs (moe, 2023). iii. sector-specific policies: the government of bhutan has introduced various sector-specific policies to enhance economic growth and development. in the agriculture sector, the government has recently allowed 100% foreign ownership, which aims to boost production of key commodities. this initiative is a part of the broader goal to increase the sector’s contribution to gdp (world bank). in addition, the service and manufacturing sectors have also seen significant developments. in 2023, 12 foreign investment projects worth btn 7,606.95 million were authorized, with a significant focus on the service sector (hotels, it/ites) and manufacturing (moice, 2023). these initiatives reflect the government’s commitment to attracting foreign investment and fostering growth in key industries. iv. investment regulations foreign direct investment (fdi) in bhutan is governed by the fdi policy 2019 and the companies act, some of the rules include minimum of 20% equity must be held by foreign investors in fdi companies.specific incentives for various sectors, including full foreign ownership in high-priority areas like agriculture and it services (moice). v. regional and international trade agreements bhutan is a member of several regional trade agreements which facilitate international business, whose ruels and regulations also apply when engaging in international trade:  south asian association for regional cooperation (saarc)  bay of bengal initiative for multi-sectoral technical and economic cooperation (bimstec)  agreement on south asian free trade area (safta)  soon world trade organization (wto) these memberships aim to enhance economic cooperation and trade liberalization within the region, offering bhutan access to larger markets and potential trade benefits (lloyds banks, 2024). 5. analysis and findings exploring the nexus between entrepreneurship and international business: a case study of bhutan 294 identification of key factors influencing the relationship between entrepreneurship and international business in bhutan as per the data analysed from various sources, the key factors influencing the relationship between entrepreneurship and international business in bhutan can be classified into two categories i.e. from the side of the entrepreneurial environment and the international trade environment: figure 4. prepared by group. venn diagram on key factors influencing the relationship between entrepreneurship and international business in bhutan 7. discussion 7.1 synthesis of findings and comparison with existing literature the study reveals multiple issues that entrepreneurs in bhutan face, which align with findings from existing literature. according to fujita, lhendup, and thinley (2022), challenges faced by entrepreneurs in bhutan are related to the complex and lengthy process of establishing businesses, difficulty in accessing finance, and lack of entrepreneurial mindset with many preferring government jobs. furthermore, bhutan's ranking of 89th out of 190 countries in the ease of doing business (eob) index, as reported by the world bank (2020), shows the presence of complex government regulations and procedures. these factors contribute to a challenging business environment characterized with complex administrative procedures, difficulty in accessing finance, and a lack of business culture. the importance of nurturing an entrepreneurial mindset is emphasized by cooney (2012), asserting that having an entrepreneurial mindset and upskilling is important for business growth. the oecd sme and entrepreneurship outlook report (2019) further highlights the significance of nurturing an entrepreneurial culture to drive innovation and economic growth. access to capital remains a critical challenge for entrepreneurs, as noted by the asian development bank (2022). they identified that lengthy loan processes and difficulties in accessing credit facilities hinder financial support for businesses in the country. according to dolkar (2022), small and medium enterprises (sme) have complained of needing to know the bank officials personally to get the loans sanctioned during the sensitization of credit lending bhuwan shrivastava, pem dechen topgay, pema lhaden topgay, lhaki dema, sumita dave 295 schemes between private sectors and financial institutions meeting in july, 2022. this aligns with the observations made by giudici, sannajust, and auken (2021), who state that access to finance is essential, as smes play a significant role in the international business landscape. lastly, logistical issues present another hurdle for businesses in bhutan. warr (2012) points out that landlocked countries historically face challenges in adopting export-oriented development strategies, often resorting to inward-looking approaches. supporting this, business bhutan (2019) states that the lack of railways and waterways, huge dependency on port of kolkata, limited air travel poses hurdles to businesses in bhutan. overall, these findings highlight the interconnected challenges that must be addressed to foster a more conducive environment for entrepreneurship and international business development in bhutan. 7.2. implications for entrepreneurship and international business development in bhutan the findings reveal that there are multiple hurdles for initial business establishment and then for that business to grow and become internationally capable. if no interventions are carried out, the development of entrepreneurship and its contribution to economic development may continue to be very little. cooney (2012) states that the relevance of entrepreneurship to economic development has been established by multiple studies. entrepreneurship drives innovation, creates jobs, and fosters economic growth. in the context of bhutan, overcoming these hurdles is crucial to harness the potential of entrepreneurship for national development. regulatory challenges pose significant obstacles, as complex and lengthy processes of establishing businesses and accessing finance create barriers for entrepreneurs. without regulatory reforms that simplify and streamline these processes, new businesses may struggle to survive, limiting their ability to grow and expand into international markets. more entrepreneur-friendly regulatory reforms are essential to create a more conducive environment for business operations. financial accessibility is another critical issue, as many entrepreneurs face difficulty in securing the capital needed to start or expand their business. without improvements in financial accessibility, many potentially viable business ideas may never materialize. policies that facilitate easier access to credit and financial resources are necessary to foster entrepreneurial ventures. the lack of an entrepreneurial mindset and preference for government jobs over entrepreneurship stifle innovation and business creation. fostering an entrepreneurial culture through education and awareness programs can encourage more individuals to consider entrepreneurship as a viable career path. developing entrepreneurial skills at an early stage through educational reforms will be key to shifting societal perceptions. inadequate infrastructure and logistical challenges hamper the ability of businesses to operate efficiently and engage in international trade. improving transportation networks, digital infrastructure, and connectivity are essential to enhance connectivity and reduce the cost and time of doing business. government support is crucial for addressing challenges related to regulations and international trade. complex government regulations and insufficient knowledge among officials can discourage both local and international business activities. government support in the form of trade agreements, export advisory services, and participation in international trade organizations can help businesses overcome these challenges and access new markets while boosting their competitiveness. exploring the nexus between entrepreneurship and international business: a case study of bhutan 296 finally, the availability of a skilled workforce is another significant hurdle. many businesses struggle to find employees with the necessary skills to meet their needs. providing vocational training and skill development programs aligned with industry demands can ensure that the workforce meets the demands of modern businesses and supports their growth and internationalization. 7.3 policy recommendations for promoting the internationalization of bhutanese entrepreneurial ventures i. regulatory reforms simplify and streamline business registration and licensing processes by adopting best practices from countries like singapore, which consistently ranks among the top five in the ease of doing business (eob) index. singapore’s “gobusiness licensing” portal offers a single registration window for new business registration and fee payments, providing a seamless experience for entrepreneurs. in addition, singapore’s corporate income tax (cit) at 17%, one of the lowest in the world, has contributed to establish its pro-business environment, benefiting local businesses and attracting international businesses (world bank, 2019). in contrast, bhutan’s cit stands at 30% for fully tax-liable firms and 25% for limited tax-liable companies, which may discourage business growth. therefore, the government could explore reducing cit to encourage business establishments and allow firms to retain larger profits. this would enable companies to increase retained earnings, facilitating growth, expansion, or reinvestment in research and development. ii. development of entrepreneurial mindset and capacity building incorporate entrepreneurial studies into the national syllabus to foster an entrepreneurial mindset from an early stage. additionally, provide seminars, training programs, and mentorship opportunities to equip individuals with practical skills and knowledge. furthermore, popularize success stories of bhutanese entrepreneurs, such as bhutan blossoms, to inspire and motivate aspiring entrepreneurs. iii. sensitization of relevant government agencies improve coordination and efficiency, by making it mandatory for relevant government agencies to meet regularly and collaborate. additionally, establishing a common web portal will streamline access to information and provide updates on any changes in service delivery rules. furthermore, setting up an entrepreneurship development and international trade office, along with a customer complaints division, to address discrepancies and ensure seamless access to trade-related information. iv.enhance financial accessibility develop specialized financial products for smes and startups, and establish government-backed loan guarantee schemes like the national credit guarantee scheme launched during the pandemic but later discontinued (dolkar, 2023). v. launch more initiatives like the expanding horizons guidebook vi. skill development programs offer vocational training aligned with industry needs and foster collaborations between educational institutions and businesses. bhuwan shrivastava, pem dechen topgay, pema lhaden topgay, lhaki dema, sumita dave 297 8. conclusions 8.1 summary of the study's key findings the study revealed several factors contributing to bhutan’s 89th position in the ease of doing business (eob) ranking out of 190 countries. key challenges include complex government regulations, coupled with a lack of awareness among government officials. limited access to finance and inadequate infrastructure, compounded by the country’s geographical challenges, further restrict business growth. additionally, there is a shortage of a skilled workforce and an entrepreneurial mindset, limiting innovation. moreover, foreign direct investments (fdis) are predominantly concentrated in the hotel sector, signaling a need to diversify investments. the study emphasizes the importance of policy reforms and enhanced capital access avenues to facilitate entrepreneurial growth and facilitate international trade. 8.2 contributions to the field of entrepreneurship and international business this research makes several significant contributions to the fields of entrepreneurship and international business. it applies both case studies and comparative analysis to provide insights by drawing parallels between bhutan’s entrepreneurial landscape and those of other economies. through longitudinal studies, the research tracks changes and trends in trade balance and economic growth, offering a broader understanding over time. it also sheds light on the entrepreneurial ecosystem of small developing economies like bhutan, revealing how regulatory, financial, and cultural factors shape these ecosystems. moreover, the study identifies key barriers hindering business growth and internationalization, such as complex regulations, limited financial access, logistical issues, and a lack of entrepreneurial mindset. with these, policy recommendations which can be used to stimulate entrepreneurship and facilitate international business development include, simplifying regulatory processes, improving financial accessibility, promoting entrepreneurial culture, and developing infrastructure to support business growth. in addition, the importance of financial accessibility for small and medium enterprises (smes) is also highlighted, with suggestions for improving credit availability and fostering financial inclusion. the study underscores the need for education reforms to integrate entrepreneurship at all stages, thereby nurturing an entrepreneurial mindset from an early stage. furthermore, briefly highlights the impact of government policies on entrepreneurship, evaluating the existing regulatory environment and system. 8.3 suggestions for future research this study identifies several areas for future research. future studies with proper data collection can help strengthen the understanding of the link between entrepreneurship and international business in bhutan. additionally, the impact of regional trade agreements on bhutan’s international trade dynamics along with the effects of specific government policies, such as high taxation, on entrepreneurship and trade can be further examined. another scope for future research involves analyzing how fdis influence bhutan’s trade and entrepreneurial environment, helping policymakers craft more effective strategies to attract and manage foreign investments. exploring the nexus between entrepreneurship and international business: a case study of bhutan 298 references 1. asian development bank. (2022, april). asian development outlook 2022: mobilizing taxes for development. adb.org/sites/default/files/publication/784041/ado2022.pdf 2. bhutan foundation. (2019, october 30). made in bhutan: entrepreneur stories by loden foundation celebrates 10th anniversary. bhutanfound.org/made-in-bhutanentrepreneur-stories-by-loden-foundation-celebrates-10th-anniversary/ 3. business bhutan. (2019, february 5). private sector beset with challenges. business bhutan. businessbhutan.bt/private-sector-beset-with-challenges/ 4. cheong, i., bark, t., & jeong, h. y. (2015). a framework of trade policy for bhutan compatible with the gross national happiness. asian development bank. adb.org/sites/default/files/publication/174813/south-asia-wp-039.pdf 5. cooney, t. m. (2012). entrepreneurship skills for growth-oriented businesses. dublin institute of technology. oecd.org/cfe/leed/cooney_entrepreneurship_skills_hgf.pdf 6. daily bhutan. (2024, june 10). what are the entrepreneurship programmes and initiatives available in bhutan? dailybhutan.com/article/what-are-the-entrepreneurshipprogrammes-and-initiatives-available-in-bhutan 7. dolkar, d. (2022, july 20). no credit facility for small and medium enterprises. kuensel. kuenselonline.com/no-credit-facilities-for-small-and-medium-enterprises/ 8. dolkar, d. (2023, august 22). ncgs projects come to an end by this month. kuensel. kuenselonline.com/ncgs-projects-come-to-an-end-by-this-month/ 9. ebhutan. (2024, january 4). empowering dreams and thriving startup ecosystem. entrepreneurbhutan.com/empowering-dreams-and-thriving-startup-ecosystem/ 10. giudici, g., sannajust, a., & auken, h. (2021). special issue on small business financing: new actors, new opportunities, new challenges. journal of small business management, 59, 219-222. doi.org/10.1080/00472778.2020.1865540 11. g2b. (n.d.). to obtain cottage registration certificate. ministry of economic affairs. g2b.gov.bt 12. hayes, a. (2024, june 6). foreign direct investment (fdi): what it is, types, and examples. investopedia. investopedia.com/terms/f/fdi.asp 13. itc. (n.d.). entrepreneurship ecosystem in bhutan. itcbenchmarking.org/downloadfile/789 14. lewis, s. (2015, april 4). qualitative inquiry and research design: choosing among five approaches. sage journals, 16(4). doi.org/10.1177/1524839915580941 15. lhamo, t. (2020, february 11). multiple strategies in place to tackle youth unemployment. business bhutan. businessbhutan.bt/multiple-strategies-in-place-totackle-youth-unemployment/ 16. ministry of industry, commerce and employment (moice). (2023, march). foreign direct investment rules and regulations 2012. moice.gov.bt/wpcontent/uploads/2023/03/fdi-rules-regulations-2012-amended-ondecember-30-2014.pdf 17. ministry of industry, commerce and employment (moice). (2023, september). fdi annual report. industry.gov.bt/publications/annual-fdi-report-2023 bhuwan shrivastava, pem dechen topgay, pema lhaden topgay, lhaki dema, sumita dave 299 18. ministry of economic affairs (moea). (2019). foreign direct investment policy 2019. royal government of bhutan. bhutan.eregulations.org/media/fdi-policy-2019.pdf 19. ministry of finance, bhutan. (2023). bhutan trade statistics. https://www.mof.gov.bt/publications/reports/bhutan-trade-statistics/ 20. organisation for economic co-operation and development (oecd). (2019). oecd sme and entrepreneurship outlook 2019. oecd publishing. doi.org/10.1787/34907e9c-en 21. singh, e., wangda, s., khan, s., & khan, s. (2020). exploring the obstacles for startups in bhutan: from a prevented entrepreneur's perspective. international journal of innovation, creativity and change, 11(4), 70. ijicc.net/images/vol11iss4/11407_singh_2020_e_r1.pdf 22. razzaque, m. (2020, may). graduation of bhutan from the group of least developed countries: potential implications and polity imperatives. working paper series, macroeconomic policy and financing for development division. unescap.org/sites/default/files/publications/wp_20_04%20bhutan%20graduation_po tential%20implications%20and%20policy%20imparatives.pdf 23. royal bhutanese embassy, dhaka, bangladesh. (n.d.). investment opportunities in bhutan. mfa.gov.bt/rbedhaka/business-opportunities/ 24. rinzin, y. (2021). a cursed year for the tourism sector. kuensel online. kuenselonline.com/a-cursed-year-for-the-tourism-sector/ 25. united nations conference on trade and development. (2024). key statistics and trends in international trade 2024. unctad.org/system/files/officialdocument/ditctab2024d1_en.pdf 26. united nations development programme (undp). (2024, june 6). springboard programme celebrates its 2024 cohort. undp.org/bhutan/news/springboardprogramme-celebrates-its-2024-cohort 27. utha, k., rinchen, s., gurung, b., gurung, g., rabgay, t., & dorji, c. (2016). entrepreneurship education in bhutan: perception, culture and challenges. world journal of educational research, 3(2), 460. doi.org/10.22158/wjer.v3n2p460 28. vijayasri, g. (2013). the importance of international trade in the world. international journal of marketing, financial services and management research, 2, 111-119. scirp.org/reference/referencespapers?referenceid=3189848 29. world bank. (n.d.). bhutan policy notes attracting foreign direct investment. openknowledge.worldbank.org/server/api/core/bitstreams/192484c3-dd5f-5360-8710313d9967fb74/content 30. world bank group. (2020). doing business 2020. openknowledge.worldbank.org/bitstream/handle/10986/32436/9781464814402.pdf 31. world bank. (2019). the world bank in singapore. worldbank.org/en/country/singapore/overview agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 19, no. 1 (2025), pp. 163-175 163 global minimum tax and the determinants of corporate tax revenue: an econometric analysis for the western balkan countries d. kilaj, a. bexheti, s. alija duresa kilaj1, abdymenaf bexheti2, sadri alija3 ¹ ² ³ faculty of business and economics, south east european university tetovo, north macedonia ¹ https://orcid.org/0000-0002-6331-2234, e-mail: dk32331@seeu.edu.mk ² https://orcid.org/0009-0003-9737-7647, e-mail: a.bexheti@seeu.edu.mk ³ https://orcid.org/0000-0002-0355-731x, e-mail: s.aliji@seeu.edu.mk abstract: the purpose of this paper is to analyze the global minimum tax of 15% for international corporations, the fiscal impact of this policy which is already in force internationally as of january 1, 2025, as well as the determinants of corporate tax revenues, with a particular focus on the western balkan countries. the paper relies on secondary data collected from world bank, the imf, and eurostat reports. data processing is carried out using the stata software, while the analyzed period covers the last 20 years. the empirical results show that foreign direct investment, gdp per capita, and trade openness have a positive impact on corporate tax revenues, while unemployment has a negative impact. regarding the global minimum tax, it is seen that this tax has an effect in some countries but does not have a huge impact in some other countries. keywords: global minimum tax, corporate tax revenue, economic determinants, trade openness, foreign direct investments, gdp per capita. introduction corporate income tax is a crucial source of government revenue, especially in developing countries, where it accounts for 15-20% of tax revenues. however, there is a widespread perception that an increasing number of businesses, especially large ones, are paying less tax on their profits. this belief is supported by the ongoing decline in statutory tax rates and the growing competition among states to offer tax incentives, such as tax credits, income exemptions, and lower rates, to attract investments. this paper analyzes the impact of these tax incentives on reducing effective tax rates and how this effect varies depending on firm size (bachaset al., 2023). the global minimum tax ensures that corporate profits are taxed at a minimum effective rate of 15%, regardless of the jurisdiction in which they are recorded. if a company reports profit in a country with a lower tax rate, its home country imposes a top-up tax to meet the global minimum threshold. however, there are several important exceptions to this rule. first, the global minimum tax applies only to multinational corporations with worldwide revenues exceeding €750 million. second, it is not designed to penalize legitimate business https://orcid.org/0000-0002-6331-2234 mailto:dk32331@seeu.edu.mk https://orcid.org/0009-0003-9737-7647 mailto:a.bexheti@seeu.edu.mk https://orcid.org/0000-0002-0355-731x mailto:s.aliji@seeu.edu.mk duresa kilaj, abdymenaf bexheti, sadri alija 164 activities in low-tax jurisdictions, as demonstrated by the carve-out rule, which reduces the taxable profit base by considering a firm's tangible assets and labor costs. third, the tax does not apply to countries where a corporation has only a minimal operational presence (johannesen, 2022). the paper is divided into 5 sections. the first part includes the literature review, the second section includes the meta-analysis, the third section includes the scientific methodology and the details of the econometric model. the fourth section includes the statistical analysis and findings of the study, while the last section includes the conclusions and recommendations of this study. literature review the 137 member countries that have adopted the oecd framework for a global minimum tax of 15% have the option to either implement the oecd model pillar 2 rules or comply with the adoption of these rules by other nations. the agreement establishes global anti-base erosion (globe) rules, ensuring that large multinational corporations with consolidated revenues above €750 million pay an effective minimum tax rate of 15% on "excess profits" generated in any jurisdiction where the effective tax rate falls below this threshold. in such cases, companies must pay the additional taxes either in their home country or in the low-tax jurisdiction. the primary goal of the global minimum tax is to decrease tax competition for investment capital and limit profit shifting by creating a standardized framework for corporate taxation globally (schjelderup & stahler, 2024). the global minimum corporate tax primarily aimed to prevent the “race to the bottom” and increase corporate income tax rates. this concept suggests that the erosion of the tax base encourages tax competition, which subsequently results in lower corporate income tax rates. globalization has played a key role in this phenomenon, as financial structures, transfer pricing, and intellectual property licensing have made income more mobile. this trend is evident in empirical data: the average corporate income tax rate, weighted by gdp across 94 countries, dropped from 34.1% in 2005 to 25.4% in 2020, a decline of 8.7 percentage points. notably, in 2018, the u.s. recorded a significant decrease in the federal corporate income tax rate from 29.7% in 2017 to 26.4%, following a 14% reduction. this shift was greatly influenced by the u.s., which accounts for nearly 25% of the gdp among the 94 analyzed countries(mintz & tulkens, 1986). the goal of the global minimum corporate tax is to mitigate the negative effects of tax base shifting. this is achieved by imposing a minimum tax on profits transferred to low-tax jurisdictions. as a result, this could lead to an increase in corporate tax revenues for tax havens in the caribbean and low-tax countries like ireland, which have experienced revenue losses (mintz, 2022). according to the research, a global tax deal would look equitable in the long run, with individual countries either gaining or losing tax revenue. as a result, countries would have to adjust their budgets. the corporate tax rates in each country are shown in this chart along with the recommended floor of 15%. countries that are currently in deficit and/or below the line will move quickly to enact regulations in order to become global tax collectors. global minimum tax and the determinants of corporate tax revenue: an econometric analysis for the western balkan countries 165 similarly, countries with surpluses and effective tax rates above the threshold may be reluctant to adopt regulations designed to address this issue (mrozek, 2023). figure 1. corporate tax rate in 2023 sources: (mrozek, 2023) the objective of a global minimum tax is to change the nature of international tax competition. according to devereux et al. (2021), the structure of the tax base for the surcharge has an impact on how the second pillar affects tax competition. corporations in low-tax countries experience downward pressure on their corporate tax rate due to the methodology used to calculate the surcharge. furthermore, because source nations can collect the surcharge themselves, they have a tremendous incentive to do so, see perry (2023). it is argued that the second pillar is effective in creating a floor for tax competition in source countries (devereuxet al., 2022). table 1. definitions of global corporate minimum tax for western balkan countries definitions of global corporate minimum tax the corporate income tax (cit) system in kosovo is based on the principle of worldwide taxation. taxpayers subject to cit are corporations and other legal entities. organizations and businesses operating with public/state assets. non-resident persons with permanent residence in kosovo. resident taxpayers are generally subject to tax on both foreign and kosovo-sourced income, while non-resident taxpayers are generally subject to tax only on their kosovo-sourced income. the cit rate is 10%. in albania, non-resident individuals and entities are taxed only on income earned within the country. in contrast, resident entities are subject to taxation on all sources of income, both domestic and foreign. the corporate income tax (cit) in albania is set at a rate of 15%. cit applies to taxable gains, which are determined by deducting deductible expenses from taxable income. corporate income tax (cit) is progressively imposed on businesses operating in montenegro. the realized profit of taxpayers determines the applicable tax level, which varies from 9% to 15%. residents are subject to profit taxes around the world. montenegro origin or income attributed to a non-resident taxpayer of montenegro is subject to taxation. moreover, non-residents have to pay the duresa kilaj, abdymenaf bexheti, sadri alija 166 retention tax for income earned in montenegro. serbia domestic and foreign income earned by residents is subject to tax. only income derived from a permanent establishment within serbian territory is subject to tax for non-residents, the corporate income tax (cit) rate is 15%. in north macedonia, cit is generally due by all resident and non-resident legal companies that conduct business through permanent establishments. entities that reside in macedonia are subject to taxes on their international income. the profit realized by non-resident entities through its pe in north macedonia is subject to taxation. 10% is the cit rate. the two entities that makeup bosnia and herzegovina are the federation of bosnia and herzegovina and the republika srpska. both entities also govern a third territory, the brčko district (bd). while indirect tax laws are implemented at the state level, direct taxes are imposed at the entity or district level. the republika srpska, the brčko district, and the federation of bosnia and herzegovina are all tax resident corporations globally. income earned in the regions of the federation of bosnia and herzegovina, republika srpska, and brčko district is subject to non-resident tax. source: collecting data from the author (2025) the corporate income tax (cit) rate in singapore stands at 17%, one of the lowest globally, and has played a key role in fostering a pro-business environment by supporting domestic firms and attracting foreign investment (world bank, 2019). in contrast, bhutan imposes a cit rate of 30% on fully taxable firms and 25% on those with limited tax liability, which may hinder entrepreneurial growth. consequently, the government could consider reviewing tax rates to encourage the establishment of new businesses and allow existing companies to retain a larger share of their profits. this would help increase retained earnings, supporting expansion, growth, or reinvestment in research and development (shrivastava et al., 2024). according to the latest data, in 2023 there was an increase in tax revenues in the capital of ukraine and in 18 other regions, compared to 2022. however, this growth was not evenly distributed across all regions, as only 13 of them showed improvement compared to the same period of the previous year. these findings are consistent with existing literature, which highlights the vulnerability of economic sectors to geopolitical and fiscal contexts, particularly in conflict-affected areas (mazaraki et al., 2024). transfer pricing practices used by multinational companies pose a significant challenge for national economies, especially in developing countries such as those in the western balkans. as highlighted in the study on the impact of transfer pricing on the romanian economy, these practices can lead to substantial losses in fiscal revenues for the state budget, undermining fiscal capacity and the ability to finance public services. therefore, governments need to strengthen the monitoring and regulation mechanisms of transfer pricing, in line with international best practices, aiming to strike a balance between encouraging foreign investment and preserving the integrity of the tax system. this underlines the need for a global minimum tax that ensures a fair and sustainable framework for taxing multinational corporations, addressing tax avoidance, and contributing to sustainable economic development in the region (ivan & ladar, 2017). meta–analysis of research paper global minimum tax and the determinants of corporate tax revenue: an econometric analysis for the western balkan countries 167 in this part, a considerable number of scientific works analyzed by the following authors will be analyzed, which will be presented in tabular form and which deal with works with the same theme as our work. table 2. meta-analysis of research author year title methodology finding (mintz, 2022) 2022 the global corporate minimum tax: a cure or not? panel data the results suggest that, to ensure that passive income is taxed, many countries could take action to tighten their foreign business control rules. it is unclear whether a minimum corporate tax worldwide would be more effective in reducing profit shifting than other focused initiatives, given the complexity of all these regulations. (johannesen, 2022) 2022 the global minimum tax meta analysis from the findings, we can say that the global minimum tax increases the welfare of individuals on the one hand, but also increases government revenue by preventing profit shifting. however, by raising tax rates and shifting resources away from businesses, this reduces their welfare. when profit shifting is paused in some form and the global minimum rate is high enough, there is an undeniable positive net welfare effect. (mrozek, 2023) 2023 the global minimum tax: hurdles to implementation of an effective tax meta analysis according to the research findings, the oecd will not be able to implement its two -pole strategy by 2024 unless it is noted by all legislative bodies. large multinational firms, governments around the world, the accounting sector, and the global economy in general should consider these results. the research shows that legislation can be approved and only succeed if the stakeholders cooperate to an extreme extent. (schjelderup & stahler, 2024) 2023 the economics of the global minimum tax meta analysis it follows that if sbie is positive, a minimum 15% corporate tax for lowtax subsidiaries is not met. we demonstrate that while pillar 2 reduces tax motivated transfer prices, it changes employment, investments, and import incentives. moreover, we show that sbie is comparable to a production subsidy for a very high part duresa kilaj, abdymenaf bexheti, sadri alija 168 of work and/or capital. (haufler & kato, 2024) 2024 a global minimum tax forlarge firms only: implications for tax competition meta analysis the results say it is not certain that tax discrimination always results in lower levels of taxes for small multinational corporations in a business environment. including a response separated by multinational corporations to take advantage of lower tax levels for small mnes would be the third and last extension. source: collecting data from the author (2025) scientific research methodology the aim of this paper is to analyze the global minimum tax of 15% for international corporations, focusing on the factors that influence corporate tax revenues, particularly in the western balkans. to carry out the research, will use secondary data provided by reliable sources from the world bank, the international monetary fund, eurostat, and others. also, in the literature review part, we will focus on the works of different authors,together with relevant books by experts in the fields of finance, economics, and taxes. also, we will focus on various international conferences, numerous reports and safe resources from the internet. the study will use panel data covering 20 years (2004-2023) and the countries we will analyze are (bosnia and herzegovina, kosovo, montenegro, north macedonia, serbia, and albania). for data processing, we will use the stata software program. the importance of the paper lies in its aim to provide real and consistent results that can shed light on corporate taxes and economic growth. the variables included in this research are: dependent variable (cit) and independent variables (foreign direct investment, gross domestic product per capita, trade openness,and unemployment). the data will be processed in the stata program and to prove the validity of the hypotheses of this study, we will apply the following statistical tests: descriptive statistics, correlation analysis, linear regression, random effect, fixed effect, hausman – taylor regression and gmm. arellano bond valuation model, generalized valuation equations (gee model). the hypothesis of the study is: h0: economic determinants have a positive and significant impact on corporate tax revenues in the countries of the western balkans. h: economic determinants don't have a positive and significant impact on corporate tax revenues in the countries of the western balkans. the research questions of the research are: 1. what are the effects of the global minimum tax on the economic determinants in these countries? 2. does the impact of the global minimum tax differ between the different countries of the western balkans? 3. what are the main economic factors affecting corporate tax revenues in western balkan countries? table 3. description of the variables included in the econometric models global minimum tax and the determinants of corporate tax revenue: an econometric analysis for the western balkan countries 169 source: data obtained by authors (2025) the econometric model that will be used in this study is specified as follows: cti = β0 + β1fdi + β2gdpc+ + β3to + β4unmp + γit where: cti – corporate tax revenues fdi – foreign direct investment gdppercap – gross domestic product per capita to– trade openness unmp – unemployment γ – stochastic variables (other factors not considered in the model) i – code and t – time period econometric analysis and findings of the study in the chapter, the results will be presented through econometric analysis, where in this part the hypotheses presented in the research will be tested and we will try to get answers to the research questions presented earlier. initially, descriptive statistics, correlation, linear regression, fixed effect model, random effect model, hausman taylor estimation, gee model, and gmm model. all these results will be extracted through the stata program. in the following table, descriptive statistics will be presented for the variables included in the research. we will analyze the number of observations, the average, the standard deviation, the minimum, and the maximum of these variables. table 4. descriptive statistics for the variables included in the econometric model variables obs. mean std. deviation minimum maximum fdi 120 3.65 3.570326 -15.2 13.4 cit 66 32.66515 5.961066 22.3 41.3 gdppercap 105 6.949524 5.149517 .1 37.3 to 120 91.9725 26.35181 0 168.8 unmp 100 19.949 7.190348 8.7 37.3 source: author's calculations in stata (2025) variables description of variables data source dependent variable (y)  corporate tax revenues (% gdp) annual reports of the bank world (2004-2023)  independent variable (x1) foreign direct investment (% of gdp) annual reports of the bank world (2004-2023)  independent variable (x2)  gross domestic product per capita (annual %) annual reports of the bank world (2004-2023)  independent variable (x3) trade openness (% gdp) annual reports of the bank world (2004-2023)  independent variable (x4) unemployment (%) annual reports of the bank world (2004-2023) duresa kilaj, abdymenaf bexheti, sadri alija 170 based on the data obtained from descriptive statistics, we can observe that the sample of our work is 120 observations, as for the average, we see that the variable with the highest average is to. if we analyze the part of the standard deviation, we can notice that we have the highest value of the standard deviation in the to variable as well, in the part of the minimum value is the cit variable, and as for the maximum value, again the to has the highest value. figure 2. graphic representation of the histogram source: authors' calculations in stata (2025) based on the graphical representation of the histogram, we see that between the dependent variable of gdp and the independent variable, there is a normal distribution of these variables included in the analysis. table 5. correlation analysis for the variables included in the econometric model variables cit fdi gdppercap to unmp cit 1.0000 fdi -0.2172 1.0000 gdppercap 0.1052 0.2679 1.0000 to 0.0197 -0.2007 0.1035 1.0000 unmp 0.0856 -0.3585 0.0495 -0.0260 1.0000 source: authors' calculations in stata (2025) the correlation table shows the relationships between the five main economic variables: cit, fdi, gdppercap, to and unmp. the correlation between cit and fdi is -0.2172, suggesting a weak negative relationship between these two variables. this implies that an increase in corporate taxes is associated with a small decrease in foreign direct investment, although the relationship is weak.the correlation is 0.1052, indicating a very weak positive relationship between cit and gdp per capita. this implies that an increase in gdp per capita is associated with a small increase in corporate taxes, but the relationship is negligible.the correlation is 0.0197, indicating an almost insignificant relationship between cit and to. this result suggests that 0 .0 0 0 .2 5 0 .5 0 0 .7 5 1 .0 0 n o rm a l f [( c it -m )/ s ] 0.00 0.25 0.50 0.75 1.00 empirical p[i] = i/(n+1) 0 .0 2 .0 4 .0 6 .0 8 .1 d e n s it y 20 25 30 35 40 cit global minimum tax and the determinants of corporate tax revenue: an econometric analysis for the western balkan countries 171 there is no significant relationship between corporate taxes and the level of open trade.the correlation is 0.0856, indicating a weak positive relationship between cit and the unemployment rate. this may mean that an increase in corporate taxes is associated with a small increase in unemployment, but this relationship is weak. the following is the analysis of statistical tests performed through the stata program, such as linear regression, random effect, fixed effect, hausman taylor regression, gmm model -generalized estimating equations (gee model). gdp = β0-.5552252+ β1.3855899+ β2.0154152+ β3.7088763+ β45552252+ γit table 6. econometric results and empirical findings of the study variables linear regression random effects – gls regression fixed – effects regression hausman – taylor regression gee model gmm model cit fdi -.1617591 (0.000)*** -.2958505 (0.056)** -.5338307 (0.008)** -.5328499 (0.008)** -.5312379 (0.008)** -.148731 (0.373) gdppercap -.2415487 (0.249) .3855899 (0.004)** .4978438 (0.001)*** .4822447 (0.002)** .4768369 (0.002)** .5684211 (0.000)*** to .0049486 (0.475) .0154152 (0.054)** .0222733 (0.067)** .0185606 (0.093)* .0184015 (0.093)* .0012802 (0.931) unmp .8297792 (0.000)*** .7088763 (0.044)** .0491625 (0.141) .0415701 (0.174) .0411805 (0.175) .046002 (0.230) const. 1.023933 (0.144) -.5552252 (0.703) -.9106561 (0.600) -1.399409 (0.558) -.3690647 (0.826) r square 0.4737 0.4095 0.0428 adj.r2 0.4503 0.3448 0.0198 source: authors' calculations in stata (2025) explanation: p-values are shown in brackets: *** indicates statistical significance at the 1% level; ** indicates statistical significance at the 5% level and * indicates 10% statistical significance. based on the econometric results in the table above, we can conclude that some of the independent variables are significant at the 1%, 5%, and 10% levelsfor interpretation purposes, we will base our analysis on the random effects gls model, where all results in this regression are significant. β0 if all other factors are constant, then cit will be -0.5552252units. β1 – if foreign direct investment increases by one unit holding all other variables constant, then cit will decrease by -0.2958505 units. this statement is correct since the values are within the 5% confidence interval, because (p-value = 0.056=0.05).increased foreign direct investment often leads to increased corporate tax revenues. this effect occurs because fdi increases economic activity and company profits. the increase in the number of companies and the improvement of the business environment stimulate more economic activity and other investments, contributing to a continued increase in corporate tax revenues. duresa kilaj, abdymenaf bexheti, sadri alija 172 β2 – if gdp per cap increases by one unit keeping all other variables constant then cit willincreaseby 0.3855899units. this statement is correct since the values are within the 5% confidence interval, because (p-value = 0.004<0.05).an increase in gross domestic product (gdp) per capita usually leads to an increase in corporate tax revenues. this is because a higher gdp per capita typically indicates increased economic activity and living standards, which boosts demand for products and services, and consequently, corporate profits.better economic conditions, along with increased private consumption and investment, contribute to heightened business activity and boosted corporate tax revenues. β3 – if the trade openness increases by one unit, keeping all other variables constant, then cit will increase by 0.0154152units. this statement is correct since the significance value is within the 5% confidence interval, because (p-value = 0.054=0.05).increased trade openness, which includes increased imports and exports, can boost economic activity and create new opportunities for companies. this often leads to increased profits for businesses that benefit from expanded markets and increased sales volumes. furthermore, increased trade openness can stimulate additional investment and create a more favorable business environment, helping to increase tax revenues. β4 if unemployment increases by one unit keeping all other variables constant then cit will increaseby 0.7088763units. this statement is correct since the significance value is within the 5%confidence interval, because (p-value = 0.044<0.05). rising unemployment typically leads to a decrease in consumption and demand for products and services, negatively impacting company profits. with less income and a weaker economic environment, companies may cut back on investment and hiring, further reducing corporate tax revenues. additionally, increasing unemployment can deteriorate the business environment and impact economic sustainability, leading to a potential decline in corporate tax revenues. table 7. heteroscedasticity test breusch-pagan / cook-weisberg test for heteroskedasticity h0: constant variance variables: fitted values of cit chi2 (1) = 1.40 prob > chi2 = 0.2365 source: authors' calculations in the stata program (2025) breusch-pagan/cook-weisberg test results indicate that there is insufficient evidence to suggest heteroskedasticity in the regression model. with a p-value of 0.2365, which is greater than the significance level of 0.05, the hypothesis of constant variance (homoscedasticity) is not rejected. this indicates that the errors in the model have a constant variance and it is not necessary to make adjustments for heteroscedasticity. table 8. tests of normality global minimum tax and the determinants of corporate tax revenue: an econometric analysis for the western balkan countries 173 skewness/kurtosis tests for normality variable obspr (skewness) pr (kurtosis) adj chi2 (2) prob>chi2 resid 65 0.8880 0.0000 15.21 0.0005 source: authors' calculations in the stata program (2025) skewness: the high p-value (0.8880) suggests that there is no problem with skewness of the residuals. kurtosis: a very low p-value (0.0000) suggests that there is a significant deviation from the normal distribution in terms of kurtosis. joint test: the p-value of the joint test (0.0005) shows that, in general, the residuals do not follow a normal distribution, suggesting that the model may have problems with the assumption of normality of the errors. overall, this result indicates that the distribution of the residuals is not normal, mainly due to a problem with kurtosis. table 9. vif test variable vif 1/vif gdppercap 1.37 0.731420 unmp 1.20 0.832592 fdi 1.15 0.872143 trd 1.09 0.915363 mean vif 1.20 source: authors' calculations in the stata program (2025) the test results (vif) show that there is no significant collinearity problem between the independent variables in your model. all vif values are below 10, with an average of 1.20, suggesting that the independent variables are stable and not affected by collinearity. this shows that your model is reliable and the regression coefficients are stable. discussions/conclusions the purpose of this research was to analyze the global minimum tax of 15% for international corporations and to examine the determinants of corporate tax revenues, specifically focusing on the western balkan countries. we successfully analyzed several factors and developed an econometric model, which yielded some significant results. analysis of the results shows that foreign direct investment, gdp per capita, and trade openness positively influence corporate tax revenues. this conclusion is supported by the econometric models used in this research. the other independent variable, which is unemployment, turns out to hurt corporate tax revenues. from here we say that most of the analyzed countries have been good in this aspect, but some other analyzed countries still need to work on this issue.the global minimum tax is a type of initiative led by the oecd/g20, duresa kilaj, abdymenaf bexheti, sadri alija 174 which aims to establish an effective minimum tax of 15% for multinational corporations with revenues over 750 million euros. as we discussed in the paragraphs above, the purpose of this tax is to reduce tax avoidance and set a floor in tax competition between countries. research shows that this tax is present in some western balkan countries, while others do not implement it.north macedonia: the republic of macedonia adopted the law on the global minimum tax on corporate income in december 2024, implementing the oecd/g20 pillar two rules. the law entered into force on january 1, 2025. montenegro: this country has not yet formally adopted the pillar two rules in its tax legislation. but importantly, this country has taken steps toward improving tax policies, including the introduction of transfer pricing rules and progressive taxation as of january 1, 2022(cms, 2023).serbia: although it has not yet implemented the regulations on the global minimum tax, the corporate income tax rate is 15%, in line with the rate proposed by the oecd. however, it is believed that due to various tax incentives, the effective tax rate may be lower than 15%(karanovic, 2024).kosovo, bosnia and herzegovina and albania: so far these countries have not taken concrete steps towards implementing the global minimum tax. the concept of this tax may still be new to many countries and involves a complex process that requires alignment with both domestic and international legislation. as a result, western balkan countries may be at varying stages of this process, and further developments are anticipated in the future. examining other countries worldwide, which have been analyzed by different authors, reveals the presence of this tax in those regions as well. given its importance, we say that this tax should be taken more seriously even by countries that do not yet implement it. during the implementation of this research, we also encountered several limitations that sometimes made the work difficult. a major limitation was the lack of information regarding the global minimum tax for the western balkan countries, there was no literature review for these countries since it was an unexplored topic, and we encountered a lack of data for some variables. we hope that in the coming years, this gap in the literature review section will be filled with sufficient information. references 1. bachas, p., anne., b., dom, r., & semelete, c. (2023). effective tax rates and firm size. development research group & macroeconomics, trade and investment global practice, 1-47. 2. bank, w. (2019). the world bank in singapore. doi:worldbank.org/en/country/singapore/overview 3. cms. (2023). cms expert guide to mastering oecd's pillar two in montenegro. expert guide comparison (cms law-tax-future). 4. devereux, m. p., simmler, m., vella, j., & wardell-burrus, h. (2022). pillar 2: rule order, incentives and tax competition. institute-leibniz institute for economic research a the university of munich econpol policy breif. global minimum tax and the determinants of corporate tax revenue: an econometric analysis for the western balkan countries 175 5. haufler, a., & kato, h. (2024). a global minimum tax for large firms only: implications for tax competition. cesifo working paper no. 11087, 1-34. retrieved from file:///c:/users/hp/downloads/cesifo1_wp11087.pdf 6. ivan, r., & ladar, c. t. (2017). general considerations on the impact of transfer pricing performed by multinational companies on a national economy. agora international journal of economical sciences, 11. 7. johannesen, n. (2022). the global minimum tax. journal of public economics, 212, 1-8. doi:https://doi.org/10.1016/j.jpubeco.2022.104709 8. karanovic. (2024, march 20). karanovic partners. retrieved january 3, 2025, from unpacking the minimum tax act: implications for slovenia, croatia, and the region: https://www.karanovicpartners.com/news/unpacking-the-minimum-tax-actimplications-for-slovenia-croatia-and-the-region/?utm_source=chatgpt.com 9. mazaraki, a., kulyk, m. .., boiko, m., bosovska, m., & vedmid, n. (2024). implementation of hotel revenue management strategies during a martial law. agora international journal of economical sciences, 18(1), 124-131. 10. mintz, j. (2022). the global corporate minimum tax: a cure or not? canadian tax journal / revue fiscale canadienne, 70, 231-55. doi:https://doi.org/10.32721/ctj.2022.70.supp.mintz 11. mintz, j., & tulkens, h. (1986). commodity tax competition among members of a. journal of public economics, 29, 133-72. doi:https://doi.org/10.1016/00472727(86)90001-0 12. mrozek, h. e. (2023). the global minimum tax: hurdles to implementation of an effective tax. university of new hampshire, durham, 1-22. doi: https://scholars.unh.edu/honors 13. schjelderup, g., & stahler, f. (2024). the economics of the global minimum tax. springer link, 935-952. doi:https://doi.org/10.1007/s10797-023-09794-w 14. shrivastava, b., topgay, p., topgay, l. p., dema, l., & davee, s. (2024). exploring the nexus between entrepreneurship and international business: a case study of bhutan. agora international journal of economical sciences, 18(2), 276-299. doi:https://univagora.ro/jour/index.php/aijes/issue/view/199/183 agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 19, no. 1 (2025), pp. 37-45 37 hydrogen's role in green economy: opportunities and challenges in selected european countries m. bartekova, s. janikovicova maria bartekova¹, sabina janikovicova² ¹ ² university of economics in bratislava, slovakia ¹ https://orcid.org/0000-0003-2691-3185, e-mail: maria.bartekova@euba.sk ² https://orcid.org/0009-0006-9330-1292, e-mail: sabina.janikovicova@euba.sk abstract: hydrogen is an important element in the transition to a green economy, with its potential to play a key role in the decarbonization of industry and transport within the european union. the aim of this article is to analyse the differences in hydrogen production and consumption between selected european countries in the context of their economic maturity. based on data from 2020 to 2023, a quantitative analysis was conducted including variables such as hydrogen production and consumption capacity and gdp per capita. using non-parametric tests (kruskal-wallis, dwass-steel-critchlow-fligner), statistically significant differences were identified between groups of countries with high and low levels of hydrogen infrastructure development. the results confirm that higher economic performance of countries is closely related to a more developed hydrogen economy. the discussion highlights the importance of investments, regulatory frameworks and technological innovations in the implementation of hydrogen solutions. the article also identifies the challenges faced by less developed countries and recommends an approach based on support and cooperation within the eu. keywords: european union, green economy, green logistics, hydrogen, nonparametric tests, sustainability. 1 introduction the transition to a green economy is one of the key challenges of the 21st century, with the decarbonisation of industry and transport among its main priorities. hydrogen, as a flexible energy carrier, is gaining increasing attention for its potential to contribute to reducing greenhouse gas emissions, diversifying energy sources and supporting innovation in the field of sustainable mobility. in this context, the european union has set ambitious targets for the production and use of hydrogen, which, however, encounter differences in the economic and technological readiness of individual member states. the aim of this study is to analyse the relationship between the economic performance of countries and the level of development of hydrogen infrastructure, specifically in the area of hydrogen production and consumption capacity and the number of registered hydrogen vehicles. special emphasis is placed on identifying differences between countries with a high and low level of economic development, while the approach chosen in the work allows identifying potential disparities and formulating recommendations for eu policy in the area of supporting the development of hydrogen technologies. https://orcid.org/0000-0003-2691-3185 mailto:maria.bartekova@euba.sk https://orcid.org/0009-0006-9330-1292 mailto:sabina.janikovicova@euba.sk hydrogen's role in green economy: opportunities and challenges in selected european countries 38 1.1 literature review hydrogen has been at the forefront of discussions on europe’s energy transition in recent years as a key element in the fight against climate change. although plans are ambitious and investments are increasing, this energy carrier remains at the beginning of its journey towards mass use (abbasov, 2024). the european union has set ambitious goals to achieve 10 million tonnes of domestic production of green hydrogen and a further 10 million tonnes from imports by the end of this decade, but current production of clean hydrogen remains well below these values. studies show that for hydrogen technologies to be successfully implemented, obstacles must be overcome technological, economic and regulatory barriers. the so-called hydrogen valleys and national initiatives in selected european countries must play a key role in this (sadikzada, 2021). 1.1.1 concrete steps under the european hydrogen strategy the european commission plans to present an eu hydrogen strategy together with a strategy for the integration of european energy systems with the aim of connecting the various energy sectors. the primary steps the eu is considering include scaling up the development of hydrogen technology, increasing the production of clean hydrogen to one million tonnes per year and doubling the funding for the hydrogen initiative within the eu budget to €1.3 billion (kovač, paranos & marciuš, 2021). other measures include allocating €2-4 billion over the next two years to launch projects financed by the sale of emission allowances and supporting investments in renewable energy and hydrogen infrastructure. according to the published documents, the overall eu economic package should include a plan for 2021-2027 and a "recovery instrument" of at least half a trillion euros (vivanco-martín & iranzo, 2023). one of the most promising concepts for the development of a hydrogen economy in europe are the so-called hydrogen valleys. these are regional ecosystems within which hydrogen is produced, transported and used within an integrated system. such areas could serve as a springboard for the creation of a larger european hydrogen economy (sadikzada, 2021). currently, there are only three hydrogen valleys in the eu one in denmark and two in germany. these countries can be considered pioneers in this area. on the positive side, however, another 17 projects are actively developing, indicating a gradual expansion of hydrogen solutions across the european continent (kumar & lim, 2022). 1.1.2 european ambitions for hydrogen valleys the european commission has set itself an ambitious target of doubling the number of operational hydrogen valleys by 2025. the commissioner for innovation, research, culture, science and youth has highlighted their importance. according to her, hydrogen valleys are key to creating a european hydrogen research and innovation area. hydrogen valleys allow new technologies to be integrated directly into a hydrogen ecosystem tailored to local requirements. this approach provides space for testing and optimizing different solutions before their wider deployment, which is extremely important for new and emerging technologies (lagioia, spinelli & amicarelli, 2023). maria bartekova, sabina janikovicova 39 1.1.3 main challenges in the development of hydrogen technologies the three main obstacles can be considered regulation, permitting processes and access to the energy grid. countries need clear regulation and clear permitting processes, but access to the energy grid is the most problematic (zainal et al., 2024). this is essential to ensure sufficient renewable electricity to produce green hydrogen. without solving this problem, it will be difficult to achieve the set goals for the production and use of hydrogen on the required scale. these challenges reflect the complexity of the transition to a hydrogen economy (kakoulaki et al., 2021). while the european union coordinates a common approach to the hydrogen economy, individual member states are implementing their own initiatives that reflect their specific conditions, priorities and possibilities (mneimneh et al., 2023). germany and denmark have emerged as european leaders in hydrogen technologies, as evidenced by the fact that these countries are home to three currently operational hydrogen valleys (hashimova, 2023). germany, europe's largest economy, is investing massive resources in the development of the hydrogen sector, while denmark is building on its experience with wind energy, which it plans to use to produce green hydrogen (van der spek et al., 2022). in 2024, the european commission, together with spain, lithuania and austria, announced new financial support for the development of hydrogen from renewable sources through an innovation fund. these three member states have joined the "auctions as a service" scheme in the second auction of the european hydrogen bank. in addition to the €1.2 billion in eu funding, the three countries have allocated over €700 million from national resources to support renewable hydrogen projects on their territory. the total funds mobilised through the renewable hydrogen auction reached around two billion euros (falcone, hiete & sapio, 2021). 1.1.4 technological and infrastructure constraints another major challenge is the need to develop and optimise technologies for the production, storage, transport and use of hydrogen. electrolysers, the essential equipment to produce green hydrogen, are still relatively expensive and their production on an industrial scale is limited. the infrastructure for the distribution of hydrogen is also problematic (squadrito, maggio & nicita, 2023). although some european countries, such as the netherlands, germany and portugal, have the potential to use existing natural gas infrastructure to transport hydrogen, this requires significant investment and technical adaptations. these countries are well placed to expand the use of hydrogen thanks to their natural gas infrastructure that can be adapted to transport hydrogen (trattner, klell & radner, 2022; azadnia et al., 2023). the economic viability of hydrogen projects remains one of the biggest obstacles to their wider deployment. the production of green hydrogen is currently more expensive compared to conventional methods of producing hydrogen from natural gas or the direct use of fossil fuels in industry (capurso et al., 2022). hydrogen currently accounts for less than 1 percent of european energy consumption and is mainly used as a feedstock in the chemical industry (ismayilova & hajiyeva, 2024). this situation highlights a significant gap between current reality and strategic objectives, underlining the need to accelerate the development of the sector and increase investment in relevant technologies and infrastructure (seck et al., 2022; genovese et al., 2023). hydrogen's role in green economy: opportunities and challenges in selected european countries 40 while there is a growing number of studies addressing the potential of hydrogen as part of a green transition (e.g. in industry, transport or energy), most research focuses on the technical, technological or environmental aspects of hydrogen use. however, only a limited number of works analyse regional differences in the development of hydrogen infrastructure in relation to the economic performance of countries. in particular, there is a lack of comparative analysis linking economic indicators such as gdp per capita with practical indicators of progress in hydrogen mobility and production. this study therefore seeks to fill this gap by examining whether and how a country’s economic strength influences its ability to develop a hydrogen economy. based on the identified research gap, we formulated the following research question: “what is the relationship between the economic maturity of countries (measured by gdp per capita) and the rate of development of hydrogen infrastructure, including the number of hydrogen vehicles and production capacities in eu-27 countries?”. 2 data and methodology this study examines the relationship between hydrogen infrastructure capacities and economic development in eu-27 countries. the dataset used includes national indicators obtained from publicly available sources such as eurostat, the european hydrogen observatory and national statistical offices. three main variables were selected for the analysis:  hydrogen production capacity (mw/mwel),  hydrogen consumption capacity (in tonnes/year),  gdp per capita (in euros). countries were divided into two groups – high and low levels of hydrogen infrastructure development – based on aggregated indicators of hydrogen production and consumption in 2025. due to the small sample size and the lack of examination of normal distribution, nonparametric tests were used to verify statistical differences between these groups:  the kruskal-wallis test was used to assess differences between groups,  the effect size (ε²) was calculated to estimate the significance of the differences,  subsequently, dwass-steel-critchlow-fligner pairwise comparisons were applied to identify specific differences between groups. the chosen methodological approach allowed comparing the readiness for the implementation of hydrogen solutions in different economic contexts, while taking into account the limitations of the available data and their distribution. based on the research question, we formulated the following hypotheses: h1: there is a statistically significantly higher hydrogen production and consumption capacity among countries with higher gdp per capita compared to countries with lower gdp per capita. h2: countries with higher gdp per capita have a higher number of registered hydrogen cars compared to countries with lower gdp per capita. maria bartekova, sabina janikovicova 41 3 results and discussion figure 1 shows the differences in hydrogen production capacities between eu-27 countries. the results show higher production capacity in economically stronger countries, which corresponds to their investment potential and technological maturity (germany, france, denmark, finland). figure 1. production capacity in the european union (2025) source: european hydrogen observatory (2025) figure 2 illustrates the current number of registered hydrogen-powered passenger vehicles in individual european union member states. countries such as germany and france have the highest number of registrations, indicating their more active approach to supporting alternative transport fuels and developing hydrogen infrastructure. figure 2. number of registered hydrogen cars in the european union source: european hydrogen observatory (2025) hydrogen's role in green economy: opportunities and challenges in selected european countries 42 figure 3 shows the market share of different car brands offering hydrogen-powered vehicles in individual european union member states. the dominance of brands such as toyota and hyundai highlights the technological leadership of asian manufacturers in the field of hydrogen propulsion and their penetration into the european market. figure 3. brand share of registered hydrogen cars in the european union source: european hydrogen observatory (2025) the results of the analysis show that there are statistically significant differences in the three variables under study between groups of countries with high and low levels of hydrogen infrastructure development: hydrogen production capacity, hydrogen consumption capacity and gdp per capita. table 1: one-way anova results χ² df p ε² production_capacity 6.1372 1 0.0132 0.3230 consumption_capacity 5.7130 1 0.0168 0.3007 gdp_per_capita 10.5657 1 0.0012 0.5561 dwass-steel-critchlow-fligner pairwise comparisons pairwise comparisons production_capacity w p high low -3.5035 0.0133 pairwise comparisons consumption_capacity w p high low -3.3802 0.0169 bmw honda huyndai mercedesopel toyota maria bartekova, sabina janikovicova 43 pairwise comparisons gdp_per_capita w p high low -4.5969 0.0012 these results confirm that countries with higher gdp per capita also have significantly more developed hydrogen infrastructure – both higher production and consumption capacity. this trend is consistent with findings from previous studies that suggest that economically stronger countries are better positioned to invest in new technologies, including hydrogen (capurso et al., 2022). these differences suggest that the development of a hydrogen economy is closely linked to a country's economic performance. rich countries such as germany, austria, and denmark invest in the so-called “hydrogen valleys” – integrated regional ecosystems where hydrogen is produced, distributed and consumed locally (lagioia et al., 2023). on the contrary, in countries with lower gdp and weaker infrastructure, the development of these technologies faces a number of obstacles. the main ones include regulatory barriers, complex permitting processes and limited access to energy networks (zainal et al., 2024). an important finding is also the fact that high gdp does not automatically guarantee increasing hydrogen consumption – for example, germany shows a decreasing trend in the volume of biofuel consumption, which may be related to the diversification of renewable sources and the streamlining of production processes (van der spek et al., 2022). the obtained results confirm that the development of hydrogen infrastructure is significantly influenced by the economic strength of the country. to achieve the eu's green economy goals, it will therefore be crucial to create support tools for less developed countries so that they can effectively participate in europe's energy transformation (falcone et al., 2021). the results of the analysis clearly support both hypotheses and indicate that the economic maturity of countries is a significant determinant of the development of hydrogen infrastructure. countries with higher gdp per capita achieve higher hydrogen production and consumption capacity, as well as a larger number of registered hydrogen vehicles. this trend is consistent with the findings of previous studies (capurso et al., 2022; lagioia et al., 2023) and points to the need for specific support instruments for less developed eu member states. at the same time, it was identified that economic maturity alone may not be a sufficient prerequisite for the intensive use of hydrogen, as consumption can also be influenced by the diversification of the energy mix and the structure of industry in the countries concerned. table 1 clearly confirm the statistical significance of the differences between groups of countries. a p value of < 0.05 for all three variables (production capacity, consumption and gdp per capita) together with an effect size of ε² above 0.3 indicates a moderate to strong effect. these results are consistent with the assumption that economically stronger countries have a higher level of technological readiness as well as better access to investment resources. 4 conclusions this paper highlights significant differences in the development of hydrogen infrastructure between european countries and confirms that economically stronger countries (with higher gdp per capita) achieve higher hydrogen production and consumption capacity. the strength of the research hydrogen's role in green economy: opportunities and challenges in selected european countries 44 is the use of non-parametric statistical methods, which are also suitable for smaller samples and nonideal data distribution, which allows for robust comparisons between groups of countries. on the other hand, the study is limited by the relatively small number of countries analysed and the focus on selected quantitative indicators only. therefore, the results cannot be generalized without reservations to the entire eu. in addition to economic maturity, other factors can also influence the development of hydrogen infrastructure – for example, the availability of natural resources, energy policy, public perception of hydrogen technologies or the level of technological readiness (compare with van der spek et al., 2022; capurso et al., 2022). the practical implications of the research are clear – if the hydrogen economy is to be a tool for a fair and environmentally sustainable transformation of europe, it is essential to specifically support the development of infrastructure, including in economically weaker countries. policies should focus on: widening access to investment through european funds; simplifying permitting processes; supporting research and development of local solutions (zainal et al., 2024); strengthening education and raising awareness about hydrogen in society. in the future, research should follow longer-term developments and expand the spectrum of variables, including environmental benefits and socio-economic effects of the introduction of hydrogen technologies. it is also important to analyse in more depth successful examples, such as the so-called “hydrogen valleys” in germany and denmark, which could serve as a model for other countries (lagioia et al., 2023). the paper summarizes the knowledge on the development of hydrogen infrastructure in eu member states and confirms the importance of economic maturity as a key factor in this development. the results point to the need for a differentiated approach to the creation of public policies that would take into account regional specificities and support the implementation of hydrogen solutions also in less developed areas. specifically, countries with a gdp per capita above eur 35,000 showed on average twice the hydrogen production capacity compared to countries whose gdp did not exceed eur 20,000. in the future, it is appropriate to expand the research to include qualitative aspects, as well as environmental and socio-economic consequences of the introduction of hydrogen technologies. in conclusion, it can be stated that the support of the hydrogen economy must be systemic, inclusive and strategically coordinated at the eu and individual national levels in order to fulfill its transformative potential in the context of a green economy. the practical implications of the study lie in identifying specific economic obstacles that limit the development of hydrogen infrastructure in less developed countries. the results provide an argumentative basis for creating targeted financial and technical support from the eu, for example through cohesion policy, the european hydrogen bank or programs focused on regional innovation. at the same time, the contribution points to the need to simplify permitting processes and strengthen interstate cooperation in building hydrogen ecosystems. taking these factors into account can contribute to a more balanced and effective implementation of the goals of the european green deal. acknowledgment this research paper is a partial result of the multiyear research projects vega 1/0465/23 “generic, convergence and model-based approaches of environmental production and logistics in business development on slovakia”, project kega no. 002eu-4/2025 „electromobility: a systemic approach to transport transformation – creating university textbook with emphasis on developing and enhancing the knowledge, skills, competencies and critical thinking of students in the study field of economics and management“ and the project of university of economics no. i-25-105-00. maria bartekova, sabina janikovicova 45 references 1. abbasov, a. (2024). scientific-theoretical issues in the formation of a green economy. agora international journal of economical sciences, 18(2), 1-10. 2. azadnia, a. h., mcdaid, c., andwari, a. m., & hosseini, s. e. (2023). green hydrogen supply chain risk analysis: a european hard-to-abate sectors perspective. renewable and sustainable energy reviews, 182, 113371. 3. capurso, t., stefanizzi, m., torresi, m., & camporeale, s. m. (2022). perspective of the role of hydrogen in the 21st century energy transition. energy conversion and management, 251, 114898. 4. european hydrogen observatory (2025). datasets. https://observatory.cleanhydrogen.europa.eu/tools-reports/datasets 5. eurostat. (2025). real gdp per capita. https://ec.europa.eu/eurostat/databrowser/view/sdg_08_10/default/table?lang=en 6. falcone, p. m., hiete, m., & sapio, a. (2021). hydrogen economy and sustainable development goals: review and policy insights. current opinion in green and sustainable chemistry, 31, 100506. 7. genovese, m., schlüter, a., scionti, e., piraino, f., corigliano, o., & fragiacomo, p. (2023). powerto-hydrogen and hydrogen-to-x energy systems for the industry of the future in europe. international journal of hydrogen energy, 48(44), 16545-16568. 8. hashimova, a. (2023). personnel work process using digital economy application programs. agora international journal of economical sciences, 17(2), 78-86. 9. ismayilova, h., & hajiyeva, s. (2024). agro-economic synergy: enhancing food security through innovative agricultural practices in azerbaijan. agora international journal of economical sciences, 18(2), 134-147. 10. kakoulaki, g., kougias, i., taylor, n., dolci, f., moya, j., & jäger-waldau, a. (2021). green hydrogen in europe–a regional assessment: substituting existing production with electrolysis powered by renewables. energy conversion and management, 228, 113649. 11. kovač, a., paranos, m., & marciuš, d. (2021). hydrogen in energy transition: a review. international journal of hydrogen energy, 46(16), 10016-10035. 12. kumar, s. s., & lim, h. (2022). an overview of water electrolysis technologies for green hydrogen production. energy reports, 8, 13793-13813. 13. lagioia, g., spinelli, m. p., & amicarelli, v. (2023). blue and green hydrogen energy to meet european union decarbonisation objectives. an overview of perspectives and the current state of affairs. international journal of hydrogen energy, 48(4), 1304-1322. 14. mneimneh, f., ghazzawi, h., abu hejjeh, m., manganelli, m., & ramakrishna, s. (2023). roadmap to achieving sustainable development via green hydrogen. energies, 16(3), 1368. 15. sadik-zada, e. r. (2021). political economy of green hydrogen rollout: a global perspective. sustainability, 13(23), 13464. 16. seck, g. s., hache, e., sabathier, j., guedes, f., reigstad, g. a., straus, j., ... & cabot, c. (2022). hydrogen and the decarbonization of the energy system in europe in 2050: a detailed model-based analysis. renewable and sustainable energy reviews, 167, 112779. 17. squadrito, g., maggio, g., & nicita, a. (2023). the green hydrogen revolution. renewable energy, 216, 119041. 18. trattner, a., klell, m., & radner, f. (2022). sustainable hydrogen society–vision, findings and development of a hydrogen economy using the example of austria. international journal of hydrogen energy, 47(4), 2059-2079. 19. van der spek, m., banet, c., bauer, c., gabrielli, p., goldthorpe, w., mazzotti, m., ... & gazzani, m. (2022). perspective on the hydrogen economy as a pathway to reach net-zero co 2 emissions in europe. energy & environmental science, 15(3), 1034-1077. 20. vivanco-martín, b., & iranzo, a. (2023). analysis of the european strategy for hydrogen: a comprehensive review. energies, 16(9), 3866. 21. zainal, b. s., ker, p. j., mohamed, h., ong, h. c., fattah, i. m. r., rahman, s. a., & mahlia, t. i. (2024). recent advancement and assessment of green hydrogen production technologies. renewable and sustainable energy reviews, 189, 113941. agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 19, no. 1 (2025), pp. 56-66 56 rising danger of air conditioners: a necessity or a luxury? u. breskvar uroš breskvar b2 ljubljana school of business, slovenia https://orcid.org/0009-0002-4503-1495 e-mail: uros.breskvar@sckr.si abstract: air conditioners have become an indispensable part of modern life, providing a comfortable indoor climate, especially during the hot summer months. however, their use comes with environmental consequences. the increased electricity consumption required to power air conditioners significantly contributes to greenhouse gas emissions and further exacerbates climate change. this research focuses on the use of air conditioners and addresses the question of whether they are used rationally. methods for reducing air conditioner usage and promoting their proper use are presented. the study analyzes the relationship between air conditioner electricity consumption, gdp, and temperature, highlighting the significant correlation between air conditioner usage and economic prosperity rather than climate conditions. a discussion on policy measures, energy efficiency improvements, and behavioral adaptations is also included. keywords: air conditioner; greenhouse gases; gdp; electricity consumption; cooling, international standard 1. introduction the mass use of air conditioners began in the 20th century, when technologies began to improve and reduce costs (basile, 2016). the first commercial air conditioner was developed in 1902 in the united states. however, these devices were very expensive and could only be used by the rich. in the 1920s, new technologies began to be developed, which made it possible to produce cheaper and more efficient air conditioners. this led to an increase in demand for air conditioners, which began to be used even in commercial premises. in the 1950s, air conditioners began to be massively used in households. this was due to several factors, including:  growing population: a greater number of people lived in urban areas where summers can be very hot and humid.  rising standard of living: people began to appreciate comfort more and were willing to pay more for air conditioners. in recent decades, the use of air conditioners has continued to increase. this is due to several factors, including:  upcoming climate crises (lynas, 2008) (polya, 2020): climate change is making summers warmer and more humid in many parts of the world. this increases the demand for air conditioners that provide a comfortable indoor temperature.  reducing the cost of air conditioners: air conditioners have become cheaper in recent years. this made them more accessible and contributed to an increase in demand. https://orcid.org/0009-0002-4503-1495 mailto:uros.breskvar@sckr.si uroš breskvar 57  development of new technologies: the development of new technologies (silberstein et al., 2024), such as inverter air conditioners, has increased the energy efficiency of air conditioners. this contributed to reducing their negative impact on the environment. today, air conditioners are used in all parts of the world. in some parts of the world, such as the united states, household air conditioners are almost indispensable. figure 1. centrifugal cooling machine from 1922 source: (magazine, 2019) 2. methodology this study analyzed data from 17 countries that account for more than 70% of the world’s air conditioner electricity consumption. the analysis included data from organizations such as the international energy agency (iea, 2022), the world meteorological organization (wmo, 2023), and the world bank (2023). the study evaluated variables such as national electricity consumption, gdp per capita, and the average summer temperature at 12 pm in the capitals of each country. macroeconomic variables such as gdp are frequently used in empirical energy studies to explain cross-country differences in consumption patterns (boduri & pjetri, 2024). the statistical correlation was analyzed using the pearson correlation coefficient. 2.1 research questions 1. what is the global electricity consumption of air conditioners? 2. how does electricity consumption of air conditioners relate to gdp in each country? 3. how does electricity consumption of air conditioners relate to the average summer temperature in each country? 2.2 research objectives the aim of this research is to determine how electricity consumption of air conditioners, gdp, and average summer temperature relate to each other. the results of the research may be useful for designing policies that will help reduce electricity consumption and greenhouse gas emissions from air conditioners. 3. electricity consumption and greenhouse gas production all electricity consumers are responsible for greenhouse gas production, specifically co2 (mackay, 2013). the amount of co2 produced depends on how the electricity is produced. the average co2 emission per 1 kwh per country depends on the structure of electricity production in that country. rising danger of air conditioners: a necessity or a luxury? 58 countries that produce most of their electricity from renewable sources have lower co2 emissions than countries that produce most of their electricity from fossil fuels. the average global co2 emission per 1 kwh is 0.55 kg/kwh. this emission varies depending on the energy source used to produce electricity (eldesouki et al., 2023). renewable energy sources such as solar, wind and hydropower have the lowest emissions (lave & hendricks, 2013). these energy sources do not produce any co2 emissions, but it should be borne in mind that a lot of energy is needed to produce the technology that captures renewable sources and that these sources are very volatile. high emissions are produced by fossil fuels such as coal, oil and natural gas (ipcc, 2013). the production of electricity from these sources releases large amounts of co2. air conditioners accounted for 1.6% of global greenhouse gas emissions in 2020 (iea, 2022), equivalent to 4.8 billion tonnes of co2. emissions from air conditioners have been increasing in recent years as demand for them has increased. demand is driven by global warming, which is causing rising temperatures during the summer months. by comparison, lighting accounted for about 2.4% of global greenhouse gas emissions. that's about 7.2 billion tons of co2. emissions from lighting are decreasing as more and more efficient lighting such as led bulbs are used. so far, only refrigeration appliances contribute more greenhouse gases to households. they accounted for 2.2% of global greenhouse gas emissions in 2020. that's 6.6 billion tonnes of co2. in line with the expected thermal heating and the consequent increasing use of air conditioners, in a few years air conditioners can be expected to become the largest consumer of electricity and consequently, the main cause of greenhouse gases in households. if the trend of electricity consumption continues, this could cause significant problems for global electric energy. air conditioners are important consumers of electricity and their consumption contributes to an increase in greenhouse gas emissions. 3.1 measurement of electricity consumption for air conditioning operation to conduct research on the use of air conditioners, a lot of data was obtained. for accurate data, measurements should be carried out on each air conditioner. since such measurements are not carried out, certain values are given approximately, which were obtained with the help of previously conducted public research. the amount of electricity consumed by a particular air conditioner is determined by (wang, 2001):  outdoor temperature  set temperature in the room  insulation of air-conditioned space  proper use of air conditioning  installation location of an external device  air conditioning device maintenance  energy class  the method of using the air conditioner, etc. the consumption of electricity at the national level is determined by the number of installed devices. here also, the values are given from various surveys, since the exact number of working devices is unknown. air conditioners are mainly used for cooling living quarters. uroš breskvar 59 therefore, the key to use of air conditioners is outdoor temperature. the study used data on the average temperature during the 2 warmest months of the year at 12 p.m. in the country's capital (wmo, 2023). the reason for choosing the capital, and not the average temperature to countries, lies in the reliability of the data. the reason for using the average temperature data at 12 o'clock is because there can be large differences between day and night temperatures, but air conditioners should only be used for outdoor temperatures higher than 26°c. 4. the use of air conditioners in the world the number of built-in air conditioners is rapidly increasing. in 2022, around 3.6 billion air conditioners were operating worldwide, 50% more than in 2010 (iea, 2022). the number of air conditioners is expected to increase to 9.2 billion by 2050. according to the world's population – 8 billion, 0.45 air conditioners are installed per capita. figure 2 shows the increasing electricity consumption for air conditioners globally. in 2022, it amounted to 2,700 twh, representing 8% of global electricity consumption. in europe, this figure is 7%, in the united states it is 15%. electricity consumption of air conditioners increases as average temperatures on earth rise, as does air conditioning availability. according to projections (iea, 2022), this share will increase to 18% and 3,000 twh respectively by 2050. figure 2. trend of rising co2 and electricity consumption due to air conditioners figure 3 shows that more than 40% of all air conditioners are used in china, which is somewhat expected as china is the largest in terms of number of people and has also the largest production capacity. figure 3. distribution of electricity consumption due to the use of air conditioners 1,8 mrd 650 twh 4% co2 3.6 9,2 mrd 3.000 twh 18% co2 2000 2010 2020 2030 2040 2050 2060 china 41.4% united states 15.0% japan 8.6% india 7.1% europe 5.7% rest of the world 22.2% rising danger of air conditioners: a necessity or a luxury? 60 most air conditioners are installed in households. with the current share of installed air conditioners, it can be expected that the number of installed appliances will increase most significantly precisely in household use, since a significant part of the developing world does not yet use mass air conditioners compared to the developed world. furthermore, more and more people, in general, work from home. figure 4. distribution of installed air conditioners by sector for further detailed analysis, 17 countries that consume more than 70% of the world’s electricity consumed by air conditioners have been selected. figure 5 shows that the largest consumer is china. as we will see in later analyses, high consumption is due to the population of a particular country and not due to the excessive use of air conditioners. figure 5: countries with the highest electricity consumption for air conditioners a better indicator of the overall use of air conditioners in each country is the number of installed appliances per capita. figure 6 shows that saudi arabia uses the most devices per capita 1.4 devices per capita, followed by the usa, australia and japan. the global average is 0.45 climates per capita. figure 6: number of installed air conditioners per capita households 44% businesses 37% industry 19% 0 50 100 150 200 250 300 350 400 tw h /y ea r 0 0.2 0.4 0.6 0.8 1 1.2 1.4 uroš breskvar 61 in addition to the average number of air conditioners per individual, it is also important how much the appliance is used. the following figure 7 shows how much kwh of electricity is accounted for by the average air conditioning user. it is clear that the use of air conditioners is the highest in the united states, followed by australia and japan. figure 7: average air conditioning consumption per air conditioner user logically, we would expect that consumption would depend on external temperatures the warmer the location of a particular country, the greater the use of air conditioners (nguyen et al., 2017). however, figure 8 shows a large consumption gap between countries with comparable outdoor temperatures. in terms of consumption, the united states stand out strongly, while germany stands out for its low average temperature. when establishing the statistical correlation between outdoor temperature and electricity consumption per air conditioner the peason correlation coefficient was applied (blalock, 1972). since the coefficient is only 0.019, we can conclude that the use of air conditioners is not related to outdoor temperature. figure 8. consumption depending on outdoor temperature 0 200 400 600 800 1,000 1,200 kw h usa australia japan south korea germany saudi arabia china india brazil indonesia pakistan thailand argentina russia iran mexicoturkey 25 27 29 31 33 35 37 39 41 43 350 450 550 650 750 850 950 1,050 1,150 1,250 a ve ra ge t em p er at u re average air conditioning consumption per air conditioner user rising danger of air conditioners: a necessity or a luxury? 62 the survey then examined whether the use of air conditioners is related to the gdp of each country (world bank, 2023). figure 9 shows that countries are divided into two groups. the first group contains countries that have low gdp and also have low electricity consumption for air conditioners. the second group consists of rich countries – the united states, australia, japan, saudi arabia, germany and south korea, which also consume the most energy. the link between consumption and gdp is also statistically provable, with the pearson correlation coefficient of 0.956, which translates into a very high correlation. the trend line shown in the graph also proves the correlation. from the data obtained, we can conclude that the use of air conditioners does not depend on temperature conditions, but primarily on the level of the standard of living. we can conclude that, especially in more affluent countries, air conditioners are being over-utilized. figure 9. spending as a function of government gdp 4.1 rational use of air conditioners the purpose of air conditioners is to create a temperature zone of comfort. in order for a person to feel well, however, several factors need to be taken into account. air conditioning can only affect temperature and humidity. the comfort zone depends on (nicol et al., 2022):  human activities. the activities of a person are usually conditioned by his work which is impossible to control.  wall temperatures. the temperature of the walls is highly dependent on the insulation used. with proper insulation, we can significantly influence energy consumption both in winter and summer (zhang et al., 2022). with good insulation and built-in ventilation system, a favourable temperature can be maintained in most cases without the use of air conditioners.  relative humidity. the humidity in the room is mostly influenced by the climate in which we are located or the air in the vicinity of the building. the humidity of the air can be largely regulated by the ventilation of the premises.  air temperatures. the air temperature depends on the outdoor temperature, the number of devices that heat the air and the number of people in the room. we can greatly usa australiajapan south korea germany saudi arabia china india brazil indonesia pakistan thailand argentina russia iran mexico turkey 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 350 450 550 650 750 850 950 1,050 1,150 g d p p er c ap it a average air conditioning consumption per air conditioner user uroš breskvar 63 influence the temperature in the room by properly shading and preventing direct sunlight during the summer months.  the speed of air movement. the speed of air movement depends on the mode of ventilation and air conditioners, which, with unprofessional installation, can greatly affect the comfort zone.  clothing. the right temperature can be greatly influenced by choosing suitable clothing. we use light and airy clothing during the hot months. all of the above influences whether we will feel comfortable at a lower or higher temperature. figure 10. comfort zone where temperature and relative humidity are taken into account most people set the temperature of the air conditioner to their feel. such adjustment leads to an incorrectly defined temperature. setting the thermostat too low not only wastes energy but also increases the risk of respiratory illnesses. international standards ansi ashrae55 (ashrae, 2021) (fig. 10) and iso7730 can help to set up air conditioners correctly (loveday et al., 2002). the standards define the comfort zone, where the temperature and relative humidity in the room for work in the office and in the locals in general are taken into account. a favourable temperature is determined between 22.5°c and 27°c. by lowering the desired temperature, we influence a higher consumption of electricity (pita, 2008) (kato et al., 2018). with each degree, electricity consumption increases by 6-8% (wang et al., 2013). the difference between the set maximum (27°c) and the minimum temperature (22.5°c) can be more than 30% in electricity consumption (el berry, 2019). many air conditioners are set below the recommended minimum temperature and electricity consumption is even higher. the optimal use of air conditioners would be automatic adjustment of their operation according to the relative humidity and temperature in the room. 5. discussions and conclusions this study has presented important insights into the rising global use of air conditioners and its relationship with economic development and climate. one of the key findings is that electricity consumption for air conditioning is much more closely related to a country’s gdp than to its average outdoor temperature. this suggests that comfort and lifestyle, driven by economic capability, are stronger motivators than actual climatic needs. 22.5, 80% 26, 57% 27, 20% 23.5, … 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 22 23 24 25 26 27 28 r el at iv e h u m id it y temperature °c comfort zone rising danger of air conditioners: a necessity or a luxury? 64 the strength of this study lies in its use of cross-national data and its statistical approach, including pearson correlation, which offers strong evidence for the conclusions drawn. however, one limitation is the reliance on average national data, which may overlook regional variations within countries. additionally, some of the data, such as the number of functioning air conditioning units, had to be estimated due to lack of direct measurements. the results are generally consistent with previous research (nguyen et al., 2017; aijes, 2024), reinforcing the concern that increased access to cooling, if unmanaged, can escalate energy demand and co2 emissions significantly. while smart and energy-efficient technologies can mitigate this trend, behavioral adaptations and policy regulation remain critical. although this study does not employ primary data collection, its analytical approach allows for generalisation across many countries, especially those in similar stages of economic development. future research could include deeper case studies or household-level surveys to validate the observed macro trends. in practical terms, the study underlines the need for:  policy incentives for energy-efficient cooling;  greater enforcement of international temperature standards;  improved insulation regulations in building codes;  public campaigns that promote sustainable cooling habits. these findings provide valuable input for decision-makers and urban planners aiming to reduce the environmental burden of rising cooling demand. more interdisciplinary research will be necessary to further integrate engineering, behavioral science, and public policy approaches in this field. findings indicate that air conditioner electricity consumption is strongly correlated with gdp rather than outdoor temperature. countries with higher gdps exhibit higher electricity consumption from air conditioners, suggesting overuse rather than necessity. this aligns with previous studies, such as nguyen et al. (2017), which found that energy consumption patterns depend more on economic prosperity than climatic conditions. a comparative analysis with prior literature, including studies published in aijes (2024), supports the idea that improvements in insulation, energy efficiency, and smart cooling technologies can significantly reduce electricity consumption and mitigate environmental impacts. aijes research highlights the importance of integrating adaptive cooling systems and enforcing energy policies that address the increasing demand for cooling in both developed and developing regions. policy recommendations include:  implementing international temperature-setting standards (ashrae, 2021) to prevent unnecessary overcooling.  promoting energy-efficient air conditioners (el berry, 2019) to optimize energy use.  enhancing building insulation (zhang et al., 2022) to reduce dependency on artificial cooling.  public awareness campaigns to encourage responsible air conditioner use and sustainable practices. uroš breskvar 65 if the current global trend in air conditioner consumption continues, it could pose severe challenges for electricity infrastructure and climate policies. addressing this issue requires a collaborative effort involving policymakers, manufacturers, and consumers to implement energy-efficient solutions effectively. references 1. aijes. (2024). strategies for reducing energy demand in residential cooling systems: a comparative study. american international journal of energy studies, 6(1), 45–58. 2. ashrae. (2021). thermal environmental conditions for human occupancy. ashrae®. 3. basile, s. (2016). cool: how air conditioning changed everything. fordham university press. 4. blalock, h. m. (1972). social statistics (2nd ed.). mcgraw-hill. 5. boduri, l., & pjetri, f. (2024). analyzing the dynamic relationships between macroeconomic variables and gdp growth in albania: a panel data approach. agora international journal of economical sciences, 18(2), 50–62. 6. el berry, a. (2019). novel techniques for saving energy consumption in air conditioning systems. proceedings of the 5th world congress on mechanical, chemical, and material engineering. https://doi.org/10.11159/icmie19.139 7. eldesouki, m. h., rashed, a. e., & el-moneim, a. a. (2023). a comprehensive overview of carbon dioxide, including emission sources, capture technologies, and the conversion into value-added products. clean technologies and environmental policy, 25(10), 3131–3148. https://doi.org/10.1007/s10098-023-02599-9 8. intergovernmental panel on climate change (ipcc). (2013). the impact of coal, oil, and gas on climate change. cambridge university press. 9. international energy agency (iea). (2022). global energy review 2022. iea. 10. kato, k., horie, s., owaki, d., hamanaka, m., iwane, y., yukita, k., matsumura, t., & goto, y. (2018). relationship between the set temperature and power consumption of air conditioners. 2018 international conference on smart grid (icsmartgrid). https://doi.org/10.1109/isgwcp.2018.8634516 11. lave, r. g. h., & hendricks, j. c. (2013). life cycle assessment of renewable energy sources. mit press. 12. loveday, d. l., parsons, k. c., taki, a. h., & hodder, s. g. (2002). displacement ventilation environments with chilled ceilings: thermal comfort design within the context of the bs en iso7730 versus adaptive debate. energy and buildings, 34(6), 573–579. https://doi.org/10.1016/s0378-7788(02)00007-5 13. lynas, m. (2008). six degrees: our future on a hotter planet. harpercollins publishers. 14. mackay, d. j. c. (2013). the carbon footprint of electricity. cambridge university press. 15. magazine, s. (2019, june 24). the unexpected history of the air conditioner. smithsonian.com. https://www.smithsonianmag.com/smithsonianinstitution/unexpected-history-air-conditioner-180972108/ rising danger of air conditioners: a necessity or a luxury? 66 16. nicol, f., rijal, h. b., & roaf, s. (2022). routledge handbook of resilient thermal comfort. routledge. 17. nguyen, h., makino, y., lim, y., & tan, y. (2017). short-term prediction of energy consumption of air conditioners based on weather forecast. 2017 4th nafosted conference on information and computer science. https://doi.org/10.1109/nafosted.2017.8108063 18. pita, e. g. (2008). air conditioning principles and systems: an energy approach. phi learning private limited. 19. polya, g. m. (2020). climate crisis, climate genocide & solutions. korsgaard publishing. 20. silberstein, e., obrzut, j., tomczyk, j., & johnson, w. m. (2024). refrigeration & air conditioning technology. cengage learning. 21. wang, n., zhang, j., & xia, x. (2013). energy consumption of air conditioners at different temperature set points. energy and buildings, 65, 412–418. https://doi.org/10.1016/j.enbuild.2013.06.011 22. wang, s. k. (2001). handbook of air conditioning and refrigeration. mcgraw-hill education llc. 23. world bank. (2023). world development indicators. world bank. 24. world meteorological organization (wmo). (2023). global climate data portal. wmo. 25. zhang, m., cheng, z., li, c., & deng, n. (2022). did the energy efficiency upgrades for air conditioners reduce residential electricity consumption? evidence from china. energy and buildings, 275, 112471. https://doi.org/10.1016/j.enbuild.2022.112471 title of the paper: example paper for business systems research journal agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 18, no. 2 (2024), pp. 124-133 124 process renovation: case study of a liquidity planning process of the national budget in slovenia m. horjak, a. gartner marjeta horjak¹, anja gartner² ¹ ljubljana school of business, ljubljana, slovenia https://orcid.org/0000-0002-4691-8234, e-mail: marjeta.horjak@gmail.com ² ministry of finance, ljubljana, slovenia e-mail: anja.gartner@gmail.com abstract: the constant development of new technologies and tools is forcing organizations to recast their processes. the paper examines the reengineering of the key processes in a public finance organization that cause bottlenecks and consequent ineffectiveness. the aim is to eliminate and reduce obstacles, as simulations and cash flow forecasts (reports) are prepared too slowly and are consequently reported late, certain operations are carried out manually and duplicated. this increases the chance of errors. theoretical findings are presented for the case study of the liquidity planning process of the national budget. they present the renovation process and the effects of the improvements achieved using the object-oriented method (tad) approach, which is based on a tabular representation, and the aris method for the graphic depiction of the model of the business process flow based on the bpmn standard for business process modelling. the renovated liquidity planning process of the national budget was found to be necessary. it proved to be 50% quicker, saving 466 hours a year through the elimination of the hard work tasks. it provides added value in the further forecasting of cash flows that effect the liquidity of the national budget. keywords: process renovation, tad, aris method, bpmn, public finance organization, model, bpm introduction we live in the age of globalisation, which is constantly introducing modern technologies and forcing us to recast business processes and adapt them to changes in order to keep up with the competition. organizations are constantly looking for cost-effective improvements for their business processes (wynn et al., 2013). business renovation (br) is a useful method to help organizations cut operational costs and improve the quality of their processes. it provides organizations sustainable competitive advantage in the market (bhaskar, & singh, 2014). in order to be successful in business renovation, organizations utilize specific methodology for analysing and modelling the current state of the business process (as-is) and the effectiveness of the renovated process (to-be). this provides information regarding the executability of the process renovation, the weak points in the processes and resource bottlenecks, as well as suggests possible improvements. https://orcid.org/0000-0002-4691-8234 mailto:marjeta.horjak@gmail.com mailto:anja.gartner@gmail.com marjeta horjak, anja gartner 125 approaches that focus on analysing the current state of the business process (as-is) and the effectiveness of the renovated process (to-be) are combined in the tad method. as stated by damij (2009), the tad method is based on a tabular representation of the state of the analysing processes. according to damij, n., damij, t., grad, & jelenc, (2008), it provides a lot of new ideas for process modelling (development of a design model) and process improvements. the suggested method for business process modelling is the aris method based on the bpmn standard for business process modelling (ivandic vidovic, & bosilj vuksic, 2003). this is a unique and internationally established method for the graphic modelling of a business process renovation (scheer, 2000). business process modelling has a number of positive effects, as it increases the model quality of the business processes (hilt, 2007; fettke &loos, 2007; kirchmer, 2009 in, indihar štemberger & kovačič, 2011), facilitates improvements, and provides the opportunity to increase competition on the market (dantis, 2019). this paper presents a case study of the liquidity planning process of the slovenian national budget. it details the procedure of the process renovation and the effects of the improvements achieved. obstacles, i.e., bottlenecks (e.g., simulations and cash flow forecasts (reports) are prepared too slowly and are consequently reported late, certain operations are carried out manually and duplicated, leading to errors in the forecasts) are being encountered in the execution of the process, which in turn leads to the inefficiency of the liquidity planning process of the national budget. business renovation approach using the tad method, the current state (as-is) and the renovated process state (tobe) were analysed for the liquidity planning process of the slovenian national budget. the process involved preparing the work processes for the proposed liquidity plan (plp) and the confirmed liquidity plan (clp), the adjusted liquidity plan (alp), and reporting adjustments to the lp and cash flow (cf) management. the effect of the renovated process was also measured. the main goal of the renovation was to eliminate or reduce so-called bottlenecks. the data was acquired through interviews with 27 process users. the measurements of the current state of the process (as-is) and the renovated process (to-be) as recorded in the information system after the implemented improvements were both analysed. the process activities were evaluated according to the duration in minutes and the costs in eur. table 1 presents the analysis of the properties of the activities in the current process (as-is) and the renovated process (to-be) of preparing the plp and confirming the lp along with the measured effect of the renovated process. process renovation: case study of a liquidity planning process of the national budget in slovenia 126 table 1: properties of the current and renovated process of the plp preparation and lp confirmation and measurements of the effect of the process renovation properties of the current process of plp preparation and lp confirmation (as-is) properties of the renovated process of plp preparation and lp confirmation (to-be) measuring the effect of the process renovation activity time in minutes cost in eur time in minutes cost in eur reduced time in minutes reduced time in minutes reduced costs in % (tobe) initialising plp documents 5 0.61 0 0.00 -5 -0.61 -100 data review and preparation for plp entry 85 10.33 82 9.96 -3 -0.36 -4 entering and arranging a plp document 37 4.50 35 4.25 -2 -0.24 -5 plp rejection 10 1.22 5 0.61 -5 -0.61 -50 data import/export 10 1.22 0 0.00 -10 -1.22 -100 plp approval 5 0.61 5 0.61 0 0.00 0 storage of data in a blms (budget liquidity management system] database 5 0.61 0 0.00 -5 -0.61 -100 transfer of data from plp to lp and alp 10 1.22 0 0.00 -10 -1.22 -100 total 167 20.29 127 15.43 -40 -4.86 -24 the analysis of the results from table 1 indicates that the renovation process (to-be) eliminated 4 manual activities (initializing the process, importing and exporting data, data saving process, and the data transfer process). the to-be process execution was shorter by 24% relative to the existing current state (as-is). we determined that the process of preparing the plp and confirming the lp was also shortened by 40 minutes, constituting a lowered cost of eur 4.86. it was also concluded that the process is carried out once a month, amounting to 12 times a year, which represents 8 fewer hours of unnecessary labour a year and eur 58.12 lower costs a year as depicted in table 4. marjeta horjak, anja gartner 127 compared to the current as-is process, the information and data flow of information in the renovated process (to-be) runs between the process participants through the unified mferac information system (with new and expanded functionalities) and eliminating manual entries (as illustrated by figure 1 – graphically depicted process model). the manual activities (starting the processes of initialization, importing, exporting, entry of data) have been replaced by automated service procedures that are simultaneously implemented with each change in the system, which consequently means that the number of activities for the participants in the process has decreased. these improvements in the renovated process have influenced their effectiveness as presented in figure 1. the visualisation, i.e., the graphic process model, was created using the bpmn (business process management notation), which is standard for business process modelling in aris. the main benefit of using bpmn is that it is allows for the flexible development of business processes (rosing, white, cummins, & man, 2015). figure 1 model of the renovated plp process (to-be) table 2 presents the analysis of the properties of the implemented activities in the current process (as-is) versus the renovated process (to-be) or communicating adjustments to the liquidity plan and measuring the effects of the process renovation. process renovation: case study of a liquidity planning process of the national budget in slovenia 128 table 2: the properties of the current and renovated process of communicating adjustments to the liquidity plan and measuring the effects of the process renovation properties for the existing lp adjustments reporting process (as-is) properties of the renovated lp adjustment reporting process (to-be) measuring the effect of the process renovation activity time in minutes cost in eur time in minutes cost in eur reduced time in minutes reduced time in minutes reduced costs in % (tobe) verifying data for preparing the alp 19 2.31 17 2.07 -2 -0.24 -11 oversight and arrangement of the alp document for the pu 20 2.43 10 1.22 -10 -1.22 -50 preparing the increase application 5 0.61 3 0.36 -2 -0.24 -40 confirming the increase application 5 0.61 5 0.61 0 0.00 0 review and documentation of the submitted corrections 30 3.65 10 1.22 -20 -2.43 -67 data entry in the auxiliary blms database 25 304 0 0.00 -25 -3.04 -100 data entry into the blms database 10 1.22 0 0.00 -10 -1.22 -100 total 114 13.85 45 5.47 -69 -8.38 -61 the analysis of the gathered results from table 2 indicates that on average, the renovated process (to-be) is 61% shorter, which is an improvement of 15% from the analysis of the current process analysis (as-is). the shorter implementation time of the renovated process constitutes eur 8.38 fewer costs. it was revealed that this process is executed daily, which sums up to eur 175.98 eur fewer costs a month and means eur 2,111.76 eur in cost savings a year (table 4). the main change of the renovated process of communicating corrections to the liquidity plan (to-be) that can be discerned from the graphically presented model on figure 2 is that 129 in comparison to the as-is process, the communication flow of data between the process participants runs exclusively through the mferac information system. the manual activities (manual entries, data import and export) have been replaced by automatized service procedures concurrently with each change in the system, which has consequently decreased the number of activities for the process participants. the renovated process (to-be) has also introduced smaller organizational changes, for example, that in contrast to the as-is process, users in the to-be process can communicate a change for the 1st of the month, no longer on the 10th of the month. this change was implemented in order to acquire the most precise possible data for the national budget manager who plans, monitors, and coordinates the executed cash flow of the national budget and the users have smaller disparities between the realized and the forecast payments at the end of the month. figure 2 model of the renovated alp process process renovation: case study of a liquidity planning process of the national budget in slovenia 130 table 3 contains the analysis of the properties of implementing activities in the existing process (as-is) and the renovated process (to-be) of cash flow management as well as measurements of the effect of renovated process (to-be). table 3: properties of the existing and renovated process and the effects of the improvements to the renovated process of cash flow management properties of the existing process of cash flow management (as-is) properties of the renovated process of cash flow management (to-be) measuring the effect of the process renovation activity time in minutes cost in eur time in minutes cost in eur reduced time in minutes reduced time in minutes reduced costs in % (tobe) data collection and overview 30 3.65 15 1.82 -15 -1.82 50 data entry 20 2.43 5 0.61 -15 -1.82 -75 data import/export 10 1.22 0 0.00 -10 -1.22 -100 total 60 7.29 20 2.43 -40 -4.86 -67 the analysis of the acquired results as displayed in table 3 indicate that the renovated process (to-be) has shortened the process execution by 67% relative to the current state process (as-is). it was determined that the process is executed on a daily basis, which constitutes eur 102.06 fewer costs a month, i.e., eur 1,224.72 fewer costs a year (table 4). the key substantive change in the renovated process (to-be) is the database that has been established at the economic classification level. it is no longer organized at the level of liquidity items as it used to be in the as-is process. additionally, the to-be process is implemented in the new online environment of the mferac information system, which provides the required and necessary functionalities and an adjusted manner of executing individual activities (as depicted by figure 3 – graphically presented model of the process). these improvements in the renovated process have also impacted their effectiveness as presented in table 4. marjeta horjak, anja gartner 131 figure 3 model of the renovated cash flow (cf) process (to-be) discussion: measuring the effect of the process renovation table 4 presents the effects of the renovated liquidity planning process of the national budget. presented are the average values of executing individual work processes and the achieved impact – annual saving in hours and costs in eur. table 4: annual impact of the renovated liquidity planning process of the national budget (to-be) annual impact of the renovated liquidity planning process of the national budget to-be process no. of executions time change in min cost change in eur cost change in % annual savings in hours annual savings in eur process of preparing the plp and confirming the lp 12 -40 -4.86 -24 -8 -58.32 process of communicating adjustments to the lp 252 -69 -8.38 -61 -290 -2,111.76 cash flow management process 252 -40 -4.86 -67 -168 -1,224.72 total 516 -149 -18.11 -51 -466 -3,394.80 source: own (gartner, 2020) process renovation: case study of a liquidity planning process of the national budget in slovenia 132 we have determined that the renovated process is executed 50% faster, consequently resulting in eur 3,394.80 lower cost a year. it has been indicated that the renovated liquidity planning process of the national budget (including the new and expanded functionalities of mferac and in eliminating manual entries) saves 466 hours of time that had previously been dedicated to compiling the necessary analyses and preparing reports. the renovated process is executed 50% faster. the additional daily measurements of entry errors and discrepancies between the forecast liquidity plan and realized liquidity plan has also determined that the gathered data and information in the renovated process are 18% more accurate (which means 18% fewer discrepancies between the planned cash flow and actual realization) and as much as 72% fewer errors. the renovation of the liquidity planning process of the national budget also provides added value for future cash flow forecasts and executing cash flow simulations by taking into account certain scenarios that can impact the liquidity of the national budget (table 9). the analysis of the answers of the interviewed users of the renovated liquidity planning process of the national budget (to-be) confirmed the advantages of the to-be process: 22% of the users share the opinion that user support is well established, 19% of the users recognize the advantage of implementing the economic classification that has replaced the liquidity items, which also shortens the time users need to spend on the review, collection, and preparation of the data. 9% of the users think the automatic nature of coordinating the dynamics on the last day of the month is an advantage that shortens the processing time, 9% of the users think the renovated system in more transparent. furthermore, 9% of the users also believe that the renovation has shortened the time needed for the process execution, 6% are pleased with the enabled function of reporting corrections to be set for the 1st of the month, no longer on the 10th of the month as was customary in the as-is process. conclusions this paper analysed the liquidity planning process of the slovenian national budget. the core notion is that the process renovation has a significant impact in its efficiency. in practice, this means that the renovated process aims to eliminate and reduce the obstacles or so-called bottlenecks (i.e., simulations and forecasts (reports) of cash flows are prepared too slowly and are consequently reported too late, certain operations need to be carried out manually and are duplicated). this increases the chance for errors. the proposed business renovation approach using the tad and aris method on press and hold bpmn standard for modelling has proven to be valuable for understanding the current process (as-is), the renovated process, and the effects of the improvements. the case study confirms that the renovated process is executed 50% faster. in addition, the data and information acquired through the renovated process are 18% more accurate (meaning 18% fewer discrepancies between the forecast cash flow and the actual realization) and present 72% fewer errors. tables 1, 2, and 3 reveal that the activities of duplicated data entry, import, and export that were executed several times a day upon each change of data or upon errors in the manual marjeta horjak, anja gartner 133 data entry. in the to-be process, these activities have been automated or can only be executed only once when needed. furthermore, the renovation process has proven to be useful since it enables a faster and more precise preparation of future cash flow forecasts. the reached conclusion was that the shortened duration of the process execution and the eliminated manual activities saves 466 hours of labour a year that can be utilized in a more productive way for preparing different analyses and reports enabled by the renovated mferac information system. this constitutes added value for future cash flow estimates and preparing simulations by taking into account certain event scenarios that affect the liquidity of the state budget. the limitation of the study is that the renovated liquidity planning process of the national budget including the new and expanded functionalities of the mferac information system is still in the implementation phase. in the future, the effects of the renovated process are expected to increase further (decreased hours spent and costs). for this reason, further research of the process remains necessary and advisable. references 1. bhaskar, h. l. & singh, r. p. (2014). business process reengineering: a recent review. global journal of business management, 8 (2), 24-51. 2. damij, n., damij, t., grad, j. & jelenc, f. (2008). a methodology for business process improvement and is development. information and software technology, 50(1), 11271141. 3. damij, n. (2009). management poslovnih procesov: modeliranje, simuliranje, inovacija in izboljšanje. ljubljana: založba vega. 4. dantis, d. (2019). benefits for the implementation of a business process model approach inside organizations. international conference knowledge-based organization, 25(2), 32-36 doi:10.1515/kbo-2019-0053. 5. ivandic vidovic, d. & bosilj vuksic, v. (2003). dynamic business process modelling using aris. ieee xplore. doi:10.1109/iti.2003.1225410. 6. rosing, p., white, s., cummins, f. & man, h. (2015). business process model and notation—bpmn. the complete business process handbook, 1 (pp.429-453). elsevier morgan kaufmann. 7. scheer, a.w. (2000). aris — business process modeling. doi: 10.1007/978-3-64257108-4 https://www.researchgate.net/publication/321502532_aris_business_process_modeling . https://www.researchgate.net/publication/321502532_aris_business_process_modeling https://www.researchgate.net/publication/321502532_aris_business_process_modeling agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 19, no. 1 (2025), pp. 124-131 124 the effect of monetary policies on the economy of the western balkan countries j. ignjatović, a. đorđević jelena ignjatović¹, aleksandra đorđević² ¹ ² academy of applied studies šabac, serbia ¹ https://orcid.org/0000-0001-9946-6916, e-mail: jignjatovic985@gmai.com ² https://orcid.org/0009-0000-0315-7570, e-mail: aleksandradj993@gmail.com abstract: monetary policies have one of the key roles in the creation of economic policies of all countries of the world. although the main task of monetary policy is to regulate the required amount of money, the objectives of monetary policy can have a development and stabilization character, which affects the entire economy of a country. in accordance with that, this paper analyzes development goals through economic growth and employment growth, as well as stabilization goals through price stability and balance of payments. the aim of this paper is to point out the effects of monetary policy on the economies of the western balkan countries, which have been striving for integration into the european union for years. the research is based on a systematic review of theoretical frameworks and empirical verification of results. in addition to the introduction, the paper consists of three parts. the first part of the paper evaluates the monetary policies of the western balkan region over time, while the second part analyzes the development goals of these countries. the third part of the paper examines the stabilization goals of the countries of the western balkans. finally, concluding remarks are given. the results of the research indicate that the monetary policies of the region are designed to be in line with the requirements of the eu, focusing on integration and socioeconomic convergence with the eu. in addition, the western balkan countries record lower economic growth rates compared to the eu, while on the other hand they record significantly higher average inflation and unemployment, which is not in line with the goals of european integration in the future. keywords: monetary policy, eu integration, western balkans countries. introduction monetary policies play a key role in creating economic policies in all countries of the world. although the primary task of monetary policy is to regulate the required amount of money, monetary policy goals can have a developmental and stabilization character, which affects the entire economy of a country. accordingly, this paper analyzes development goals through economic growth and employment growth, as well as stabilization goals through price stability and the balance of payments. the goal of the countries of the western balkans (albania, bosnia and herzegovina, north macedonia, montenegro, serbia) (kosovo) (figure 1) is to join the european union, but also economic growth and an increase in the standard of living (filipović & ignjatović, 2022). by strengthening economic growth, the standard of living in the western balkans would https://orcid.org/0000-0001-9946-6916 mailto:jignjatovic985@gmai.com https://orcid.org/0009-0000-0315-7570 mailto:aleksandradj993@gmail.com jelena ignjatović, aleksandra đorđević 125 gradually approach that enjoyed by the citizens of the more advanced economies of the european union, but structural reforms are necessary for this (world bank, 2024). figure 1. western balkans countries source: https://dijalog.net/pojam-zapadni-balkan-nestace-kada-citav-region-bude-u-evropskoj-uniji/ the main goals of the monetary policy relate to the creation of an environment of low and stable inflation that will be in accordance with the eu accession criteria, greater trust and greater use of the domestic currency, greater flexibility and adaptability of the economy to various domestic and external shocks and changes in the domestic environment that will occur in the process of convergence towards the eu (belgrade university, 2014). the aim of this paper is to point out the effects of monetary policy on the economies of the countries of the western balkans, which have been striving for integration into the european union for years. the research is based on a systematic review of theoretical frameworks and empirical verification of the results. the research questions of the article relate to the comparison of economic growth rates, inflation and unemployment in the countries of the western balkans region. the research results indicate that the monetary policies of the region are designed to be in line with eu requirements, focusing on integration and socioeconomic convergence with the eu. 1. evaluation of the monetary policy of the western balkans region these countries also share certain similarities (filipović et al. 2024; filipović & ignjatović, 2023). regional cooperation has become an important indicator for evaluating the countries of the western balkans, not only in the context of their approach to the european union (mašović, et. al., 2024)., but also for strengthening mutual economic connections. all regional initiatives and organizations strive for alignment with eu programs and policies, so the eu sees regional cooperation as one of the key criteria for progress towards membership. in addition, governments in the region rarely place regional cooperation high on the list of political priorities. however, many initiatives launched in the region did not yield significant results, mainly due to poor mutual relations and lack of capacity for their implementation. (balkans policy research group, 2021). the effect of monetary policies on the economy of the western balkan countries 126 the region of the western balkans is already integrating or rapidly approaching the european union in many areas such as trade, investments, energy, transport, telecommunications, scientific and research work, but also police cooperation and border protection. in some segments this process has already progressed a lot, while in others it is just at the beginning. due to the strong economic connection with the eu, the economic crisis from the eu easily spread to the western balkans. after a brief recovery in the previous decade, the region fell back into recession and stagnation, leading to increased unemployment, corruption, organized crime and political instability. also, due to the lesser involvement of the eu and its members, other powers such as russia, china, turkey and saudi arabia began to enter the region, gaining significant political and economic influence (the european movement in serbia,2016). in the last few years, many regional initiatives have been launched in the western balkans, and new ones still appear from time to time. however, these initiatives generally have weak structures, are easily subject to political crises and fail to bring major changes in regional cooperation or concrete benefits for citizens. initiatives such as the regional economic area (rea), "mini-schengen", the common regional market (crm) and the modernization of payments in the western balkans attracted the most attention (balkans policy research group, 2021). the regional economic area (rea) of the western balkans is an initiative that aims to create a single market within the region, modeled on the internal market of the european union. its main objective is to enable the free and unimpeded flow of goods, services, capital and highly skilled labor among the countries of the western balkans. rea is based on four key components: trade, investment, mobility and digital integration. through this initiative, the countries of the region strive to improve mutual economic cooperation, facilitate business and prepare for future eu membership. "mini-schengen" is an initiative launched in 2019 by serbia, albania and north macedonia, with the aim of facilitating the free movement of people, goods, services and capital between the countries of the western balkans similar to the schengen zone in the eu. the idea is that citizens of those countries can travel without a passport, speed up customs procedures and increase economic cooperation. later, this initiative was renamed open balkans, but the main goal remained the same – strengthening regional connectivity and preparing for eu membership. the common regional market (crm) aims to establish a western balkans market that functions according to the rules and procedures of the european union, which would gradually bring the region closer to the eu single market. the initiative received the support of the leaders of the countries of the region and builds on the experiences and achievements of the previous initiative the regional economic area (rea), which had variable results. the new action plan for crm, to be implemented by the end of 2024, includes measures in four key areas: regional trade, investments, digitization and industry with innovations (balkans policy research group, 2021). the "modernization of payments in the western balkans" project is part of the reforms within the berlin process and is being implemented with the support of the european commission, the regional cooperation council and the world bank. its goal is for the jelena ignjatović, aleksandra đorđević 127 countries of the western balkans to harmonize their payment systems with eu standards, in order to create a common regional market and improve their competitiveness and attractiveness for business. due to the different level of development of payment systems in the region, modernization aims to adopt european legal and technical standards, in order to prepare the countries for joining the sepa zone (single euro payment area). this would enable faster, simpler and cheaper mutual payments within the region, as well as with sepa member countries. currently, these payments are made through correspondent banks, which is the slowest and most expensive way to process transactions (national bank of serbia, 2024). all countries of the western balkans have a common goal membership in the european union and express their readiness for mutual cooperation. however, unresolved conflicts and disputes between states create serious mistrust, which often leads to instability and hinders joint initiatives. this deep mistrust is an obstacle to both regional economic integration and progress towards the eu. in order for the region to progress, the countries of the western balkans will have to work on solving mutual problems and building better relations. also, it is necessary to strengthen the capacities for implementing cooperation and place regional cooperation on a higher position among political priorities (balkans policy research group, 2021). 2. development goals of the western balkan cuntries the growth plan for the western balkans aims to (european commission, 2023):  integrate the western balkan partners into the eu’s single market,  advance regional economic cooperation,  deepen eu-related reforms  increase pre-accession funding in view of accelerating socio-economic convergence of the western balkans to the eu. the new eu growth plan for the western balkans ( represents a chance to stimulate economic growth through reforms and investments, especially in the area of the green economy. to accelerate this growth, these countries should improve trade both within the region and with the european union, integrate their payment systems, address demographic and labor market challenges (full focus on human capital development), and improve education and health systems (which are crucial for the transition from middle to upper income levels) (world bank, 2024). the european commission presented the economic and investment plan for the western balkans, which aims to encourage long-term recovery of the economy and stronger economic connection of the western balkans with the european union. the focus is on supporting the green and digital transition, implementing key reforms for progress towards eu membership and bringing the region closer to the eu single market. all these activities aim to contribute to sustainable economic development and the creation of new jobs (european commission, 2020). the plan predict ten main investment initiatives that include important areas for economic development, such as sustainable transport and energy connectivity, green and digital transformation, strengthening the private sector and support in health, education and social protection. special focus is placed on young people, through programs that encourage youth https://enlargement.ec.europa.eu/2023-communication-new-growth-plan-western-balkans_en the effect of monetary policies on the economy of the western balkan countries 128 employment. the european commission will consider the costs, benefits and impact of priority areas and proposed projects within the framework of the green and digital transition, in order to enable their successful and efficient implementation (european commission, 2020). also, the western balkans still needs to improve its investment by implementing more economic, administrative and legal reforms and developing the infrastructure network (mashovic et al., 2024). figure 2. growth plan for western balkan source: https://epi.org.mk/post/30461?lang=sq 3. stabilization golas of the western balkans countries the stabilization goals of the western balkans are related to:  economic growth,  controlled inflation and  reduction of unemployment. accordingly, the work analyzed data for the period 2018-2023 for the western balkans region. economic growth is in the period 2019-2023. averaged 2.9% (western balkans), 6.6% (eu). the growth in the western balkans is expected to accelerate to 3.4% (2025) and 3.5% (2026) (figure 3) supported by easing price pressures and growing availability of credit and a resilient labor market (world bank, 2025). https://epi.org.mk/post/30461?lang=sq jelena ignjatović, aleksandra đorđević 129 figure 3. economic growth (%), western balkans, 2018-2023. source: world bank, 2025. as almost a quarter of the citizens of the western balkan countries currently live abroad, better management of the global workforce from the western balkans could be a key driver of economic development in this region. while emigration can lead to challenges, such as labor shortages, there are also clear opportunities to use migration for economic benefits (world bank, 2024). unemployment is in the period 2019-2023. averaged 11% (western balkans), and 6.6% (european union) (figure 4). the highest level of unemployment in region, was recorded in montenegro (15.5%), north macedonia (15.5%), bosnia and herzegovina (14%), and followed by albania (11%) and serbia (9.2%) (world bank, 2025). figure 4. unemployment (%), western balkans, 2018-2023. source: world bank, 2025. the effect of monetary policies on the economy of the western balkan countries 130 reducing inflation is one of the biggest tasks of the countries of the western balkans, especially in serbia. according to the data world bank (2025) in the period 2019-2023. year, the regional average was 4.9% (western balkan), 4% (european union). the highest level of inflation was recorded by serbia (6.4%), followed by north macedonia (5.8%), montenegro (4.8%), bosnia and herzegovina (4.3%) and albania (3.3%) (figure 3). the highest level of inflation in serbia was 12.4% (2023). figure 5. inflation (%), western balkans, 2013-2013. source: world bank, 2025. discussions/conclussions monetary policies are key in creating economic policies in all countries of the world. in addition to the fact that the primary task of monetary policy is to regulate the required amount of money, monetary policy goals can have a developmental and stabilization character, which certainly affects the overall economy of an economy. the growth plan for the western balkans aims to integrate the western balkan partners into the eu’s single market, advance regional economic cooperation, deepen eu-related reforms increase pre-accession funding in view of accelerating socio-economic convergence of the western balkans to the eu. the stabilization goals of the western balkans are related to economic growth, controlled inflation and reduction of unemployment. effects of non-compliance with stabilization: the region's monetary policies designed to be in line with eu requirements, focusing on specific actions or policies that support integration and socio-economic convergence with the eu; the countries of the western balkans record lower rates of economic growth compared to the eu, while on the other hand they record a significantly higher average of inflation and unemployment. this has been the case for the last 30 years, however, there is still a desire for european trends. the western balkans should adjust their monetary policies to better meet the goals of eu integration in the future. -2.0 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 2019 2020 2021 2022 2023 albania bosnia and herzegovina north macedonia montenegro serbia european union https://enlargement.ec.europa.eu/2023-communication-new-growth-plan-western-balkans_en https://enlargement.ec.europa.eu/2023-communication-new-growth-plan-western-balkans_en jelena ignjatović, aleksandra đorđević 131 references 1. balkans policy research group (2021). regional cooperation on the western balkans. retrieved april 10, 2024, from https://balkansgroup.org/wpcontent/uploads/2021/02/regionalna-saradnja-na-zapadnombalkanu_komparativna-analiza-regionalnog-ekonomskogpodru%c4%8cja-%e2%80%9emini-%c5%a0engena%e2%80%9c-izajedni%c4%8ckog-regionalnog-tr%c5%bdi%c5%a0ta_web-1.pdf 2. european commission (2023). growth plan for the western balkans. retrieved april 10, 2024, from https://enlargement.ec.europa.eu/enlargement-policy/growth-planwestern-balkans_en 3. european commission (2020). western balkans: an economic and investment plan to support the economic recovery and convergence. retrieved april 10, 2024, from https://ec.europa.eu/commission/presscorner/detail/en/ip_20_1811 4. filipović, s., ignjatović, j., lađevac, i. (2024). macroeconmics stability of the brics and potential for improwing foreign trade cooperation with serbia. the review of international affairs, vol. lxxv (1191), 217-240. doi: https://doi.org/10.18485/iipe_ria.2024.75.1191.2 5. filipović, s., ignjatović, j. (2023). foreign trade commodity exchange between the countries of the former sfrj. the review of international affairs, vol. lxxiv (1187), 3158. doi: https://doi.org/10.18485/iipe_ria.2023.74.1187.2 6. filipović, s., ignjatović, j. (2022). ekonomski razvoj zapadnog balkana: šanse i ograničenja za zelenu tranziciju, megatrend revija, vol.19 (3), 167-182. doi: 10.5937/megrev2203167s 7. the european movement in serbia forum for international relations (2016). foreign policy notebooks 03/16, the future of the eu and the western balkans a view from serbia. retrieved april 10, 2024, from https://library.fes.de/pdffiles/bueros/belgrad/12944.pdf 8. mašović, a., kisin, j., ignjatović, j. (2024). comparative analysis of foreign direct investment in serbia and north macedonia, international monograph chapter, powiślański university in kwidzyn, poland, 109-128. https://powislanska.edu.pl/wpcontent/uploads/2024/05/oblicza%20dobrobytu%206.pdf 9. national bank of serbia (2024). questions related to joining the single euro payment area – sepa. retrieved april 10, 2024, fromhttps://www.nbs.rs/sr/scripts/showcontent/index.html?id=19511&konverzija=no 10. world bank. (2024). predviđa se umjereno ubrzanje ekonomskog rasta zapadnog balkana u 2025. retrieved april 10, 2024, fromhttps://www.worldbank.org/bs/news/press-release/2024/10/17/western-balkanseconomic-growth-projected-to-moderately-accelerate-in-2025 11. belgrade unversity. (2014). monetarna politika narodne banke srbije. retrieved april 10, 2024, from https://www.ekof.bg.ac.rs/wp-content/uploads/2014/10/xxviiimonetarna-politika-narodne-banke-srbije.docx 12. world bank. (2025). data. retrieved april 10, 2024, fromhttps://data.worldbank.org/indicator/ny.adj.aedu.gn.zs?page=1 13. https://dijalog.net/pojam-zapadni-balkan-nestace-kada-citav-region-bude-u-evropskojuniji/ 14. https://epi.org.mk/post/30461?lang=sq https://enlargement.ec.europa.eu/enlargement-policy/growth-plan-western-balkans_en https://enlargement.ec.europa.eu/enlargement-policy/growth-plan-western-balkans_en https://ec.europa.eu/commission/presscorner/detail/en/ip_20_1811 https://doi.org/10.18485/iipe_ria.2023.74.1187.2 https://library.fes.de/pdf-files/bueros/belgrad/12944.pdf https://library.fes.de/pdf-files/bueros/belgrad/12944.pdf https://www.worldbank.org/bs/news/press-release/2024/10/17/western-balkans-economic-growth-projected-to-moderately-accelerate-in-2025 https://www.worldbank.org/bs/news/press-release/2024/10/17/western-balkans-economic-growth-projected-to-moderately-accelerate-in-2025 https://data.worldbank.org/indicator/ny.adj.aedu.gn.zs?page=1 https://dijalog.net/pojam-zapadni-balkan-nestace-kada-citav-region-bude-u-evropskoj-uniji/ https://dijalog.net/pojam-zapadni-balkan-nestace-kada-citav-region-bude-u-evropskoj-uniji/ https://epi.org.mk/post/30461?lang=sq agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 18, no. 2 (2024), pp. 375-386 375 valuation model of crowdfunding campaigns applying simple additive weighting method s. venslavienė, j. kartašova santautė venslavienė¹, jekaterina kartašova² ¹ ² vilnius university business school, lithuania ¹ https://orcid.org/0000-0002-4432-6753, e-mail: santaute.venslaviene@vm.vu.lt ² https://orcid.org/0000-0003-3774-1817, e-mail: jekaterina.kartasova@vm.vu.lt abstract: every investor has some difficulties when investing into crowdfunding campaigns, as it is not clear how to evaluate specific crowdfunding campaign or what success factors to choose. the aim of this study is to propose the crowdfunding campaign assessment model, test it empirically and illustrate how to select the most appropriate crowdfunding campaign for individual investor to invest. multi-criteria methods, used in the evaluation process, enable to get objective answers about the effectiveness of the optimal crowdfunding campaign comprehensively by presenting some generalized indicators and considering both quantitative and qualitative data. the obtained empirical results comparing two crowdfunding campaigns show that the proposed method could be used for evaluating complex processes of the optimal crowdfunding investments, and could be adapted for various situations. keywords: crowdfunding, crowdfunding campaign, valuation model, multi-criteria decision method, simple additive weighting introduction the crowdfunding industry increased significantly after the 2008 global financial crisis, as the typical financial system, especially the banking sector, was no longer trusted. since then, crowdfunding has thrived globally (jalal et al., 2024). crowdfunding, being one of the key applications of fintech that may disrupt traditional financial intermediation, is an emerging financing alternative form that connects those who can invest money directly with those who need financing for a specific project (pandey et al., 2024; wan et al., 2023). it is an internetbased way for companies, organizations or individuals to raise money through either donations or investments from multiple individuals (hussain et al., 2023). the basic principle of crowdfunding is therefore to pool money from a group of individuals instead of professional parties (mora-cruz & palos-sanchez, 2023). the definitions of crowdfunding might be different, but they summarize the following key components: 1) raise funds in minor amounts; 2) many-to-many platform and 3) use of digital technology (hussain et al., 2023; mora-cruz & palos-sanchez, 2023). these days many crowdfunding campaigns are emerging. due to the high variety of crowdfunding campaigns, it is very difficult to select the right one. in order to select the most wanted campaign, the crowdfunding campaigns must be evaluated whether it is worth to invest or not. it is very difficult to assess the crowdfunding campaign, as most campaigns are from https://orcid.org/0000-0002-4432-6753 mailto:santaute.venslaviene@vm.vu.lt https://orcid.org/0000-0003-3774-1817 mailto:jekaterina.kartasova@vm.vu.lt valuation model of crowdfunding campaigns applying simple additive weighting method 376 new companies which still do not have much accounting information or any tangible wealth. also, there are not many specific success factors of crowdfunding campaigns to look. the proposed model identifies the success factors and evaluates new campaigns from investor’s perspective and reflects both their financial performance and overall attraction. this model is based on a multi-criteria decision weighting methodology and to be more precise – simple additive weighting (saw) method. the main benefits of this method are 1) ability to combine; 2) find relations; 3) evaluate both quantitative and qualitative criteria. this model follows main concept of all multi-criteria evaluation methods – it integrates the criteria values and weights into a single magnitude. the general simple additive weighting model framework is adopted to fit specifically crowdfunding campaigns. this model can be used by any individual investor having chosen the proposed criteria to evaluate the crowdfunding campaigns and make investment decisions for the most exciting campaigns. for application purposes, two different campaigns were discussed in the evaluation model. the main goal of the paper is to propose the crowdfunding campaign assessment model, test it empirically and illustrate how to select the most appropriate crowdfunding campaign for individual investor to invest. three tasks were developed: 1) to identify the main success factors that influence the value of crowdfunding campaigns. 2) to adopt the multi-criteria decision method based on saw into crowdfunding campaign valuation process. 3) to test the model applicability and to evaluate two crowdfunding campaigns. the paper is organized as follows: first, the literature review of financing crowdfunding campaigns and their success factors was conducted. second, the applied methodology is described. finally, the results, discussion, limitations and conclusions are discussed. 1. literature review 1.1. financing crowdfunding campaigns an ecosystem of crowdfunding consists of three groups: the platform, campaign owners and backers. the dominant point of every crowdfunding ecosystem is a platform. a platform is a technologically supported solution used to link supply (those who provide funds) and demand (those who are seeking for funds). the supply side consists of lenders, investors, backers and donors. the demand side consists of individuals and various organizations that seek for financial support (jenik et al., 2017; kumar et al., 2024). crowdfunding has become very novel and popular financing application worldwide (huang et al., 2023; liang et al., 2019). first studies that emphasised crowdfunding platforms, compared the decision-making process of equity crowdfunding with new venture capital funding (hagedorn & pinkwart, 2016; löher, 2017). however, there is not enough knowledge about the crowdfunding success targets should be evaluated. additionally, studies on campaign success factors and investment criteria in equity crowdfunding is rare. on the other hand, knowledge of the crowdfunding success factors is required in order to better understand the dynamics of crowdfunding and its campaign success rates (fan-osuala et al., 2018). while the number of crowdfunding campaigns is santautė venslavienė, jekaterina kartašova 377 increasing, it is essential to understand what motivates people to fund these campaigns. the success of crowdfunding campaigns is influenced by various factors, including social capital theory (butticè et al., 2017; colombo et al., 2015; skirnevskiy et al., 2017), signal theory (ahlers et al., 2015; courtney et al., 2017), the herding effect (mohammadi & shafi, 2018), and local bias (mendes-da-silva et al., 2016). therefore, success factors for crowdfunding campaigns will be discussed from traditional funding, venture capital and business angels theories. moreover, crowdfunding can be comparable with traditional e-commerce transactions (ahlers et al., 2015). 1.2. success factors for crowdfunding campaigns success factors for crowdfunding campaigns were taken from crowdfunding, venture capital and business angel theory and e-commerce literature. most combinations of success factors were adapted from other study (venslavienė et al., 2021) and are given in the table 1. according to the existing literature of crowdfunding theory, success factors are splitted into 4 categories: campaign characteristics, networks, understandability and quality signals (cumming et al., 2020; ferreira & pereira, 2018). those 4 categories included other subfactors, in total counting 15 success factors from crowdfunding theory. while discussing venture capital and business angels theory, there were found 6 success factors (huang et al., 2023; liu et al., 2023; zhu et al., 2023). finally, from e-commerce theory, there were found three main factor groups related with risk, including 10 related risks. to summarize, 6 global factor groups including 24 success factors affect crowdfunding campaigns. table 1. success factors for crowdfunding campaigns found in the literature theory global success factor codes success factor codes description c ro w d fu n d in g t h eo ry campaign characteristics c1 campaign duration sc11 duration of the project campaign funding target sc12 minimum sum needed to launch the project min. investment sc13 minimum amount to invest to participate in the project campaign provision of financials sc14 financial forecasts/projections, early financial statements number of early backers sc15 number of investors who invest before the campaign is launched capital raised sc16 total capital raised for one project number of investors sc17 actual number of investors investing in the same project networks c2 social media networks sc21 the followers’ social network of the project owner private networks sc22 family and friends who support the project understandability c3 understandability sc31 is it oriented to business (b2b) or customer (b2c) information about risk sc32 if the crowdfunding campaign is giving information about the risk valuation model of crowdfunding campaigns applying simple additive weighting method 378 environment commitments sc33 if the crowdfunding campaign is committed to the environment quality signals c4 updates sc41 how often updates are sent to audience spelling mistakes sc42 are there any spelling errors in the campaign text video sc43 is there a descriptive video about the campaign/product v en tu re c ap it al a n d b u si n es s a n g el s company ratings c5 team rating sc51 industry expertise educational background experience the balance between team members’ skill sets perceived motivation, drive, passion, commitment, honesty markets rating sc52 attainable market that determines the company’s growth potential. concept rating sc53 how well the product fits the target market relevance of the end customer’s problem how well the company addresses the problem compared to other alternatives value of the solution to the customer scalability rating sc54 it is easy to scale up the solution to the entire target market. terms rating sc55 valuation whether the targeted funding amount is sufficient to lift the company to the next level stage rating sc56 progress of the company on its development path remaining gap to the target state status of the product status of market validation existence of paying customers e -c o m m er ce t h eo ry risk c6 risks associated with the project sc61 product risk/funding object risk social risk psychological risk post-funding risk/ repayment risk risks associated with the project initiator sc62 project initiator risk/owner risk/seller risk time risk/convenience risk delivery risk risks associated with the intermediary sc63 intermediary risk/privacy risk financial risk performance risk/operating risk source: adapted from (venslavienė et al., 2021) these success factors should be used in evaluation model for crowdfunding campaigns. santautė venslavienė, jekaterina kartašova 379 2. methodology when assessing crowdfunding campaigns, investors usually do not have full information and have to turn their attention to secondary sources of information to help find out qualitative differences among crowdfunding campaigns. thus, usually crowdfunding campaigns have both quantitative and qualitative success factors. therefore, in order to create a model, six main factor groups were analyzed. since these success factors are multidimensional, there is a need to apply methods that can link all criteria to one descriptive measure. multi-criteria evaluation methods are the ones which can analyze those factors (barretta et al., 2023; hashemi et al., 2022; khan et al., 2022). multi-criteria decision making (mcdm) is applied to preferable decisions among available classified alternatives by multiple attributes (taherdoost & madanchian, 2023; zavadskas et al., 2022). multi-criteria desicion method is a method that does the analysis of several unrelated criteria. in this method environmental, economic, technological and social factors are discussed for the choice of the project and for making the choice sustainable (alvarez et al., 2021). in this paper, simple additive weighting method, one of mcdm methods, will be used to create valuation model. saw method is the oldest, one of the simplest, widely known and practically used (amalia & alita, 2023; kelen et al., 2023; rusidah et al., 2023; sinaga & riandari, 2020). the criterion of the method sj clearly demonstrates the main concept of multicriteria evaluation methods – the integration of the criteria values and weights into a single magnitude (amalia & alita, 2023; sinaga & riandari, 2020). the sum sj of the weighted normalized values of all the criteria is calculated for the j-th object: 𝑆𝑗 = ∑ 𝜔𝑖𝑟𝑖𝑗, 𝑚 𝑖=1 (1) where ωi is weight of the i-th criterion rij is normalized i-th criterion’s value for j-th object; i = 1,..., m; j = 1,…, n; m is the number of the criteria used, n – is the number of the objects (alternatives) compared. the largest value of criterion sj corresponds on the best alternative (rajagukguk et al., 2022). all the compared alternatives must be ranked in the decreasing order of the calculated values of the criterion sj. adopting the saw method in the crowdfunding campaign evaluation process several steps should be done: 1) weights are given for each criterion as the importance of attribute 2) a value (score) is given for each alternative by criteria assessment 3) when there is already normalized matrix, every member of that matrix is multiplied by its weight and summed with other members of the alternative 4) the alternative with the highest score is selected. model consists of three stages. first, choose criteria. second, use saw to weight the evaluative criteria and the last, third stage gives the optimal crowdfunding campaign to fund for investor. 3. application of valuation model crowdfunding campaigns in order to have more specific and detailed valuation of factors, all factors were defined and grouped in smaller groups of sub-factors. also, this way is easier for experts to evaluate valuation model of crowdfunding campaigns applying simple additive weighting method 380 factors more precisely. after the expert evaluation, all sub-factors should be combined into factor groups with global weights and those factor groups will be used in the model to choose the most optimal crowdfunding campaign to invest in. when all factors are set, the factor weights can be found. here expert estimates are chosen. this estimation is very subjective, therefore five professionals with experience in investing into crowdfunding platforms were chosen. three of them constantly invest into crowdfunding campaigns, while the other two are the owners of crowdfunding campaigns. the results of expert evaluations are given in table 2. table 2. expert estimation of factor weights no success factor codes 1 2 3 4 5 total weights 1 campaign duration sc11 8 3 2 4 1 18 0.036 2 funding target sc12 4 4 3 3 1 15 0.030 3 min. investment sc13 10 5 3 2 1 21 0.042 4 provision of financials sc14 3 3 2 3 5 16 0.032 5 number of early backers sc15 0 4 4 2 8 18 0.036 6 capital raised sc16 0 3 5 4 7 19 0.038 7 number of investors sc17 0 3 3 2 6 14 0.028 8 social media networks sc21 3 2 4 3 2 14 0.028 9 private networks sc22 3 2 20 9 6 40 0.080 10 understandability sc31 6 4 5 3 1 19 0.038 11 information about risk sc32 10 3 1 2 4 20 0.040 12 environment commitments sc33 5 2 1 3 3 14 0.028 13 updates sc41 3 2 1 2 4 12 0.024 14 spelling mistakes sc42 5 3 1 2 3 14 0.028 15 video sc43 0 4 1 3 5 13 0.026 16 team rating sc51 7 5 10 6 4 32 0.064 17 markets rating sc52 5 3 2 3 4 17 0.034 18 concept rating sc53 3 7 10 6 4 30 0.060 19 scalability rating sc54 0 3 4 3 5 15 0.030 20 terms rating sc55 0 5 4 3 2 14 0.028 21 stage rating sc56 0 5 4 3 2 14 0.028 22 risks associated with the project sc61 10 10 4 8 8 40 0.080 23 risks associated with the project initiator sc62 5 8 3 11 5 32 0.064 24 risks associated with the intermediary sc63 10 7 3 10 9 39 0.078 total 100 100 100 100 100 500 1.000 simple additive weighting method uses the typical normalization. the values of the criterion sj of the method range from 0 to 1 for all the alternatives considered, while the sum of the criterion values is equal to unity allowing for graphical (geometrical) interpretation of the method. santautė venslavienė, jekaterina kartašova 381 the global weights of each criterion should be estimated for further calculations. the global weights will show the most important factors from the whole group. the global weights are calculated in a very simple way – by finding simple arithmetic average from each subfactor group. the results of global weights are found in table 3. the results shall be used in the valuation model to get which one of crowdfunding campaigns is more attractive to invest. the most important factors are related with risk and with networks, while the least important are quality signals. table 3. global weights of each factor group global success factor codes success factor codes total weights global weights campaign characteristics c1 0.0346 campaign duration sc11 18 0.036 funding target sc12 15 0.030 min. investment sc13 21 0.042 provision of financials sc14 16 0.032 number of early backers sc15 18 0.036 capital raised sc16 19 0.038 number of investors sc17 14 0.028 networks c2 0.054 social media networks sc21 14 0.028 private networks sc22 40 0.080 understandability c3 0.0353 understandability sc31 19 0.038 information about risk sc32 20 0.040 environment commitments sc33 14 0.028 quality signals c4 0.0260 updates sc41 12 0.024 spelling mistakes sc42 14 0.028 video sc43 13 0.026 company ratings c5 0.0407 team rating sc51 32 0.064 markets rating sc52 17 0.034 concept rating sc53 30 0.060 scalability rating sc54 15 0.030 terms rating sc55 14 0.028 stage rating sc56 14 0.028 risk c6 0.0740 risks associated with the project sc61 40 0.080 risks associated with the project initiator sc62 32 0.064 risks associated with the intermediary sc63 39 0.078 valuation model of crowdfunding campaigns applying simple additive weighting method 382 the next step is to find out the most attractive crowdfunding campaign to invest in. there were analyzed two different crowdfunding campaigns from different sectors. the first crowdfunding campaign is in real estate and oriented to both foreign and local markets, while the second is innovative with unique product in the industry, but oriented only to local market. moreover, both already have some early investors. further, crowdfunding campaign 1 is considered to be on lower risk, while crowdfunding campaign 2 is the opposite – very risky. with proper descriptions of the crowdfunding campaigns, it is likely to assess crowdfunding campaigns by scores. in other words, the factor matrix should be normalised. as input data for calculation are the factors and their values of importance, the matrix should be normalised according to these conditions by evaluating the values of factors in the interval from 1 to 5, where: 1) negative value of factors (decreasing value of factors). 2) insufficient value of factors (remaining the same). 3) medium value of factors (medium increasing). 4) sufficient value of factors (sufficient increasing). 5) high value of criteria (high increasing). the normalized values of alternatives are provided in table 4. the estimation of aggregated values was done by applying the formula (1). the final results are presented in table 5. based on the results, it is possible to draw some conclusions. as the optimal alternative, it should be selected the second crowdfunding campaign since its aggregated value is 1.0303 that is higher than the first crowdfunding campaign with aggregated value of 0.7982. table 4. global normalized values for crowdfunding campaigns global success factor codes crowdfunding campaign 1 crowdfunding campaign 2 campaign characteristics c1 5 4 networks c2 3 4 understandability c3 4 3 quality signals c4 2 3 company ratings c5 3 3 risk c6 2 5 table 5. crowdfunding campaign value calculation using saw method global success factor codes crowdfunding campaign 1 crowdfunding campaign 2 global weights value of crowdfunding campaign 1 value of crowdfunding campaign 2 campaign characteristics c1 5 4 0.0346 0.1729 0.1383 networks c2 3 4 0.0540 0.1620 0.2160 understandability c3 4 3 0.0353 0.1413 0.1060 quality signals c4 2 3 0.0260 0.0520 0.0780 company ratings c5 3 3 0.0407 0.1220 0.1220 risk c6 2 5 0.0740 0.1480 0.3700 aggregated value 0.7982 1.0303 santautė venslavienė, jekaterina kartašova 383 for this analysis six factor groups and 24 sub-factors were selected and 2 alternatives created. multi-criteria evaluation method was applied to perform quantitative evaluation on these success factors. first, all values and weights of all factors were estimated and then they were applied to evaluation model. the overall conclusion from evaluation of those two alternatives shows not very wide dispersion, so it can be assumed that the factors and factor weights are selected correctly and the aggregated value sum of 1.0303 shows that alternative 2 is more attractive to choose for a decision considering the investment idea in some crowdfunding campaigns. discussion this paper provides the estimation framework to determine the optimal crowdfunding campaigns to invest. a new valuation model was proposed applying simple additive weighting methods which is part of multi-criteria evaluation method. the model suggests that crowdfunding investors should focus not only on traditional financial factors but also on their given parameters and conditions. the model works properly and helps for investors to decide on the best crowdfunding campaign. moreover, it might be recommended to select more success factors or to use more combinations of other methods of multi-criteria evaluation to normalise the factors used and to pool the alternatives of various crowdfunding campaigns. the results from the implementation with more multi-criteria methods might show stronger and more effective results from different perspectives. conclusions before investing into new crowdfunding campaigns, investors must evaluate whether it is worth to invest or not. it is quite difficult to evaluate crowdfunding campaigns as most of them are very new in the market and there is little financial data. the valuation model to assess crowdfunding campaigns was proposed in this paper. moreover, the multi-criteria valuation method simple additive weighting was applied. comparing with other models, simple additive weighting is effective, as different factors can be chosen by different investor according to his personal preferences. for this analysis six factor groups and 24 sub-factors were selected and 2 alternatives created. multi-criteria evaluation method was applied to perform quantitative evaluation on these success factors. first, all values and weights of all factors were estimated and then they were applied to evaluation model. simple additive weighting method has worked properly and proved that it was the right method to apply in the model. the results of this method helped to choose the most optimal crowdfunding campaign to invest in. it can be concluded that the created model can be extensively applied for evaluating and selecting most optimal crowdfunding campaign. the overall conclusion from evaluation of those two alternatives shows not very wide dispersion, so it can be assumed that the factors and factor weights are selected correctly. valuation model of crowdfunding campaigns applying simple additive weighting method 384 references ahlers, g. k. c., cumming, d., günther, c., & schweizer, d. (2015). signaling in equity crowdfunding. entrepreneurship: theory and practice, 39(4), 955–980. https://doi.org/10.1111/etap.12157 alvarez, p. a., ishizaka, a., & martínez, l. (2021). multiple-criteria decision-making sorting methods: a survey. expert systems with applications, 183, 115368. https://doi.org/10.1016/j.eswa.2021.115368 amalia, f. s., & alita, d. (2023). application of saw method in decision support system for determination of exemplary students. journal of information technology, software engineering and computer science, 1(1), 14–21. https://doi.org/10.58602/itsecs.v1i1.9 barretta, r., taherdoost, h., & madanchian, m. (2023). multi-criteria decision making (mcdm) methods and concepts. encyclopedia 2023, vol. 3, pages 77-87, 3(1), 77–87. https://doi.org/10.3390/encyclopedia3010006 butticè, v., colombo, m. g., & wright, m. (2017). serial crowdfunding, social capital, and project success. entrepreneurship: theory and practice, 41(2), 183–207. https://doi.org/10.1111/etap.12271 colombo, m. g., franzoni, c., & rossi-lamastra, c. (2015). internal social capital and the attraction of early contributions in crowdfunding. entrepreneurship: theory and practice, 39(1), 75–100. https://doi.org/10.1111/etap.12118 courtney, c., dutta, s., & li, y. (2017). resolving information asymmetry: signaling, endorsement, and crowdfunding success. entrepreneurship: theory and practice, 41(2), 265–290. https://doi.org/10.1111/etap.12267 cumming, d. j., leboeuf, g., & schwienbacher, a. (2020). crowdfunding models: keep-itall vs. all-or-nothing. financial management, 49(2), 331–360. https://doi.org/10.1111/fima.12262 fan-osuala, o., zantedeschi, d., & jank, w. (2018). using past contribution patterns to forecast fundraising outcomes in crowdfunding. international journal of forecasting, 34(1), 30–44. https://doi.org/10.1016/j.ijforecast.2017.07.003 ferreira, f., & pereira, l. (2018). success factors in a reward and equity based crowdfunding campaign. 2018 ieee international conference on engineering, technology and innovation (ice/itmc), 1–8. hagedorn, a., & pinkwart, a. (2016). the financing process of equity-based crowdfunding: an empirical analysis. in fgf studies in small business and entrepreneurship (pp. 71– 85). springer. https://doi.org/10.1007/978-3-319-18017-5_5 hashemi, a., dowlatshahi, m. b., & nezamabadi-pour, h. (2022). ensemble of feature selection algorithms: a multi-criteria decision-making approach. international journal of machine learning and cybernetics, 13(1), 49–69. https://doi.org/10.1007/s13042-02101347-z/tables/15 huang, x., kabir, r., & nguyen, t. n. (2023). do project quality and founder information signals always matter? evidence from equity and reward crowdfunding. international journal of finance & economics. https://doi.org/10.1002/ijfe.2835 santautė venslavienė, jekaterina kartašova 385 hussain, n., di pietro, f., & rosati, p. (2023). crowdfunding for social entrepreneurship: a systematic review of the literature. journal of social entrepreneurship. https://doi.org/10.1080/19420676.2023.2236637 jalal, a., al mubarak, m., & durani, f. (2024). financial technology (fintech). studies in systems, decision and control, 487, 525–536. https://doi.org/10.1007/978-3-031-358289_45/cover jenik, i., lyman, t., & nava, a. (2017). crowdfunding and financial inclusion. march. kelen, y. p. k., sucipto, w., tey seran, k. j., ullu, h. h., manek, p., lestari, a. k. d., & fallo, k. (2023). decision support system for the selection of new prospective students using the simple additive weighted (saw) method. aip conference proceedings, 2798(1). https://doi.org/10.1063/5.0154676/2904117 khan, i., pintelon, l., & martin, h. (2022). the application of multicriteria decision analysis methods in health care: a literature review. medical decision making, 42(2), 262–274. https://doi.org/10.1177/0272989x211019040/asset/images/large/10.1177_0272 989x211019040-fig5.jpeg kumar, j., rani, m., rani, g., & rani, v. (2024). crowdfunding adoption in emerging economies: insights for entrepreneurs and policymakers. journal of small business and enterprise development, ahead-of-print(ahead-of-print). https://doi.org/10.1108/jsbed05-2023-0204/full/pdf liang, t. p., wu, s. p. j., & huang, c. chi. (2019). why funders invest in crowdfunding projects: role of trust from the dual-process perspective. information and management, 56(1), 70–84. https://doi.org/10.1016/j.im.2018.07.002 liu, z., ben, s., & zhang, r. (2023). factors affecting crowdfunding success. journal of computer information systems, 63(2), 241–256. https://doi.org/10.1080/08874417.2022.2052379 löher, j. (2017). the interaction of equity crowdfunding platforms and ventures: an analysis of the preselection process. venture capital, 19(1–2), 51–74. https://doi.org/10.1080/13691066.2016.1252510 mendes-da-silva, w., rossoni, l., conte, b. s., gattaz, c. c., & francisco, e. r. (2016). the impacts of fundraising periods and geographic distance on financing music production via crowdfunding in brazil. journal of cultural economics, 40(1), 75–99. https://doi.org/10.1007/s10824-015-9248-3 mohammadi, a., & shafi, k. (2018). gender differences in the contribution patterns of equitycrowdfunding investors. small business economics, 50(2), 275–287. https://doi.org/10.1007/s11187-016-9825-7 mora-cruz, a., & palos-sanchez, p. r. (2023). crowdfunding platforms: a systematic literature review and a bibliometric analysis. international entrepreneurship and management journal, 19(3), 1257–1288. https://doi.org/10.1007/s11365-023-008563/figures/12 pandey, d. k., hassan, m. k., kumari, v., zaied, y. ben, & rai, v. k. (2024). mapping the landscape of fintech in banking and finance: a bibliometric review. research in international business and finance, 67, 102116. https://doi.org/10.1016/j.ribaf.2023.102116 valuation model of crowdfunding campaigns applying simple additive weighting method 386 rajagukguk, d. m., manalu, m. r., sihombing, m. j. t., & panjaitan, m. i. (2022). decision support system for selection of achievement teachers to give awards at smas imelda medan using the saw method. infokum, 10(5), 747–754. https://doi.org/10.58471/infokum.v10i5.1156 rusidah, risdianti, & susanto, j. k. (2023). selecting favourite majors at sari mulia university using saw method. international journal of artificial intelligence, 10(1), 1– 8. https://doi.org/10.36079/lamintang.ijai-01001.482 sinaga, b. s., & riandari, f. (2020). implementation of decision support system for determination of employee contract extension method using saw. journal of computer networks, architecture and high performance computing, 2(2), 183–186. https://doi.org/10.47709/cnapc.v2i2.397 skirnevskiy, v., bendig, d., & brettel, m. (2017). the influence of internal social capital on serial creators’ success in crowdfunding. entrepreneurship: theory and practice, 41(2), 209–236. https://doi.org/10.1111/etap.12272 taherdoost, h., & madanchian, m. (2023). multi-criteria decision making (mcdm) methods and concepts. encyclopedia 2023, vol. 3, pages 77-87, 3(1), 77–87. https://doi.org/10.3390/encyclopedia3010006 venslavienė, s., stankevičienė, j., & vaiciukevičiūtė, a. (2021). assessment of successful drivers of crowdfunding projects based on visual analogue scale matrix for criteria weighting method. mathematics 2021, vol. 9, page 1590, 9(14), 1590. https://doi.org/10.3390/math9141590 wan, x., teng, z., li, q., & deveci, m. (2023). blockchain technology empowers the crowdfunding decision-making of marine ranching. expert systems with applications, 221, 119685. https://doi.org/10.1016/j.eswa.2023.119685 zavadskas, e. k., lescauskiene, i., juodagalviene, b., bausys, r., & keizikas, a. (2022). comparison of the stair safety awareness in different target groups by applying the vasma-c methodology. archives of civil and mechanical engineering, 22(4), 1–11. https://doi.org/10.1007/s43452-022-00487-5/figures/4 zhu, m., zhou, w., & duan, c. (2023). integrating fmea and fuzzy super-efficiency sbm for risk assessment of crowdfunding project investment. soft computing, 28(3), 2563– 2575. https://doi.org/10.1007/s00500-023-08534-w/figures/3 agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 18, no. 1 (2024), pp. 290-301 290 the spiritual connection between the cartography of the human subconscious and the structures of neoliberal theology a.c. rath-boșca albert camil rath-boșca faculty of economic sciences, agora university of oradea, romania https://orcid.org/0009-0004-6815-9509, e-mail:camilend@yahoo.com abstract: usually, an economist, a manager, a business administrator, or any other participating member of the free market has a single and clear view of the pecuniary value of goods and the nature of capital. the logic of capitalism allows the economic agent to assign clear values to goods based on several factors. although such a strict view of a good and its nature is mechanically correct, it is an incomplete one. economists and economic theorists more broadly agree that commercial goods, whether they are directed to the consumer or intermediate goods in the production chain, are the result of human labour. keywords: neoliberalism, capitalism, economic, theories. introduction the economic structures of the 20th century, which are still used in our age, are concerned rather with economic ontology and teleology. the economist's concern is not man, but the structure formed by men to facilitate commerce between individuals, legal entities, or states. the 21st century has brought with it phenomenal technological progress, but at the same time it has brought new problems that the economic systems conceived and adopted in the past could not foresee and, as such, have no satisfactory solutions for the new human challenges. under the neoliberal empire, man becomes a product and all his activities become activities of a productive nature. every time an ordinary citizen opens their phone and uses an app, regardless of the app, they provide data about their behavioural patterns for free. these data are perhaps, in our era, what the most valuable resources for all businesses, be they local or multinational. given the fact that post-modern human no longer has no moment to simply be human, but they are constantly a producer or an intermittent good with the aim of bringing new flows of capital into the "free market", we must ask what is the effect of such a new status as homo producitur on the human psyche. ii. neoliberalism, the monstrous offspring of western thought. neoliberalism is a rare term in the perpetual terror machine we call mainstream media, yet every human being has an intimate phenomenological understanding of neoliberalism. we see either the effects or the offspring of neoliberalism in our daily lives. we see products, services, jobs, phenomena that cannot be observed in a soviet or keynesian economy.the birth of neoliberalism, or even a clear definition of the term, is a difficult task for any researcher. https://orcid.org/0009-0004-6815-9509 mailto:camilend@yahoo.com albert camil rath-boșca 291 philosophically, we can identify neoliberal ideology from the writings of american economist frank hyneman knight and austrian economist friedrich august hayek. for these two economists, and for other neoliberal economists, the state must not intervene in any way in the free market. they are against communism and keynesian models from every point of view, and even more, they believe that such economic models are the causes of the great financial crises. for hayek, the financial recession of the 1980s was caused by keynesian economic models adopted in the interwar and immediate post-war period. according to his book, unemployment and monetary policy, he criticizes the keynesian model for the inflation it causes and its effects. through keynesian policies such as social assistance or the public health system, the state is forced to produce more currency through national banks. of course, through an influx of foreign currency into the economy, it will lose its value. thus, inflation appears which appears to be excessive for neoliberal economists. hayek's proposed solution is temporary suffering followed by a return to normalcy (hayek, p.13). if the currency stays at the same value during a recession, inevitably, some jobs will be lost, and a hard time will inevitably follow for the proletariat. hayek is not unaware of how ordinary citizens will perceive such anti-inflation measures. however, a politician must remain steadfast and impose unpopular measures to save the economy in the long run (hayek, p.9). it is impossible for an industrial or service-based economy to live with huge inflation like south american countries. this inflation results in "labour trickling". by tricking labour, hayek refers to the change in the distribution of money and resources in periods of increased inflation and the attractiveness of certain jobs in periods of high inflation (hayek, p.12), that is, certain games of perception that south american governments used to maintain an illusory economic balance. if the first signs of recession are observed and countered, a depression of the economy, or an economic crisis, can be avoided. again, hayek considers necessary an economic restructuring that aims to stabilize the national currency by lowering wages, by fluctuating or elastic prices and a temporary suffering of the labour force. hayek condemns fiscal and political authorities for not understanding how the "game of economy" is played. for him, the return to the gold standard is a necessity that could once again stabilize the world economy (hayek, p.19). the second economist, whose work i consider essential to understanding neoliberalism, is frank hyneman knight. the analysis of his essay fallacies in the interpretation of social cost is important. in this essay knight criticizes the perspective of the british economists pigou and graham. pigou and graham proposes the following thesis: if we give industry unlimited freedom then it will invest precious resources in goods or products whose needs cannot be economically met in the long run. example pigou’s, that of public and private roads, is explained in the article (knight, p.219). if there are two roads, one private but much too narrow for which a sum must be paid directly to the owner, and one free, wider but poorly maintained, the effect will be that at some point both roads will be used. the spiritual connection between the cartography of the human subconscious and the structures of neoliberal theology 292 this phenomenon happens because of the way these two roads are organized. on the one hand, the private road is more efficient because it is better maintained, but being too narrow it leads to delays in the transport of goods. the public road, although more dangerous for business because of its poor condition, will become equally attractive for the transport of goods. with this example pigou wants to demonstrate the tendency of private industry to produce goods or provide services that tend to lead to financial losses. pigou believes that such infrastructure projects are more effective when the state takes charge of them and maintains them with tax money. if a private business were to manage such projects, it would not be able to provide as good a service because it would have to constantly aim for the maximum profit from the minimum investment. knight disputes this conception (knight, p.224). in his view, if all the roads were private, these private companies would be obliged by their financial interest to provide good services. if all the roads are owned by private industry, each road user will pay an amount for the use of the roads directly to the road owner. because of competition, prices must remain competitive but allow for road maintenance and owner profit (knight, p.229). another factor invoked by knight is the risk assumed by the investor. he also criticizes the "vague language" used by the economists pigou and graham. the latter do not compare different solutions to the problem of traffic and road use. rather, they are speculating in the absence of a comparable example. there were no freeways or private roads at the time, meaning pigou had no sample for his analysis, he could only guess. both knight and hayek died but, ironically, their dreams have been fully realized in america and the states that have been "democratized" by it. these two economists together with other neoliberal economists such as milton friedman, thomas saul or james buchanan had a major influence on politicians such as thatcher, nixon, bill clinton or reagan. in the words of far-right journalist andrew brightbar "politics is upstream of culture". if politics has become neoliberal, culture will inevitably be sculpted in the neoliberal spirit. thanks to these politicians and the brutal and somewhat illogical liberalization of the economic market, we live in neoliberal culture in its entirety. according to the view of the greek economist yannis varoufakis, "the ghost of margaret thatcher haunts the european economy" (https://www.youtube.com/watch?v=w6h6tvvuggo&ab_channel=politicsjoe). all neoliberal economists are against centralized economies, state intervention and public services, and as such criticize in a harsh but sometimes fair manner such economic structures. however, i believe that these economists started from two false premises in their anti-communist and anti-keynesian crusade. the first erroneous premise ascertained these economists is the human factor. economists such as marx, maynard keynes, pigou, ricardo, even the father of economic analysis, adam smith, focus on the welfare and survival of society. man is the centre of economics, not the free market, not the game of economics, but man. for neoliberals, man is a resource and must be treated as such. the second erroneous premise is the goodness and wisdom of the great capitalists. this premise is explored by edward bernays in his book propaganda. throughout the book, bernays repeats this mantra countless times. rich people form a kind of parallel government, but this is https://www.youtube.com/watch?v=w6h6tvvuggo&ab_channel=politicsjoe albert camil rath-boșca 293 really good from a moral point of view. bernays considers the common people to be far too petty and indecisive to make decisions without being guided by someone, either directly or indirectly. both premises are observed in the internal politics of the united states. domestically, america has adopted various policies that allow the free market to function without restrictions, such as the passage of the tax services modernization act in 1999 by the united states parliament and then-president bill clinton. the 1999 act repealed the glass-steagall act. under the old legislation, the banks that offered investments could not also offer commercial products such as loans for the purchase of a property and vice versa (https://www.federalreservehistory.org/essays/glass-steagall-act). in 1999 this limitation was removed. although this decision led to a period of economic boom, it was also the main cause of the financial crisis in the year 2008. because of this new freedom, the banking system used all available resources for investments that led to an imbalance in the real estate market. ii. cartography of the subconscious (sigmund freud, karl marx). this paradigm, "mapping the subconscious" is a vague one. to this day we cannot declare the human mind to be 'understood' or 'discerned'. many aspects of the human mind remain undiscovered or unexplained. this realm, which exists but is inaccessible to man in a conscious manner, is called the subconscious. the father of modern psychology and psychiatry, sigmund freud, himself identified several forms of the mental economy. in his 1900 book, the interpretation of dreams, freud presents the topographical model of the mind and mentions the existence of an economic structure of the mind. in the aforementioned book, freud divides the human mind into 3 regions, subconscious, pre-conscious and conscious. through the subconscious structure (freud, p.613), freud presents a part of the mind where there are certain desires and drives considered atypical but which cannot be fully understood. this region of the mind it represents one of the two main objects of our study, namely, the subconscious. this force which conceals the totality of the initial intensities leading to conscious actions is still unknown to man. freud actually tries to propose the following route of the subconscious space. the conscious is only the sensory apparatus that perceives the external stimulus and influences the material world, prethe conscious is the censorship barrier (freud, p.616) that differentiates the impulses that have an effect on the subconscious topography. the subconscious is where the self is born. this possibility is observed in artists who rather present the artistic process as an unconscious or subconscious process (freud, p.613). thus, the subconscious finally acquires a tangible form. a first economic structure presented by freud is that of matter and dream. according to freud's ideas, matter is for dreams the equivalent of an investor for an entrepreneur (freud, p.561). for an entrepreneur to be able to start a business, he will need one or more investors. in some cases, the entrepreneur is also the sole investor. in other situations, one investor will sponsor several future entrepreneurs or several investors will contribute to a single business. https://www.federalreservehistory.org/essays/glass-steagall-act the spiritual connection between the cartography of the human subconscious and the structures of neoliberal theology 294 freud observed a connection between the material conditions of the psychoanalytic subject and dreams to it, the subconscious processes that we cannot understand concretely. the third element introduced by freud is quantity. quantity for freud is actually the level of intensity of experience and how the subconscious processes this quantity. if the physical experience is strong enough, it will become the central point of a dream, a series of dreams, or, because of insufficient intensity of an experience, it will become a secondary point of the dream. so, we see a direct connection between our desires, ideas, dreams and the material world. these elements of the material world that we perceive through our senses, through consciousness thus become parts of the subconscious relief. freud describes this investment of libidinal energy by the terms catechesis and anticatechesis. the influence of the material world manifests itself between these two actions of investing interest in certain objects, people or concepts or not. another economic form of the mind conceived by freud is that of excitations. in his 1920 book, beyond the pleasure principle, freud proposes an economic form whose capital is vivacity. through thanatos, the drive to destroy or self-destruction of the psychoanalytic subject, there is an increase in the level of liveliness, while eros, the pleasure drive of the psychoanalytic subject, decreases the level of liveliness (freud, 1920, p.3). through this simplified economic form, freud suggests a desire of all living things to return to their inorganic form (freud 1920, p.21). this economy of ecstasy, in a subconscious way, leads us to certain painful starts or to the repetition of some traumas through actions of a symbolic nature. we repeat these actions in order to acquire an active role in the traumatic scenario, because in this way we acquire a level of control (freud 1920, p.29). these two economic forms of the human psyche are factors that shape the subconscious. as such, the relief of the real but invisible self is modified by the economy of vivacity and by the economy of consciousness-processed experiences. while the dream-matter economy is direct, that of vividness is an internal one based on the subject's experience. these two economic forms of the human psyche are comparable to international trade and national trade respectively. however, freud was not the first thinker to observe and hypothesize the connection between mental and material space. another thinker who intuited and analysed the mind-matter relationship is karl marx. although karl marx's ideas were demonized due to the failure of the soviet union, his critique of the capitalist system remains not only the most coherent, but also the most comprehensive to this day. for marx, capitalist society is defined by the possession of goods, more precisely, by the accumulation of a "heap of goods" (marx, p.27). this description is correct, the main characteristic of a capitalist, consumer society is the accumulation of many goods, this becoming an incipient form of theology. these goods are not simply possessions. these have various metaphysical, moral, social and aesthetic implications (marx, p.27). the three aspects of a psychoanalytic nature presented by marx that are relevant to our discussion are the materialist dialectic, alienation, and fetishization of possessions. materialist dialectic is a modified form of hegelian dialectic. initially, the preliminary work was done by ludwig feuerbach (https://www.marxists.org/romana/dictionar/f/ https://www.marxists.org/romana/dictionar/f/%20feuerbach_ludwig.htm albert camil rath-boșca 295 feuerbach_ludwig.htm). from feuerbach's perspective, man becomes the centre of philosophy again, not the spirit that studies itself through material forms. marx modified the concept of materialist dialectics. human consciousness is formed by its interaction with matter and other human consciousnesses. i specified a first characteristic of the subconscious, namely, that it is the real self but hidden and formed by the material world. for marx and engels, the dialectic does not start from the top down but from "earth to heaven" (john rees, p.60). there is no subconscious/conscious separation in his work, but there are "spiritual" effects of the material world. marx starts from the "species-being" dialectic (karl marx, pp.127-128). through this dialectic, each species certain inherent characteristics can be attributed to it. for man, the inherent characteristic is work. the human species works beyond its basic needs. we want certain kinds of clothes, certain tools used for work, certain new goods that do not satisfy basic needs but acquire social value through their possession and use. alienation is a phenomenon that begins with the birth of trade in the ancient world. from the moment two goods have a pecuniary value, as such, they can be exchanged through currency or barter, there is a separation between the work done to obtain a good and the person who worked to create this good (karl marx, p.51-53). the alienation of goods is a necessary process of modern civilization. contemporary societies can only exist on the basis of complex and well-organized networks of trade and transport. however, marx views labour power as a good in itself that the worker exchanges for money (karl marx, p.402). through this process of exchange between the labour power of the proletarian and the capitalist, man feels useless. work being the essential characteristic of man, he cannot but feel deprived of "spirit" (hegel, p. 256-257) the fruit of labour, the goods created by the worker, become separated by the author. in some cases, an ordinary worker would not be able to afford the products that come out of the factory where he works. this distance between people and the fruit of their work, the product of human nature, is heart-breaking. the third psychological aspect derived from marx's writings is the fetishization of goods. the fetishization of goods is rather a pathology of early economists, such as ricardo or smith (karl marx, pp.51-53), who considered that goods have an intrinsic value (adam smith, p.51). for marx, goods have a strictly social function and value. through the evolution of trade, goods also acquire a social value beyond that obtained through the work done to obtain it or through the rarity of the raw material (karl marx, p.223). for example, a branded shirt will be worth much more than a generic one bought at a thrift store. with this purchase, the man is not buying a shirt, but the guarantee of quality and the social value of this company. this is the manifestation of commodity fetishism from the consumer's perspective. through these acquisitions, the proletarian wants to copy the capitalist and his erroneous consciousness (karl marx, p.217). for marx, consciousness is man himself expressing himself through material actions, he does not in any way develop a differentiation between subconscious and conscious processes. however, marx noticed before freud the clear connection between the material world and the inner world in which man lives as a subject divided between the subconscious and the conscious. https://www.marxists.org/romana/dictionar/f/%20feuerbach_ludwig.htm the spiritual connection between the cartography of the human subconscious and the structures of neoliberal theology 296 the difference between freud and marx is of course the political element. because of the separation of the proletariat from the means of production and because of the financial surplus produced by labour, it becomes alienated and obsessed with improving its financial and social condition. by superimposing the political and psychoanalytic conceptions of marx on the freudian subconscious structure we arrive at a new relief of the subconscious. the self is born in the subconscious. this self is formed through consciousness by external stimuli. these external factors are either material in nature or the expression of consciousness through the actions of other people. through other consciousnesses, the material world and the goods that make up this world are modified to facilitate human life or to generate a profit. the progress of material standards comes with new psychological problems such as the alienation or fetishization of goods. these problems are reflected not only in political or economic structures, but also in the formation of the self and in the economic equations that take place in the human subconscious, whether we are talking about the economy of dreams or the economy of ecstasy. we can therefore call the subconscious as the real but hidden self, a series of exchanges between impulses balanced by eros and thanatos built by the material conditions of the psychoanalytic subject. man is hidden from himself, but he can discern his real person by analysing his material conditions and how they have built him. iii. neoliberal theology, between buddhist mythology and catholic oppression. now that we have clear concepts about what neoliberalism actually is and we have an obvious model about the human subconscious, we have one last step left to solve the problem proposed in the title, namely, how an economic and political category becomes a religious one. everyone knows nietzsche's famous phrase "god is dead and we are the doers", but we wonder how many really understand what he is trying to say. by the death of god, we really mean the disconnection of man from the religious structures that have held him in check and tyrannically controlled him and forced him to live under the empire of slave morality. nietzsche actually offers an optimistic proposition, namely that in the absence of an all-powerful god, man is free to decide what he wants to do. however, the essence of religion and remains steeped in the symbolic order of all persons, from the religiously devout to the convinced atheist. mircea eliade captures this dimension of reality in his book the sacred and the profane. all religions are, into a large extent, identical in formation, functions, hierarchies, conditions of membership and the goals proposed to followers. any religion, eliade says, begins with a myth that is a sacred reality (eliade, pp.95100). even farming is, in fact, a sacred activity in religious communities. the totality of the actions, whether undertaken by the eskimos, by the dacians or by the yoruba tribes, are imitations of religious rituals and myths. these myths are sacred periods that open the opportunity for the common, primitive and simple man to imitate the genesis provided by the heroes and gods of his religion. this structure, however, in the absence of a universalized divinity in small tribes or relatively homogeneous civilizations, remains present in the subconscious of humanity. in the albert camil rath-boșca 297 absence of god, man chose to create a new golden calf (exodus 32:1-4, al-a'raf, 148) to control the order he was accustomed to since the birth of the first bipedal primates. neoliberalism has become a cultural force through the development of state policies and by encouraging the market to create goods that may be pleasant or luxurious but are fundamentally useless to human life. we can live without 120 cm tvs. but we cannot live without water and food. of course, the usual patterns emerge when we observe neoliberalism as an anthropologist would observe an early religion. the elements to be analysed, the roles that the participants of this new religion are the following: the supreme deity, messianic figures, saints, priests, non-practicing members, sinners and heretics. the supreme deity of neoliberalism is the capital. the totality of the devout members of the church worships profit, efficiency, and generally, the illusion or excess of wealth. messianic figures are today's rich people. anyone who owns huge amounts of capital is held up as an example to the populace, as a mythological hero. the totality of these figures has a messianic image but not a christian one, rather, these hooligans take the example of prince siddhartha, the founder of the buddhist religion. the prince siddhartha is the first person to attain enlightenment according to buddhist mythology. he became divine by finding the 8 divine paths. in the same way, the great capitalists have stories of the hardships they experienced before they discovered wealth or the noble path to nirvana. both elon musk and trump are perfect examples of this charade. in both cases they present their life before riches as hard and poor. in reality, trump started his businesses with a "small loan of a million dollars" (https://www.cnbc.com/2018/10/02/trumps-small-loan-fromhis-father-was-more-like-60point7-million-nyt.html) from his father. elon musk is the son of errol musk (https://www.businesstoday.in/technology/news/story/amid-elon-musks-constantdenial-his-father-details-4-day-visit-to-emerald-mine-with-billionaire-son380484-2023-0508), a man who owned an emerald mine in south africa, giving him the money and opportunity to develop whatever business he wanted. we see a certain level of cognitive dissonance in the case of neoliberal messianic figures. they want to be perceived as prince siddhartha who attained divinity through the noble paths but rather, they resemble the demigods of greek mythology. born in the right conjunctures to reach this greatness. of course, in this structure there are people who have extraordinary talent and have managed to reach this „materialistic enlightenment" through their own efforts and powers, but they benefited most of the time from the opportune moment and the necessary conditions for this becoming. the neoliberal saints they are of course the first capitalists of the 19th and 20th centuries. people like ford, rockefeller, vanderbilt, carnegie, etc. are considered models of these new messianic figures. again, the same cognitive dissonance existed at the birth of capitalism. most of these industrial magnates were the right people in the right place and committed illegalities or morally deplorable deeds in order to maintain their messianic status for their times. a good example of this falsehood present since the birth of capitalism is john d. rockefeller. he is the founder of the american company then called standard oil. through https://www.cnbc.com/2018/10/02/trumps-small-loan-from-his-father-was-more-like-60point7-million-nyt.html https://www.cnbc.com/2018/10/02/trumps-small-loan-from-his-father-was-more-like-60point7-million-nyt.html https://www.businesstoday.in/technology/news/story/amid-elon-musks-constant-denial-his-father-details-4-day-visit-to-emerald-mine-with-billionaire-son-380484-2023-05-08 https://www.businesstoday.in/technology/news/story/amid-elon-musks-constant-denial-his-father-details-4-day-visit-to-emerald-mine-with-billionaire-son-380484-2023-05-08 https://www.businesstoday.in/technology/news/story/amid-elon-musks-constant-denial-his-father-details-4-day-visit-to-emerald-mine-with-billionaire-son-380484-2023-05-08 the spiritual connection between the cartography of the human subconscious and the structures of neoliberal theology 298 her famous investigation journalist ida tarbell demonstrated the reality of the monopoly created by rockefeller. a first step towards the domination of the oil market undertaken by rockefeller was the founding of the southern improvement company. this company was really meant to spy and observe the entire market (tarbell, p.39). another purpose of this company is to secure a preferential price for standard oil. this hawkish attitude of rockefeller dome was his interaction with robert hanna, the holder of a small oil refineries. when he sought help from the southern improvement company, he encountered new difficulties. the company representative told both him and other small industrialists about the preferential price standard oil received for transporting gasoline (tarbell, p.40). the objective of these economic operations was actually to hinder and even bankrupt the competition. such tactics reduced the number of oil refineries in the state of cleveland from 26 to 6 (tarbell, p.47). he continued his mission of monopolizing the oil industry through similar tactics (tarbell, p.51) aided of course by his good friend, railroad magnate vanderbilt (tarbell, p.61). such unethical actions that resulted in the loss of hundreds or thousands of jobs and the creation of a monopoly, was stopped by the sherman antitrust act of 1890 and the case of united states v. standard oil in 1911 that led to the dissolution of the monopoly. as for the priesthood, the only people fit for such a role are politicians. regardless of the ideology that these politicians present to the public, they remain in the neoliberal paradigm theology. they can propose keynesian measures or even, god forbid, socialist measures, but all these measures must be in tune with the desires of the neoliberals. this truth is visible through the media assassination of politicians like bernie sanders or jeremy corbin. in both cases these people wanted to raise the wages of the countries' workers in which they were running for the presidency respectively, the role of prime minister of great britain and to create viable national health systems. the best example of such stringent policies to maintain neoliberal spiritual hegemony is the case of former australian prime minister gough whitlam, who refused certain compromises (https://jacobin.com/2020/07/gough-whitlam-dismissal-letters-john-kerraustralia). because of his refusal, and because he wanted trade relations with yugoslavia and australia's exit from the vietnam war, he resorted to using a forgotten ruse. through the governor-general of australia at the time, lord john kerr, (a position left over from the end of australia's colonial period, the person appointed to this position of sell the role of defending the interests of the british crown) decided to dismiss him. non-practicing members of the religion are ordinary people living in neoliberal economies. these people, although not devoted to religion per se, must practice in a rudimentary manner the rituals of labour exploitation as explained by marx through alienation. who are the sinners of neoliberalism? poor people. people who cannot achieve financial salvation are seen as lazy, incompetent, mediocre or in some cases malevolent by the neoliberal capitalist. one of the most barbaric myths of neoliberalism is meritocracy. if a man is poor, this man deserves his fate. neither neoliberal theology nor classical liberal ideology is equipped https://jacobin.com/2020/07/gough-whitlam-dismissal-letters-john-kerr-australia https://jacobin.com/2020/07/gough-whitlam-dismissal-letters-john-kerr-australia albert camil rath-boșca 299 with the empathy or dialectical understanding necessary to perceive the material and social conditions that create poverty. the heretics of neoliberalism are those economic subjects who are enough insightful to understand these religious/ideological mechanisms in part. these people who organize themselves in ngos, in cooperatives or choose to live an isolated and solitary life. these people consciously refuse to participate in neoliberal religion. iv. digitization, the lutheran revolution of neoliberal theology. what do we mean by digitization? this term has haunted romanian media and politics ever since the government of former prime minister dacian cioloș (https://www.romaniaactualitati.ro/stiri/romania/dacian-ciolos-romania-urmareste-digitalizarea-administratieipublice-id87506.html). for 8 years, our country has been trying to get in line with other european countries and digitize the thick bureaucracy of the romanian state. of course, this is a monumental task for any government but, it is no excuse for the countless failures of governments in the last 8 years in terms of digitization (https://www.europafm.ro/eseculdigitalizarii-statul-roman-cosmin-savu/). although digitization has acquired the role of a sublime object (zizek, pp.12-15) of the romanian media, we must broaden the meaning of the notion. in 2021, the telekom company started a study by which it estimates that 97% of romanians have a smartphone (https://www.zf.ro/business-hi-tech/telekom-romania-97-dintre-romani-utilizazeasmartphone-peste-40-19968784). this figure indicates that the vast majority of the population is partially digitized. every citizen has at hand a device that allows him to access the internet. this state of affairs is a double covenant. on the one hand, access to the internet has become essential to everyday life, but on the other hand, this dependence on new technologies alarmingly increases not only human isolation but also creates new layer of alienation between the worker and the product of his labour. no matter what we search on the internet, each result accessed from the list provided by the search engine has become a new product in the form of data generated and sent to the internet operator and the network used to find the object of the search. this product will in turn be invisible to the manufacturer. this virtual data they are sent to big digital companies and processed to later become the fuel for new forms of commodity fetishization. desire and necessity become indistinguishable under such conditions. hunger is a state of fact strictly related to the material world of the subject, lust, on the other hand, is a cultural form of desires. there is a level of mediation between the initial hunger drive and food choice. the effect of neoliberalism through digital channels is the confusion of these two signals and channels of the subconscious economy. what the what we eat is inevitably influenced by advertisements, propaganda. in the digital age advertisements are chosen automatically based on data collected through internet usage. these ads will not suggest nutritionally rich food. most likely, they will recommend deeply unhealthy food. this is neoliberal theology in action. the common man is a resource, a factory and a consumer. in the absence of digitization, such new forms of oppression would not be possible. of course, standard practices of neoliberalism such as the privatization of some state institutions https://www.romania-actualitati.ro/stiri/romania/dacian-ciolos-romania-urmareste-digitalizarea-administratiei-publice-id87506.html https://www.romania-actualitati.ro/stiri/romania/dacian-ciolos-romania-urmareste-digitalizarea-administratiei-publice-id87506.html https://www.romania-actualitati.ro/stiri/romania/dacian-ciolos-romania-urmareste-digitalizarea-administratiei-publice-id87506.html https://www.europafm.ro/esecul-digitalizarii-statul-roman-cosmin-savu/ https://www.europafm.ro/esecul-digitalizarii-statul-roman-cosmin-savu/ https://www.zf.ro/business-hi-tech/telekom-romania-97-dintre-romani-utilizeaza-smartphone-peste-40-19968784 https://www.zf.ro/business-hi-tech/telekom-romania-97-dintre-romani-utilizeaza-smartphone-peste-40-19968784 the spiritual connection between the cartography of the human subconscious and the structures of neoliberal theology 300 would continue but not at this level. digitization among the global population has accelerated these problems. as for romania's political class, about the neoliberal priesthood, we observe a bizarre situation. the romanian politician was educated by communist politicians who, in turn, were educated in a tyrannical ideology. the same politicians from the communist period together with their teachers have become the neoliberal priests of the romanian rite. this "priesthood" led to the birth of a period of economic wilderness between the years 1989-1991 where many millionaires appeared seemingly overnight (https://www.digi24.ro/special/campaniidigi24/1990-anul-0/1990-anul-0-economia-dupa-revolutie-reforme-sabotate-ideologic440864). under the yoke of this new double covenant, the romanian politician is caught between soviet education and the neoliberal market. for almost 35 years, these romanian political actors have not been able to develop a clear identity of political parties or internal policies. they are really deficient priests of neoliberal theology, not being able to apply brute theory skilfully enough to maintain the illusion of safety. this situation actually creates a high level of mistrust for foreign investors (https://www.euronews.ro/articole/romania-ultima-in-preferintele-investitorilor-strainiexpertii-spun-ca-exista-spe) or for the european union (https://www.profit.ro/stiri/economie/romania-cel-mai-sever-declin-al-productei-de-serviciidin-uniunea-europeana-21551758). due to the lack of coherence of these thugs who will themselves as the archangels of neoliberalism, the country cannot have the public services typical of the keynesian or socialist economy, nor the neoliberal illusion of wealth. the common man, again, is being forgotten by neoliberal politics, economics and theology. digitization atglobal level is a lutheran revolution of neoliberal theology. if in the past there were some reasonable limits on the free market that guaranteed the safety of the consumer or customer, the internet manages to avoid such measures with great ease. the digital space presents a new market that has relatively low entry costs and infinite potential for profits. what are nfts if not wildly expensive products with no practical value whatsoever. such products are revolutionary for neoliberal religion. the effort is almost nonexistent, the potential profit is infinite. conclusions angrboda is the mother of all monsters in norse mythology. this image of neoliberalism as its last generation is ideal, in my opinion. this last growth was strong enough to give birth to a new secular religion of consumption and production in the absence of any clearly defined ethical boundaries that have man at the centre. digitalization is a new step in this religion of spiritual cannibalism that began with hayek, knight, milton and their other ideological companions. but is it worth asking what we can do in such conditions? an optimal solution would be to return to certain keynesian measures, but such solutions are far too idealistic for the global decomposition of carried away by the new religion. https://www.digi24.ro/special/campanii-digi24/1990-anul-0/1990-anul-0-economia-dupa-revolutie-reforme-sabotate-ideologic-440864 https://www.digi24.ro/special/campanii-digi24/1990-anul-0/1990-anul-0-economia-dupa-revolutie-reforme-sabotate-ideologic-440864 https://www.digi24.ro/special/campanii-digi24/1990-anul-0/1990-anul-0-economia-dupa-revolutie-reforme-sabotate-ideologic-440864 https://www.euronews.ro/articole/romania-ultima-in-preferintele-investitorilor-straini-expertii-spun-ca-exista-spe https://www.euronews.ro/articole/romania-ultima-in-preferintele-investitorilor-straini-expertii-spun-ca-exista-spe https://www.profit.ro/stiri/economie/romania-cel-mai-sever-declin-al-productiei-de-servicii-din-uniunea-europeana-21551758 https://www.profit.ro/stiri/economie/romania-cel-mai-sever-declin-al-productiei-de-servicii-din-uniunea-europeana-21551758 albert camil rath-boșca 301 such a return is impossible without the adoption of "tyrannical" measures to return to a balance between the freedom of economic markets and the welfare of the population. the optimal solution would be to fight for our rights to be human trough political means such as voting, protesting, organising in” heretic cells”, and most of all, search for our lost humanity trough community. as kids would have, we need to go outside to” touch grass” and meet people in order to form community references 1. frank hyneman knight, the ethics of competition, published by freeport printing, new york, usa, 1969 2. friedrich august hayek, unemployment and monetary policy, published by the cato institute, san francisco, usa, 1980 3. ida tarbell, the history of the standard oil company, published by belt publishing, cleveland, usa 2018 4. karl marx, capital volume 1, published digitally by marxist.org 5. mircea eliade, the sacred and the profane, published by harcourt, new york, usa, 1959 6. sigmund freud, beyond the pleasure principle, published by ww norton & company, new york, usa, 1975 7. sigmund freud, the standard edition of the complete psychological works of sigmund freud, published by hogart press, london, united kingdom, 1971 8. slavoj zizek, the sublime object of ideology, published by verso books, london, uk, 2008. 9. https://jacobin.com/2020/07/gough-whitlam-dismissal-letters-john-kerr-australia 10. https://www.businesstoday.in/technology/news/story/amid-elon-musks-constant-denialhis-father-details-4-day-visit-to-emerald-mine-with-billionaire-son380484-2023-05-08 11. https://www.cnbc.com/2018/10/02/trumps-small-loan-from-his-father-was-more-like60point7-million-nyt.html 12. https://www.digi24.ro/special/campanii-digi24/1990-anul-0/1990-anul-0-economia-duparevolutie-reforme-sabotate-ideologic-440864 13. https://www.euronews.ro/articole/romania-ultima-in-preferintele-investitorilor-strainiexpertii-spun-ca-exista-spe 14. https://www.europafm.ro/esecul-digitalizarii-statul-roman-cosmin-savu/ 15. https://www.federalreservehistory.org/essays/glass-steagall-act 16. https://www.marxists.org/romana/dictionar/f/feuerbach_ludwig.htm 17. https://www.profit.ro/stiri/economie/romania-cel-mai-sever-declin-al-productei-deservicii-din-uniunea-europeana-21551758 18. https://www.romania-actualitati.ro/stiri/romania/dacian-ciolos-romania-urmarestedigitalizarea-administratiei-publice-id87506.html 19. https://www.youtube.com/watch?v=w6h6tvvuggo&ab_channel=politicsjoe 20. https://www.zf.ro/business-hi-tech/telekom-romania-97-dintre-romani-utilizazeasmartphone-peste-40-19968784 https://jacobin.com/2020/07/gough-whitlam-dismissal-letters-john-kerr-australia https://www.businesstoday.in/technology/news/story/amid-elon-musks-constant-denial-his-father-details-4-day-visit-to-emerald-mine-with-billionaire-son-380484-2023-05-08 https://www.businesstoday.in/technology/news/story/amid-elon-musks-constant-denial-his-father-details-4-day-visit-to-emerald-mine-with-billionaire-son-380484-2023-05-08 https://www.cnbc.com/2018/10/02/trumps-small-loan-from-his-father-was-more-like-60point7-million-nyt.html https://www.cnbc.com/2018/10/02/trumps-small-loan-from-his-father-was-more-like-60point7-million-nyt.html https://www.digi24.ro/special/campanii-digi24/1990-anul-0/1990-anul-0-economia-dupa-revolutie-reforme-sabotate-ideologic-440864 https://www.digi24.ro/special/campanii-digi24/1990-anul-0/1990-anul-0-economia-dupa-revolutie-reforme-sabotate-ideologic-440864 https://www.euronews.ro/articole/romania-ultima-in-preferintele-investitorilor-straini-expertii-spun-ca-exista-spe https://www.euronews.ro/articole/romania-ultima-in-preferintele-investitorilor-straini-expertii-spun-ca-exista-spe https://www.europafm.ro/esecul-digitalizarii-statul-roman-cosmin-savu/ https://www.federalreservehistory.org/essays/glass-steagall-act https://www.marxists.org/romana/dictionar/f/feuerbach_ludwig.htm https://www.profit.ro/stiri/economie/romania-cel-mai-sever-declin-al-productiei-de-servicii-din-uniunea-europeana-21551758 https://www.profit.ro/stiri/economie/romania-cel-mai-sever-declin-al-productiei-de-servicii-din-uniunea-europeana-21551758 https://www.romania-actualitati.ro/stiri/romania/dacian-ciolos-romania-urmareste-digitalizarea-administratiei-publice-id87506.html https://www.romania-actualitati.ro/stiri/romania/dacian-ciolos-romania-urmareste-digitalizarea-administratiei-publice-id87506.html https://www.youtube.com/watch?v=w6h6tvvuggo&ab_channel=politicsjoe https://www.zf.ro/business-hi-tech/telekom-romania-97-dintre-romani-utilizeaza-smartphone-peste-40-19968784 https://www.zf.ro/business-hi-tech/telekom-romania-97-dintre-romani-utilizeaza-smartphone-peste-40-19968784 agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 18, no. 2 (2024), pp. 185-201 185 effectiveness of health coaching ai applications for non-communicable diseases’ management: impact on behavior change n. mikava nino mikava business and technology university, georgia https://orcid.org/0000-0002-9567-3958, e-mail: nino.mikava@btu.edu.ge abstract: the rising prevalence of noncommunicable diseases (ncds) such as diabetes, cardiovascular disease, and chronic respiratory illnesses underscores the urgent need for effective management strategies. this study investigates the effectiveness of health coaching applications enabled by artificial intelligence (ai) in promoting behavior change among individuals having ncds. utilizing a mixed-methods approach, the research evaluates user engagement, adherence to treatment regimens, and the impact of application features including personalized interventions, real-time feedback, and community support. data was collected through surveys distributed among ncd patients using various health coaching applications. preliminary findings indicate that personalized health coaching significantly enhances user adherence and engagement, with specific features being instrumental in driving positive health outcomes. additionally, barriers to effective use, such as data privacy concerns and technology access, were identified. this research contributes to the understanding of how ai applications can optimize ncd management and offers insights for developers and healthcare providers to enhance the usability and effectiveness of these technologies. ultimately, findings aim to inform the design of future health coaching applications, ensuring they better meet the needs of patients managing chronic health conditions. keywords: ai health coaching, noncommunicable disease (ncd) management, behavior change in ncds, health coaching for behavior change, ai health applications for ncds. introduction non-communicable diseases (ncds) such as diabetes, cardiovascular diseases, chronic respiratory diseases, and cancer are leading contributors to global morbidity and mortality. according to the world health organization (who), ncds account for over 70% of deaths worldwide, resulting in significant healthcare burdens, economic loss and diminished quality of life for affected individuals (who, 2022). of these, 15 million are premature deaths occurring in 30-70 years’ age range, disproportionately affecting lowand middle-income countries (lmics). moreover, to review economic impact of ncds on healthcare systems, ncds impose significant economic burden on healthcare systems, accounting for up to 16.5% of healthcare expenditure in some countries. the financial impact is particularly severe in lmics, where resources are limited. household impoverishment due to out-of-pocket payments for ncd management ranges from 6% to 84% of families affected, especially in lmics (jaspers et al., https://orcid.org/0000-0002-9567-3958 mailto:nino.mikava@btu.edu.ge effectiveness of health coaching ai applications for noncommunicable diseases’ management: impact on behavior change 186 2015). the global economic burden of ncds is expected to reach $47 trillion between 2011 and 2030, resulting from lost productivity and increased healthcare spending, according to a report from the world economic forum (wef) and the harvard school of public health (muka et al., 2015). a study published in the american journal of preventive medicine reported that ncds accounted for 75% of total healthcare expenditure in the united states, translating to approximately $2.7 trillion annually (cdc, 2020). ncds represent a significant and growing challenge, responsible for the majority of global deaths and substantial economic costs, particularly in lmics. prevention and equitable healthcare policies are essential in mitigating this problem globally. the rising prevalence of ncds is largely attributed to factors such as unhealthy diets, physical inactivity, tobacco use, and harmful use of alcohol. as the global population ages and the incidence of ncds continues to escalate, innovative and efficient management strategies are urgently needed. nevertheless, 80% of premature heart disease, strokes, and type 2 diabetes cases, and 40% of cancers, could be prevented through lifestyle changes such as improved diet, reduced tobacco and alcohol use, and increased physical activity. moreover, cardiovascular diseases, diabetes and chronic pulmonary disease, can be prevented at a population level by promoting healthy behaviors such as reducing tobacco use, increasing physical activity, and improving diets (ye, q., khan et al., 2018). policies that create supportive environments are critical for fostering such changes. amid these pressing challenges, technology is playing an increasingly crucial role in health management. to review market valuation and growth, the global digital health market was valued at approximately $140 billion in 2022 and is expected to reach around $430 billion by 2028. this data is reported by various industry research firms and market analysis reports (grand view research. (2023). digital health market size, share & trends analysis report by technology, by application, by region, and segment forecasts, 2023 – 2030). it is estimated, that globally, around 50 million people actively use health and wellness apps, including health coaching (statista. (2023). number of mobile health app users worldwide from 2017 to 2025). about 20-25% of u.s. smartphone users have downloaded health coaching apps (pew research center. (2021). mobile technology and home broadband 2021). the transtheoretical model identifies stages of readiness for change (precontemplation, contemplation, preparation, action, and maintenance). interventions tailored to an individual's stage of readiness improve compliance with lifestyle changes and long-term disease management (ng, n., eriksson et al., 2021). introduction of digital health solutions, particularly health coaching applications powered by artificial intelligence (ai), has opened new opportunities for individuals to manage their health conditions proactively. ai technologies can analyze vast amounts of health data, enabling personalized health interventions, real-time monitoring, and sustained engagement with users. digital health tools incorporating behavior change techniques such as social support, goal setting, feedback, and monitoring are effective for managing ncds. these techniques have demonstrated improved physical activity, diet quality, and medication adherence by offering tailored recommendations and support, which can empower individuals to adopt healthier behaviors and improve adherence to treatment regimens (jakob et al., 2022). nino mikava 187 ai health coaching applications, such as noom, omada health, and mysugr, are specifically tailored to address the needs of patients with ncds. by leveraging machine learning algorithms, these applications facilitate personalized feedback, goal-setting, and behavioral nudges, which are intended to promote long-term behavior change (chokshi & farley, 2014). preliminary evidence suggests that such technology-driven interventions can enhance user engagement and substantially improve health outcomes. despite the emerging literature on this topic, there is a lack of comprehensive understanding regarding the specific features that drive user engagement and adherence in these applications. thus, presented study seeks to address this gap by analyzing user experiences and expectations. the objective of this research is to assess the effectiveness of health coaching ai applications in promoting behavior change among individuals with ncds and to explore barriers to effective use of health coaching applications from the perspective of patients. in alignment with the main objective, the following research questions were identified: how effective are ai-powered applications in managing specific non-communicable diseases, such as diabetes, hypertension, and cardiovascular diseases, compared to traditional interventions? what measurable health outcomes (e.g., hba1c reduction, blood pressure control, weight loss) have been achieved through ai-driven coaching? what is customer experience with regard to ai-powered health coaching applications in scope of user engagement, satisfaction and adherence to health interventions over time? by addressing these research questions, this study aims to provide valuable insights for developers, clinicians, and policymakers to enhance the design and implementation of ai health coaching applications, ultimately improving patient management of noncommunicable diseases. methodology presented study employs a mixed-methods approach, with combination of narrative literature review and quantitative survey, to evaluate the effectiveness of health coaching ai applications in promoting behavior change among individuals having noncommunicable diseases (ncds). at the first stage, a comprehensive narrative literature review was conducted to identify existing research on the effectiveness of ai health coaching applications in the management of ncds. for this purpose, peer-reviewed articles, clinical studies, and relevant grey literature published between 2000 and 2023 were sourced from databases including pubmed, scopus, web of science, and google scholar. search keywords included "ai health coaching," "behavior change," "noncommunicable diseases," and "management applications." studies included in the review focused primarily on ai applications that provide health coaching for ncds and assessed their impact on patient engagement, adherence to treatment, and health outcomes. overall, 120 scientific articles were found and 80 were counted to be relevant for research purpose. key findings, including application features, user engagement strategies, challenges, and healthcare outcomes, were extracted and synthesized. this synthesis laid the groundwork for understanding effectiveness of health coaching applications and guided the survey design for quantitative aspect of the research. effectiveness of health coaching ai applications for noncommunicable diseases’ management: impact on behavior change 188 at the second stage, a structured survey was developed based on major findings from the literature review. the survey aimed to capture patient demographics, awareness and usage of health coaching applications, perceived challenges, and expectations from these applications. the questionnaire consisted of five sections: demographics and health information: including age, gender, type of ncd diagnosis, duration of managing ncds, and use of mobile devices; awareness and use of health coaching applications: assessing awareness, familiarity with specific applications, and usage patterns; challenges and barriers: identifying obstacles faced when using health coaching applications; needs and expectations: exploring features desired in health coaching applications; feedback and future improvements: collecting open-ended responses on gaps and desired enhancements. table 1. structure of the questionnaire prior to launching, the survey was pilot-tested with a small group of ncd patients to ensure clarity and relevance of questions. feedback was incorporated to refine the questionnaire. the survey was distributed via online platforms including social media groups, patient forums, and healthcare community websites, targeting individuals diagnosed with ncds. participation was voluntary, and respondents provided informed consent prior to completing the survey. responses were collected over eight-week period, utilizing an online survey tool (google forms) to facilitate data entry and management. overall, 289 individuals filled out survey questionnaire. section survey focus number of questions examples 1: demographics and health information basic demographics and ncd management information. 5 age, gender, type of ncd, duration of management, smartphone usage. 2: awareness and use of applications awareness, usage patterns, and barriers to adopting health coaching apps. 5 awareness of apps, app usage frequency, reasons for not using apps. 3: challenges and barriers challenges in using apps and barriers to regular usage. 2 difficulties in app usage (e.g., cost, motivation, personalization), reasons for irregular use. 4: needs and expectations desired features and engagement strategies for health coaching applications. 3 preferred features (e.g., goal tracking, reminders, peer support), engagement suggestions. 5: feedback and future improvements gaps in existing apps and suggestions for improvements. 2 biggest gaps (e.g., cost, lack of personalization), recommendations for app enhancements. nino mikava 189 descriptive statistics were calculated to summarize the demographics, awareness, utilization patterns, and responses to closed-ended survey questions. responses to open-ended questions were analyzed thematically with content analysis, to identify common themes, barriers, and suggestions for improving health coaching applications. this qualitative analysis provided insights into user experiences and expectations, complementing the quantitative data. all participants provided informed consent, ensuring anonymity and confidentiality of the responses. limitations of the study include self-selection bias, as participants who are more engaged with technology may have been more likely to respond. additionally, the crosssectional nature of the survey limits the ability to draw conclusions about causality in behavior change resulting from the use of health coaching applications. ai-based health coaching applications are emerging as impactful tools for fostering behavior change, particularly in managing chronic conditions. however, they also present barriers that may hinder their utilization. below is a narrative literature review synthesizing evidence on their effectiveness and challenges. narrative literature review targeted on the main research questions of the study demonstrates effectiveness of ai-based health coaching applications in behavior modification, chronic disease management and weight loss. these solutions are increasingly recognized for their scalability and potential to bridge gaps in preventive healthcare. digital health tools incorporating behavior change techniques such as social support, goal setting, feedback, and monitoring are effective for managing ncds. these techniques have demonstrated improved physical activity, diet quality, and medication adherence (mair et al., 2023). the effectiveness of ai applications in managing ncds can be attributed to several key features. first one to review is predictive analytics: ai systems leverage predictive analytics to forecast health risks and recommend timely interventions. for instance, livongo employs ai to analyze user data and predict potential health issues before they escalate, effectively improving management strategies for chronic conditions (bennet et al., 2018). another aspect is behavioral nudges: applications such as woebot deliver personalized behavioral nudges through engaging chat interfaces, helping users build healthier habits through evidence-based cognitive behavioral strategies. these nudges enhance motivation and adherence (fitzpatrick et al., 2017). still another feature is community support: ai-enhanced applications facilitate community building, allowing users to connect with peers facing similar health challenges. research indicates that support features within apps can lead to lower dropout rates and higher commitment to health goals (smith et al., 2022). when assessing effectiveness of ai health coaching regarding ncds management, impact of personalization on user engagement and adherence should be noted. personalized health interventions powered by ai technologies are shown to significantly boost user engagement and adherence rates among patients with ncds. to illustrate, health coaching applications like omada health provide customized content that aligns closely with individual user needs, enhancing relevance and satisfaction. studies indicate that personalized interventions yield a 2-3 times higher adherence rate compared to standardized approaches (topol, 2019). furthermore, real-time feedback and dynamic adjustments is another important effectiveness of health coaching ai applications for noncommunicable diseases’ management: impact on behavior change 190 aspectai can continuously analyze user data, allowing health interventions to adapt in real time. for example, a weight management program can adjust dietary recommendations based on user responses, maintaining engagement throughout the program duration (garcia et al., 2023). moreover, applications such as omada health provide continuous monitoring to deliver immediate feedback, which is crucial for reinforcing positive behavior change. users receive real-time insights based on their daily activities and health metrics, resulting in improved engagement and adherence (morawski et al., 2018; nguyen et al., 2023). many ai health apps, such as fitbit, incorporate gamification techniques that motivate users through rewards and challenges. research demonstrates that gamified strategies can significantly enhance user engagement and lead to sustained behavior change (lunde et al., 2018). ai health coaching has shown success in empowering patients with chronic diseases to adopt healthier behaviors and improve adherence to care plans. to illustrate impact on diabetes management, ai health coaching applications have effectively improved glycemic control in individuals with type 2 diabetes(okoye v.n. 2022). in this case, personalized interventions should be underlined: ai algorithms in applications like noom utilize user data to create tailored weight management programs, resulting in increased user adherence and significant weight loss outcomes in clinical trials (han et al., 2021). similarly, diabetes management applications like mysugr provide personalized dietary recommendations, leading to notable reductions in hba1c levels (chomutare et al., 2018; smith et al., 2022). likewise, applications incorporating self-management tools and coaching reduce cardiovascular risk factors, such as cholesterol levels and blood pressure, through targeted interventions and patient education (vale et al., 2003). furthermore, a meta-analysis revealed significant reductions in hba1c levels (mean difference of -0.17%) when health coaching was combined with structured interventions (radwan et al., 2019). in another study, digital health coaching interventions have shown significant reductions in hba1c levels. more specifically, in a 12-week program, high-risk participants (hba1c >9%) experienced a 2.28-point reduction in hba1c, demonstrating the impact of patient-centered coaching on diabetes management (martin et al., 2020). with regard to patient engagement and long-term benefits, a tailored mobile coaching system in a randomized controlled trial demonstrated significant hba1c reductions over 12 months in engaged participants, with a mean decrease of 0.92% compared to 0.33% in less engaged users (lee et al., 2021). similarly, virtual health coaching through ai tailored to individual needs has been effective in type 2 diabetes patients in improving physical activity and oral health behavior (cinar, 2015). digital tools integrating behavioral coaching reduce diabetes-related stress. studies indicate improved physical and mental health scores, particularly for participants with elevated baseline distress (martin et al., 2020). moreover, my diabetes coach program, which uses an ai conversational agent named laura, was effective in improving health-related quality of life over 12 months. while hba1c reductions were modest, the program demonstrated potential for scaling personalized interventions (gong et al., 2020). moreover, ai health coaching demonstrated effectiveness in hypertension and cardiovascular diseases management. applications incorporating ai-driven behavior change models have significantly improved blood pressure and cardiovascular health metrics by nino mikava 191 encouraging medication adherence and lifestyle changes such as dietary improvements and increased physical activity (baglivo et al., 2023). furthermore, health coaching that integrates ai-enabled tracking systems has been shown to effectively manage cardiovascular risk factors by leveraging patient behavior change models (ng et al., 2021). behavior change is integral to managing ncds, from individual-level interventions based on readiness and self-efficacy to population-level strategies facilitated by policy and technology. evidence supports the use of tailored, theory-based interventions for effective prevention and management of these diseases. according to reviewed literature sources, aisupported health coaching models help patients manage chronic diseases by empowering them to adhere to care management programs and adopt healthier behaviors (sqalli & al-thani, 2019). a pilot randomized controlled trial demonstrated improved engagement and lifestyle changes with ai-based sleep coaching systems using domain-specific question-answering algorithms (bojić et al., 2023). moreover, bccbehavior change communication leveraging theories like social cognitive theory and health belief model, effectively motivate individuals to adopt healthier behaviors and reduce ncd risk. it also facilitates communitylevel awareness and peer influence to reinforce positive habits (nancy & dongre, 2021). the transtheoretical model identifies stages of readiness for change (precontemplation, contemplation, preparation, action, and maintenance). interventions tailored to an individual's stage of readiness improve compliance with lifestyle changes and long-term disease management (zimmerman et al., 2000). furthermore, mobile applications paired with human coaching demonstrate long-term effectiveness in weight loss and sleep quality improvements among patients with chronic diseases (baglivo et al., 2023). another impact that ai-coaching applications show is with regard to promoting physical activity and healthy lifestyles. to illustrate, these applications have significantly increased physical activity levels in participants over short and long durations, particularly in low socioeconomic groups (spelt et al., 2019). to review impact of health coaching ai applications on weight loss and lifestyle management a study on conversational ai coaching for weight loss found a 2.38% reduction in body weight among participants, along with increased healthy meal choices and user satisfaction (stein & brooks, 2017). the combination of ai and health coaching led to significant improvements in selfmanagement strategies, including exercise adherence and balanced diets, in patients with chronic conditions (kang et al., 2021). ai algorithms enable personalized feedback and monitoring. for instance, ai applications tailored to user behavior and health data (e.g., through apps like noom) empower patients to make sustainable lifestyle changes (sqalli & althani, 2019). to consider psychological and behavioral outcomes of ai health coaching utilization, applications incorporating motivational interviewing and cognitive-behavioral coaching techniques have been effective in reducing stress, improving mental well-being, and fostering sustainable behavior change (lungu et al., 2020). health coaching programs using ai have shown impact on enhanced psychological states, such as, self-efficacy and perceived competence, improving physical fitness and readiness for change (bezner et al., 2020). ai tools implementing cognitive-behavioral techniques have been effective in reducing perceived stress and improving mental well-being. effectiveness of health coaching ai applications for noncommunicable diseases’ management: impact on behavior change 192 it should be noted, that according to systematic review, digital coaching achieved glycemic control outcomes comparable to in-person coaching. hba1c reductions in digital coaching ranged from −0.32% to −0.66%, similar to traditional diabetes prevention programs (gershkowitz et al., 2020). however, there is a gap in scientific evidence base in this regard and there is a need for more research to understand better differences, with regard to, ai versus human health coaching effectiveness. ai-based health coaching applications are emerging as impactful tools for fostering behavior change, particularly in managing chronic conditions. however, they also present barriers that may hinder their utilization. one of the most significant barriers in this regard, is the digital divide. older adults, who are often the target audience for managing chronic diseases, face additional challenges in adopting ai applications due to lack of digital literacy or access to smartphones. access to smartphones and internet connectivity is a major barrier, particularly in low-income populations or rural areas (spelt et al., 2019). another challenge is sustainability of engagement. more specifically, behavioral changes often decline after cessation of coaching programs. long-term engagement remains a challenge, with studies highlighting the need for continuous support to maintain results (mcgloin et al., 2015). moreover, studies indicate that approximately 40-50% of users abandon health apps within the first three months, primarily due to perceived lack of novelty or engagement (liu et al., 2019; evans et al., 2023). furthermore, health behavior change is very complex and requires addressing diverse psychological and social factors, which many ai systems struggle to capture comprehensively (frates et al., 2011). data privacy and security concerns is the next challenge identified. concerns regarding the privacy and security of personal health information remain significant barriers to widespread adoption. many users report hesitancy in sharing their health data with applications due to privacy fears (shen et al., 2021). these concerns frighten and discourage some users from fully engaging with ai tools (klein et al., 2014). among the challenges concerning ai health coaching application utilization, cost and accessibility should be emphasized. high costs of some ai-based programs limit access, particularly for uninsured or low-income patients (azelton et al., 2021). for the purpose of the research, another topic of interest in the process of narrative literature review was cost saving from ai health coaching. it should be noted, that there is a gap and lack of strong evidence base to understand monetary effect of ai health coaching applications on ncds. however, effectiveness of health coaching generally (and not specifically for ai empowered health coaching applications) is verified to some extent. ai health coaching applications demonstrate reduction in healthcare costs and improvement of economic outcomes in ncd management in scope of reduced healthcare utilization, better chronic disease management, decreased hospital and emergency costs and reduced expenditures on complications. more specifically, a quasi-experimental study analyzing healthcare claims data found that health coaching participants experienced a significant reduction in outpatient and total healthcare expenditures. estimated monthly cost savings per participant were $412, highlighting the economic benefit of health coaching for high-risk individuals (jonk et al., 2015). a study evaluating telephone-based health coaching nino mikava 193 for patients with chronic conditions (e.g., diabetes, coronary artery disease) found it to be costeffective for diabetes management, with an incremental cost-effectiveness ratio (icer) of €20,000 per quality-adjusted life year (qaly), which is below commonly accepted thresholds for healthcare interventions (oksman et al., 2017). moreover, a randomized trial of health coaching participants showed reductions in hospital readmission rates and fewer emergency room visits. for example, a telephone coaching intervention led to a significant decrease in hospital expenditures by targeting patients with a high likelihood of future costs (lin et al., 2012). other simulation studies indicate that m-health apps combined with ai coaching reduce the likelihood of severe complications (e.g., kidney damage in diabetes), leading to savings in direct and indirect costs such as hospitalization and lost productivity (baglivo et al., 2023). moreover, the capiche study in australia examined the economic effects of largescale health coaching programs and found significant reductions in preventable hospitalizations and overall healthcare expenditures among patients with multiple chronic conditions (byrnes et al., 2012). furthermore, studies on productivity losses from ncds highlight that ai-driven interventions that improve disease management can reduce absenteeism and increase workforce participation. for instance, cardiovascular disease costs the australian economy $13.2 billion annually, much of which could be mitigated through scalable health interventions (chaker et al., 2015). results of quantitative research a total of 289 participants with non-communicable diseases (ncds) completed the survey. the majority of respondents (40%) were aged 46–60 years, followed by 31–45 years (25%), 61 and above (20–25%), and 18–30 years (10–15%). gender distribution was nearly equal, with 50% identifying as male and 50% as female, while less than 1% selected "other." the most commonly reported ncds were diabetes (50%), hypertension (40%), and cardiovascular diseases (30%). chronic respiratory diseases (15%) and cancer (10%) were also prevalent. most participants reported managing their conditions for over 5 years (40%), while smaller proportions indicated durations of 3–5 years (30%), 1–3 years (20%), and less than a year (10%). notably, 85% of respondents reported regular smartphone use, highlighting widespread access to digital health tools. while 60% of respondents were aware of health coaching applications, 20% were unaware, and 20% were unsure. among the respondentsbeing aware of these apps myfitnesspal (50%) and noom (30%) were the most recognized, followed by livongo (20%) and calm (15%). approximately 20–25% of participants reported currently using a health coaching app, while 15–20% had used one in the past but stopped. however, 55–60% indicated they had never used such applications. frequency of use varied among current users: 10–15% reported daily use, 20–25% used apps several times a week, and 10–15% used them once a week. a further 20% used apps occasionally, and 30–35% reported they had stopped using them altogether. the primary barriers to adoption among non-users included lack of awareness (40%), preference for other methods of management (20%), discomfort with technology (15%), and lack of access to smartphones or the internet (10%). effectiveness of health coaching ai applications for noncommunicable diseases’ management: impact on behavior change 194 among users, the most frequently reported challenges were lack of motivation to continue using the app (40%), lack of personalization of the information provided (30%) and difficulty using the app (20%). privacy concerns (15%) and the high cost of premium features (20%) were also significant barriers. additionally, some users (25–30%) expressed frustration with the lack of integration between health coaching apps and their healthcare providers' systems. for those who struggled to use apps regularly, lack of time (30%), preference for inperson interactions (25%), insufficient guidance (20%), and technical issues (15%) were the most common reasons cited. to discuss needs and expectations from health coaching applications, participants identified personalized health tips (70%), goal-setting and progress tracking (60%) and integration with wearable devices (50%) as the most desirable features in health coaching apps. other important features included access to a health coach or expert (50%) and peer support groups (40%). when asked what would make apps more engaging, participants highlighted real-time feedback from health coaches or providers (60%), more personalized recommendations (70%) and features like gamification (30%). additionally, 40% of respondents emphasized the importance of focusing on mental health support. with regard to perceived effectiveness of ai health coaching applications, while 20% of respondents rated health coaching apps as "very effective," the majority (50%) described them as "somewhat effective but needing improvement." a further 20% felt these apps did not meet their needs and 10% were unsure about their effectiveness. participants identified key gaps in health coaching apps, including a lack of personalization (50%), insufficient integration with healthcare providers (40%), and high costs (30%). generalized or irrelevant content (25%) and technical issues (15%) were also noted as shortcomings. recommended improvements included better customization of health insights, seamless integration with clinical care systems, and more cost-effective options. despite these gaps, 50% of participants indicated they would recommend health coaching apps to others, with an additional 30% responding "maybe." conclusions the survey results reveal significant interest in health coaching applications for managing ncds but underscore critical barriers, including motivation, usability, and cost. personalized recommendations, real-time feedback, and integration with healthcare systems are key to enhancing adoption and effectiveness. these findings provide actionable insights for improving the design and delivery of digital health solutions for ncd management. aforementioned study highlights the growing potential of ai-powered health coaching applications in enhancing the management of non-communicable diseases (ncds). the findings indicate that such applications are particularly effective in empowering patients through personalized feedback, improving health behaviors and achieving better clinical outcomes, such as glycemic control and reduced hospitalization rates. while adoption rates are nino mikava 195 promising, barriers such as lack of personalization, cost and insufficient integration with healthcare providers remain significant challenges. to maximize the impact of ai powered health coaching applications, future efforts should focus on addressing mentioned barriers by tailoring app features to meet diverse user needs, ensuring affordability and promoting seamless interoperability with existing healthcare systems. furthermore, sustained engagement strategies, such as gamification and real-time coaching, could significantly improve long-term user adherence and effectiveness. this research highlights the role of ai health coaching as a transformative tool in ncd management and calls for a multidisciplinary approach to enhance its design, accessibility and integration into routine healthcare practices. by addressing the identified gaps and leveraging advancements in ai, these applications can play a pivotal role in reducing the global burden of ncds and improving population health outcomes. references 1. azelton, k., crowley, a., vence, n., underwood, k., morris, g., kelly, j., & landry, m. (2021). digital health coaching for type 2 diabetes: randomized controlled trial of healthy at home. frontiers in digital health, 3. https://doi.org/10.3389/fdgth.2021.764735 2. baglivo, f., de angelis, l., casigliani, v., arzilli, g., privitera, g., & rizzo, c. (2023). long-term efficacy of primary care combining a mobile healthcare application with human coaching. the european journal of public health, 33. https://doi.org/10.1093/eurpub/ckad160.1221 3. bennett, j., stevens, g., mathers, c., bonita, r., rehm, j., kruk, m., riley, l., dain, k., kengne, a., chalkidou, k., beagley, j., kishore, s., chen, w., saxena, s., bettcher, d., grove, j., beaglehole, r., & ezzati, m. (2018). ncd countdown 2030: worldwide trends in non-communicable disease mortality and progress towards sustainable development goal target 3.4. the lancet, 392, 1072–1088. https://doi.org/10.1016/s0140-6736(18)31992-5 4. bezner, j., franklin, k., lloyd, l., & crixell, s. (2020). effect of group health behavior change coaching on psychosocial constructs associated with physical activity among university employees. international journal of sport and exercise psychology, 18, 107–193. https://doi.org/10.1080/1612197x.2018.1462232 5. byrnes, j., goldstein, s., venator, b., pollicino, c., ng, s., veroff, d., bennett, c., & scuffham, p. (2012). the impact of population-based disease management services for selected chronic conditions: the costs to australian private insurance coaching health (capiche) study protocol. bmc public health, 12, 114–114. https://doi.org/10.1186/1471-2458-12-114 6. chaker, l., falla, a., van der lee, s., muka, t., imo, d., jaspers, l., colpani, v., mendis, s., chowdhury, r., bramer, w., pazoki, r., & franco, o. (2015). the global impact of non-communicable diseases on macro-economic productivity: a systematic review. european journal of epidemiology, 30, 357–395. https://doi.org/10.1007/s10654-015-0026-5 7. chokshi, d., & farley, t. (2014). changing behaviors to prevent noncommunicable diseases. science, 345, 1243–1244. https://doi.org/10.1126/science.1259809 https://doi.org/10.3389/fdgth.2021.764735 https://doi.org/10.1093/eurpub/ckad160.1221 https://doi.org/10.1080/1612197x.2018.1462232 https://doi.org/10.1186/1471-2458-12-114 https://doi.org/10.1007/s10654-015-0026-5 https://doi.org/10.1126/science.1259809 effectiveness of health coaching ai applications for noncommunicable diseases’ management: impact on behavior change 196 8. cinar, a. (2015). new patient-centered approach to unlock the individual’s potential to adopt healthy lifestyles: health coaching. the international journal of personcentered medicine, 5, 182–191. https://doi.org/10.5750/ijpcm.v5i4.511 9. fitzpatrick, k. k., darcy, a., & vierhile, m. (2017). delivering cognitive behavior therapy to young adults with symptoms of depression and anxiety using a fully automated conversational agent (woebot): a randomized controlled trial. jmir mental health, 4(2), e7785. 10. frates, e., moore, m., lópez, c., & mcmahon, g. (2011). coaching for behavior change in physiatry. american journal of physical medicine & rehabilitation, 90, 1074–1082. https://doi.org/10.1097/phm.0b013e31822dea9a 11. garcía f. j. (2023). the perception of artificial intelligence in educational contexts after the launch of chatgpt: disruption or panic? 12. gershkowitz, b., hillert, c., & crotty, b. (2020). digital coaching strategies to facilitate behavioral change in type 2 diabetes: a systematic review. the journal of clinical endocrinology and metabolism. https://doi.org/10.1210/clinem/dgaa850 13. gong e. et al. (2020). my diabetes coach, a mobile app-based interactive conversational agent to support type 2 diabetes self-management: randomized effectiveness-implementation trial. journal of medical internet research. https://www.jmir.org/2020/11/e20322/ 14. grand view research. digital health market size, share & trends analysis report by technology (healthcare analytics, mhealth), by component (hardware, software, services), by application, by end-use, by region, and segment forecasts, 2024–2030. https://www.grandviewresearch.com/industry-analysis/digital-health-market 15. han, m., & rhee, s. y. (2021). effectiveness of mobile health applications for 5% body weight reduction in obese and overweight adults. journal of obesity & metabolic syndrome, 30(4), 354. 16. jakob, r., harperink, s., rudolf, a. m., fleisch, e., haug, s., mair, j. l., ... & kowatsch, t. (2022). factors influencing adherence to mhealth apps for prevention or management of noncommunicable diseases: systematic review. journal of medical internet research, 24(5), e35371. 17. jaspers, l., colpani, v., chaker, l., lee, s., muka, t., imo, d., mendis, s., chowdhury, r., bramer, w., falla, a., pazoki, r., & franco, o. (2015). the global impact of non-communicable diseases on households and impoverishment: a systematic review. european journal of epidemiology, 30, 163–188. https://doi.org/10.1007/s10654-014-9983-3 18. kang, e., park, s., lee, k., lee, e., yim, j., lee, j., kim, s., rhee, y., & yun, y. (2021). efficacy of health coaching and an electronic health management program: randomized controlled trial. journal of general internal medicine, 36, 2692–2699. https://doi.org/10.1007/s11606-021-06671-2 19. lunde, p., nilsson, b., bergland, a., kværner, k., & bye, a. (2018). the effectiveness of smartphone apps for lifestyle improvement in noncommunicable diseases: systematic review and meta-analyses. journal of medical internet research, 20. https://doi.org/10.2196/jmir.9751. https://doi.org/10.5750/ijpcm.v5i4.511 https://doi.org/10.1097/phm.0b013e31822dea9a https://doi.org/10.1210/clinem/dgaa850 https://www.jmir.org/2020/11/e20322/ https://www.grandviewresearch.com/industry-analysis/digital-health-market https://doi.org/10.1007/s10654-014-9983-3 https://doi.org/10.1007/s11606-021-06671-2 nino mikava 197 20. lungu, a., boone, m., chen, s., chen, c., & walser, r. (2020). effectiveness of a cognitive behavioral coaching program delivered via video in real-world settings. telemedicine journal and e-health, 27, 47–54. https://doi.org/10.1089/tmj.2019.0313 21. martin, m., patterson, j., allison, m., o’connor, b., & patel, d. (2021). the influence of baseline hemoglobin a1c on digital health coaching outcomes in adults with type 2 diabetes: real-world retrospective cohort study. jmir diabetes, 6. https://doi.org/10.2196/24981 22. mair, j., salamanca-sanabria, a., augsburger, m., frese, b., abend, s., jakob, r., kowatsch, t., & haug, s. (2023). effective behavior change techniques in digital health interventions for the prevention or management of noncommunicable diseases: an umbrella review. annals of behavioral medicine: a publication of the society of behavioral medicine, 57, 817 835. https://doi.org/10.1093/abm/kaad041. 23. muka, t., imo, d., jaspers, l., colpani, v., chaker, l., lee, s., mendis, s., chowdhury, r., bramer, w., falla, a., pazoki, r., & franco, o. (2015). the global impact of non-communicable diseases on healthcare spending and national income: a systematic review. european journal of epidemiology, 30, 251–277. https://doi.org/10.1007/s10654-014-9984-2 24. mcgloin, h., timmins, f., coates, v., & boore, j. (2015). a case study approach to the examination of a telephone-based health coaching intervention in facilitating behavior change for adults with type 2 diabetes. journal of clinical nursing, 24(910), 1246–1257. https://doi.org/10.1111/jocn.12692 25. morawski, k., ghazinouri, r., krumme, a., et al. (2018). association of a smartphone application with medication adherence and blood pressure control: the medisafebp randomized clinical trial. jama internal medicine, 178(6), 802–809. https://doi.org/10.1001/jamainternmed.2018.0447 26. nancy, s., & dongre, a. (2021). behavior change communication: past, present, and future. indian journal of community medicine: official publication of indian association of preventive & social medicine, 46, 186–190. https://doi.org/10.4103/ijcm.ijcm_441_20 27. ng, n., eriksson, m., guerrero, e., gustafsson, c., kinsman, j., lindberg, j., lindgren, h., lindvall, k., lundgren, a., lönnberg, g., sahlén, k., santosa, a., sundberg, l., weinehall, l., & wennberg, p. (2021). sustainable behavior change for health supported by person-tailored, adaptive, risk-aware digital coaching in a social context: study protocol for the star-c research programme. frontiers in public health, 9. https://doi.org/10.3389/fpubh.2021.593453 28. okoye, v. n. (2022). the effects of using mysugr diabetes mobile app on blood glucose level among adult african americans with type two diabetes (doctoral dissertation, university of massachusetts global). 29. oksman, e., linna, m., hörhammer, i., lammintakanen, j., & talja, m. (2017). costeffectiveness analysis for a tele-based health coaching program for chronic disease in primary care. bmc health services research, 17. https://doi.org/10.1186/s12913017-2088-4 https://doi.org/10.1089/tmj.2019.0313 https://doi.org/10.2196/24981 https://doi.org/10.1093/abm/kaad041 https://doi.org/10.1007/s10654-014-9984-2 https://doi.org/10.1111/jocn.12692 https://doi.org/10.4103/ijcm.ijcm_441_20 https://doi.org/10.3389/fpubh.2021.593453 https://doi.org/10.1186/s12913-017-2088-4 https://doi.org/10.1186/s12913-017-2088-4 effectiveness of health coaching ai applications for noncommunicable diseases’ management: impact on behavior change 198 30. pew research center. (2021). mobile technology and home broadband 2021. https://www.pewresearch.org/internet/2021/06/03/mobile-technology-and-homebroadband-2021 31. radwan, n., khashan, h., alamri, f., & olemy, a. (2019). effectiveness of health coaching on diabetic patients: a systematic review and meta-analysis. traditional medicine research, 4, 314–325. https://doi.org/10.12032/tmr20191024143 32. spelt, h., karnaki, p., tsiampalis, t., kouvari, m., petralias, a., zota, d., westerink, j., & linos, a. (2019). short-term and long-term effectiveness of an e-coaching application; the inherit project. european journal of public health. https://doi.org/10.1093/eurpub/ckz185.429 33. stein, n., & brooks, k. (2017). a fully automated conversational artificial intelligence for weight loss: longitudinal observational study among overweight and obese adults. jmir diabetes, 2. https://doi.org/10.2196/diabetes.8590 34. topol, e. j. (2019). high-performance medicine: the convergence of human and artificial intelligence. nature medicine, 25(1), 44–56. https://doi.org/10.1038/s41591018-0300-7 35. who. (2022). noncommunicable diseases progress monitor 2022. https://www.who.int/publications/i/item/9789240047761 36. ye, q., khan, u., boren, s. a., simoes, e. j., & kim, m. s. (2018). an analysis of diabetes mobile applications features compared to aade7™: addressing selfmanagement behaviors in people with diabetes. journal of diabetes science and technology, 12(4), 808–816. https://doi.org/10.1177/1932296818754907 37. zimmerman, g., olsen, c., & bosworth, m. (2000). a 'stages of change' approach to helping patients change behavior. american family physician, 61(5), 1409–1416. appendix 1: survey questionnaire for quantitative research section 1: demographics and health information 1. age: o 18-30 o 31-45 o 46-60 o 61 and above 2. gender: o male o female o other 3. what type of noncommunicable disease(s) have you been diagnosed with? (check all that apply) o diabetes o hypertension https://www.pewresearch.org/internet/2021/06/03/mobile-technology-and-home-broadband-2021 https://www.pewresearch.org/internet/2021/06/03/mobile-technology-and-home-broadband-2021 https://doi.org/10.12032/tmr20191024143 https://doi.org/10.1093/eurpub/ckz185.429 https://doi.org/10.2196/diabetes.8590 https://doi.org/10.1038/s41591-018-0300-7 https://doi.org/10.1038/s41591-018-0300-7 https://www.who.int/publications/i/item/9789240047761 nino mikava 199 o cardiovascular disease o chronic respiratory disease (e.g., copd, asthma) o cancer o other: _______________ 4. how long have you been managing your ncd(s)? o less than 1 year o 1-3 years o 3-5 years o more than 5 years 5. do you use a smartphone or other mobile device regularly? o yes o no section 2: awareness and use of health coaching applications 6. are you aware of health coaching applications that help manage noncommunicable diseases? o yes o no o not sure 7. if yes, which health coaching applications have you heard of? (select all that apply) o myfitnesspal o noom o omada health o livongo o calm o other (please specify): _______________ 8. have you ever used a health coaching application to help manage your condition(s)? o yes, i currently use one o yes, i used one in the past but stopped o no, i have never used one 9. if you have used a health coaching app, how often do you use it? o daily o several times a week o once a week o occasionally (less than once a week) o i no longer use it 10. if you have never used a health coaching application, why not? (select all that apply) effectiveness of health coaching ai applications for noncommunicable diseases’ management: impact on behavior change 200 o i don’t know what they are o i don’t think they are helpful o i prefer to manage my health in other ways o i’m not comfortable with technology o i don’t have access to a smartphone/internet o other (please specify): _______________ section 3: challenges and barriers to using health coaching applications 11. if you have used a health coaching application, what challenges did/do you face? (select all that apply) o the app is difficult to use o i didn’t understand how to set goals or track progress o the information provided was not personalized to my condition o lack of motivation to keep using it o too many notifications or reminders o the app is not integrated with my healthcare provider’s system o it was too expensive to use premium features o the app stopped being useful after a while o privacy/security concerns o other (please specify): _______________ 12. what challenges prevent you from using health coaching apps regularly? (if applicable) o lack of time o lack of interest or motivation o not enough support from healthcare providers o technical issues (e.g., bugs, app crashing) o not enough guidance on how to use the app o i prefer in-person interactions with a healthcare professional o other (please specify): _______________ section 4: needs and expectations from health coaching applications 13. what features would you find most helpful in a health coaching application? (select all that apply) o easy goal-setting and progress tracking o personalized health tips based on my condition o reminders for medication and appointments o access to a health coach or expert through the app o integration with wearable devices (e.g., fitness trackers) o educational resources about managing my condition o peer support groups or communities o ability to share my health data with my healthcare provider nino mikava 201 o other (please specify): _______________ 14. what do you think would make a health coaching app more engaging or effective for you? (select all that apply) o real-time feedback from a coach or healthcare provider o more personalized recommendations o gamification (rewards, challenges, etc.) o more frequent check-ins or follow-up from the app o better design and ease of use o integration with other health apps or devices o a stronger focus on mental health and well-being o other (please specify): _______________ 15. do you feel that health coaching applications address your health needs effectively? o yes, they are very effective o somewhat effective, but they could improve o no, they do not meet my needs o i’m not sure section 5: feedback and future improvements 16. what do you think are the biggest gaps in health coaching applications for managing ncds? (select all that apply) o lack of personalization o not enough focus on mental health or well-being o too expensive o not connected with healthcare providers o the information is too general or not relevant to my condition o technical issues or lack of support o lack of motivational features o other (please specify): _______________ 17. what improvements would you like to see in health coaching applications to better support your health? (open-ended) ________________________________________ ________________________________________ ________________________________________ 18. would you recommend a health coaching app to other patients with your condition? o yes o maybe o no agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 18, no. 2 (2024), pp. 155-169 155 eurosystem central banks' climate-related financial disclosures of non-monetary policy portfolios a. kaab omeir, d. vasiliauskaite ahmad kaab omeir1, deimante vasiliauskaite2 1faculty of economics and business administration, vilnius university, lithuania https://orcid.org/0000-0001-8044-5576 e-mail: ahmad.kaab@evaf.vu.lt 2business school, vilnius university, lithuania https://orcid.org/0000-0002-8107-1964 e-mail: deimante.vasiliauskaite@vm.vu.lt abstract: this article explores the climate-related financial disclosures of eurosystem central banks' non-monetary policy portfolios, focusing on adherence to the recommendations of the task force on climate-related financial disclosures (tcfd). through an analysis of disclosures from 20 central banks in the euro area, it investigates governance structures, reporting practices, and metrics used to assess climate risks and opportunities. findings reveal significant variability in transparency levels, particularly regarding governance and the frequency of climate issue reporting to boards. the mandatory metrics, including weighted average carbon intensity, total carbon emissions, and carbon footprint, were commonly disclosed, while voluntary metrics remained underutilized. the study highlights gaps in standardized reporting and emphasizes the need for enhanced disclosure practices to support effective climate risk management within central banks. recommendations include more comprehensive reporting aligned with tcfd guidelines, improved transparency in governance disclosures, and adopting additional metrics for a clearer understanding of climate-related risks. these findings contribute to the growing literature on sustainable finance, offering insights that may guide future policy development in central banks' climate risk management practices. keywords: central banks; climate risk; disclosure; non-monetary portfolios. introduction the paris agreement and the 2030 agenda for sustainable development have catalyzed a global shift towards sustainability, greatly impacting initiatives worldwide. institutions are increasingly aligning with these goals, such as the objective to limit global warming to below 2°c (eliza, 2024). sustainable investments, which incorporate environmental, social, and governance (esg) factors, demand a sophisticated risk assessment approach. research shows that integrating esg factors enhances risk management and stabilizes financial performance, with companies emphasizing esg often achieving better long-term returns and higher investor confidence (eliza, 2024). however, challenges in esg data quality, measurement, and comparability create obstacles to informed investment decisions (yunus & nanda, 2024). additionally, the lack of standardized esg reporting https://orcid.org/0000-0001-8044-5576 mailto:ahmad.kaab@evaf.vu.lt https://orcid.org/0000-0002-8107-1964 mailto:deimante.vasiliauskaite@vm.vu.lt eurosystem central banks' climate-related financial disclosures of non-monetary policy portfolios 156 frameworks and regulatory inconsistencies intensifies these challenges, underscoring the need for improved data quality and regulatory alignment (yunus & nanda, 2024). environmental risks pose distinct challenges, frequently complicating the risk-return balance in investment strategies. institutional investors play a vital role in mitigating these risks by influencing esg performance in their portfolio companies, thus optimizing risk-adjusted returns (o’sullivan, 2024). infrastructure projects, for example, apply risk assessment tools to manage uncertainties while balancing economic, environmental, and social goals (canesi & gallo, 2024; coskun et al. (2023)). although sustainable investments offer financial and social benefits, they require a thorough understanding of associated risks. enhancing esg data quality and fostering crossdisciplinary collaboration between finance, sustainability, and regulatory policy is essential for navigating the complexities of sustainable finance (yunus & nanda, 2024). in the financial sector, climate change presents both risks and opportunities. habib et al. (2024) highlighted sustainable investment practices as a means for effective capital management, while financial regulators increasingly incorporate climate risks into risk management systems. globally, institutions are increasingly exploring how they can contribute to sustainability. climate change remains one of the most pressing risks for organizations, as the warming of our planet is recognized as having and continuing to have, profound economic and social impacts. the primary goal of the paris agreement is to maintain the global average temperature rise below 2°c above pre-industrial levels. in finance, climate change introduces both opportunities and challenges. financial institutions increasingly prioritize climate risk in their assessments, often identifying it as one of the most critical risks to manage. new regulatory requirements for banks bring further challenges in climate risk management. this presents a significant research gap, as few tools are available to assess and manage the impacts of climate change. banks also face difficulties quantifying climate risks, which are complex to incorporate into existing risk management frameworks while adhering to each institution’s risk appetite. the interest in sustainable investments continues to grow. many financial institutions actively manage sustainable assets and aim to support the green economy. recently, central banks, as major financial players, have begun considering sustainable investments in their foreign reserves management. other financial market participants also seek to integrate sustainable investments into their portfolios. although sustainable financial products may seem like an easy way to promote sustainability, a short history, limited liquidity, and complex risk management requirements challenge the market for sustainable investments. the lack of sustainable investment risk management research makes this an important and novel topic for science and practice. uncertainty regarding the extent, scope, and timing of climate change’s economic impacts translates into financial risks, affecting markets, asset classes, institutions, businesses, households, and governments. therefore, research in this area is critical for developing new tools for climate risk assessment and credit risk management within the banking sector. as sustainable considerations gain importance, there is an increasing need to invest in and support companies that contribute to sustainable economies. various financial instruments, ahmad kaab omeir, deimante vasiliauskaite 157 including mutual funds and exchange-traded funds, are emerging that adhere to strict sustainability criteria. climate risk plays an increasingly central role in today’s economy, attracting attention from academics, the banking sector (central and commercial banks), other financial institutions, businesses, and investors (campiglio et al. (2018), chenet et al. (2021), engle et al. (2020), stroebel & wurgler (2021), ma et al. (2022). this type of risk and its management is becoming a crucial challenge across sectors. studies have found that climate risk affects financial stability (campiglio et al., 2018b), energy price volatility (liang et al., 2022), stock price fluctuations (khalfaoui et al., 2022), exchange market volatility (bonato et al., 2023), and influences decision-making in companies and among investors (chenet et al., 2021b). research also indicates that climate risk impacts various economic factors, with some authors exploring how it affects inflation across countries, revealing that some nations are more sensitive to climate risks than others (zhang, 2023). this variance may also be seen in the banking sector, where climate-related risks have been found to affect audit fees (yang et al., 2023), credit risk, and sovereign ratings (sun et al., 2023). practical findings suggest that climate vulnerability and preparedness are now emerging factors in sovereign rating assessments, alongside traditional economic, political, and external factors, with climate readiness positively impacting sovereign ratings. curcio et al. (2023) examined the relationship between climate change and systemic financial risk, focusing on the banking and insurance sectors. they emphasized the need for appropriate policies to address climate-related disasters' increasing frequency and severity. their findings have implications for banks and insurers, reinforcing the importance of risk management frameworks tailored to climate-related risks. this research supports the creation of a robust climate risk management framework within the banking sector, highlighting that effective risk management relies on a well-defined framework. the main goal of this research is to investigate the level of climate-related information disclosure on non-monetary portfolios among eurosystem central banks based on tcfd recommendations governance and metrics areas. climate-related disclosures aim to improve stakeholder understanding of the distribution of carbon-intensive assets and the financial industry's vulnerability to climate change risks. theoretical challenges in this area stem from varying interpretations and classifications of climate risk and sustainable investments. a key theoretical issue is the diverse understanding of financial risks and the concept of “green” finance. climate-related metrics disclosure also remains an area of concern. empirical challenges involve the availability of sustainable investment data and limited historical information. however, as this field evolves rapidly, improvements in climate risk disclosure and data quality are anticipated, enabling future studies to incorporate more extensive time series and data reflecting periods of growing demand. this paper is organized as follows: section 2 gives insights into our research methodology, focusing on 3 level approach. section 3 focuses on research results and discussion, and finally, we present our conclusions and recommendations. eurosystem central banks' climate-related financial disclosures of non-monetary policy portfolios 158 methodology this chapter focuses on the methodology of disclosing climate-related information on non-monetary policy portfolios based on tcfd recommendations for governance and metrics. the task force's guidelines are organized into four key themes representing fundamental aspects of organizational operations—governance, strategy, risk management, metrics, and targets. in the first stage of the research, we will focus on two main aspects – governance and metrics. this study analyzed 20 central banks in the euro area to determine how they disclose climate-related information on non-monetary policy portfolios following tcfd recommendations for governance and metrics. the initiation of the task force on climate-related financial disclosures (tcfd) by the financial stability board (fsb) in december 2015 (task force on climate-related financial disclosures, 2017) represented a significant industry-led move to foster climaterelated disclosures that would inform decisions in investments, lending, and insurance underwriting processes. the objective was to provide stakeholders with a more transparent view of carbon asset concentrations and the financial sector's vulnerability to climate change risks. access to reliable data is the starting point for addressing climate change. accurate data is critical for assessing the influence of central banks on the climate and understanding the associated risks. this essential information paves the way for central banks to implement meaningful and practical actions. the reporting by central banks offers detailed insights into the carbon footprint and climate-related risks tied to the assets managed by the european central bank (ecb) and the national central banks of the euro area, collectively referred to as the eurosystem. this improved transparency facilitates a more nuanced understanding of their portfolios' impact on the climate, thereby enhancing the decision-making process concerning the climate goals of central banks and aiding others in comprehending climate-related risks and impacts. beginning in 2023, the european central bank (ecb) and the eurosystem central banks have pledged to release climate-related financial disclosures annually. these disclosures demonstrate their initiatives to reduce carbon emissions from their portfolios following the objectives set by the paris agreement. additionally, these disclosures act as instruments to track their advancement and guide any required modifications to their strategies. eurosystem central banks' initiatives significantly enhance openness and responsibility in how financial institutions manage and disclose climate risks. given their significant potential environmental impact, concentrating on non-monetary policy portfolios is crucial. the yearly frequency of these disclosures enables continuous oversight and adaptation, addressing the dynamic nature of climate-related challenges and policy goals. this movement is part of a broader global shift towards incorporating environmental factors into the financial industry, aligning with international frameworks such as the paris agreement. currently, the eurosystem framework mandates members to publish metrics based on three emission allocation methods: emissions within a country’s physical borders ("production emissions"), emissions related to domestic consumption ("consumption emissions"), and emissions associated with government institutions and expenditures ("government emissions"). mandatory reporting of production and consumption emissions is advantageous for the eurosystem. production emissions form the foundation of countries’ decarbonization efforts as ahmad kaab omeir, deimante vasiliauskaite 159 defined in their nationally determined contributions (ndcs), while consumption emissions address the effects of carbon leakage. these two types of emissions are the most relevant and widely reported sovereign emission categories. the mandatory reporting of government emissions has both benefits and drawbacks, influenced mainly by specific factors and preferences of central banks. the calculations for mandatory metrics are placed below: weighted average carbon intensity (1) total carbon emissions (2) carbon footprint (3) the weighted average carbon intensity (waci) (formula 1) measures a portfolio’s exposure to carbon-intensive issuers and acts as a proxy for climate transition risks. waci is a normalized metric, making it comparable across different portfolio sizes and over time, as it adjusts issuers' emissions relative to their economic activity. (ecb, 2023) in contrast, the total carbon emissions metric (formula 2) measures the absolute emissions associated with a portfolio, serving as a proxy for its contribution to global warming and environmental impact. unlike the other metrics, it is not normalized and is influenced by changes in portfolio values, limiting its usefulness for comparisons over time or between portfolios of different sizes. the carbon footprint metric (formula 3) addresses this by normalizing total carbon emissions by the portfolio's value, enabling better comparability. (ecb, 2023) our research design is placed in figure 1. eurosystem central banks' climate-related financial disclosures of non-monetary policy portfolios 160 figure 1 methodological framework source: done by authors results and discussion: in this research, 20 central banks of the euro area were analyzed to identify how these central banks disclose climate-related information based on tcfd recommendations for governance and metrics. the disclosures adhere to the recommendations of the financial stability board's task force on climate-related financial disclosures (tcfd) across four categories: "governance," "strategy," "risk management," and "metrics and targets," including the tcfd’s supplemental guidance for asset owners. the eurosystem has developed a common disclosure framework for the "metrics and targets" category, establishing minimum standards for each member. in creating this framework, the eurosystem also incorporated recommendations from the partnership for carbon accounting financials and the network of central banks and supervisors for greening the financial system (ngfs). 1 step identification of reporting style and the amount of disclosed information: how many pages are dedicated to information and if it is a seperate report for publcation 2 step governance aspect (7 points system, ranking, case studies): 1. the board’s oversight of climaterelated risks and opportunities 2. management’s role in assessing and managing climate-related risks and opportunities 3 step metrics disclosure and practise: * weighted average carbon intensity waci *total carbon emissions tae *carbon footprint cf ahmad kaab omeir, deimante vasiliauskaite 161 table 1 results of eurosystem central banks climate-related financial disclosures of non-monetary policy portfolios reporting style. it has a separate report name of the report the length of the report in pages announce in yearly report together with other information. austria „climate-related financial disclosures by the oesterreichische nationalbank 2022 “. sustainability issues are also analyzed in the yearly report too. 13 belgium „climate-related disclosures for non-monetary policy portfolios 2022“. also has a sustainable and responsible investment charter, annual report also covers climate issues, and climate dashboard. 25 „climate report“ as a chapter in a yearly report. 6 croatia cyprus „climate-related financial disclosures of the central bank of cyprus eur non-monetary policy portfolios“. 12 has a chapter in annual report „climate-related sustainable investment at eesti pank. 5 estonia finland „bank of finland’s annual report on responsible investment“. 27 france „responsible investment report“. 45 germany „climate related disclosures by the deutsche bundesbank 2023“. 43 lithuania „climate-related disclosures of the bank of lithuania’s non-monetary policy portfolios“. 13 greece „climate footprint of the euro-denominated non-monetary policy portfolios of the bank of greece“. 10 ireland „central bank of ireland’s climate-related financial disclosures 2023“. 27 spain “climate-related aspects of the bando de espana’s nonmonetary policy portfolios”. 22 italy „annual report on sustainable investments and climaterelated risks“. 52 latvia „climate-related disclosures of latvijas banka’s nonmonetary policy portfolios“. 13 luxembourg „climate-related disclosures of the bcl’s non-monetary policy portfolios”. 15 malta „climate-related financial disclosures of the central bank of malta‘s non-monetary policy portfolios“. 40 in annual report. „de nederlandsche bank n.v. 2022 annual report. information is very unstructed., other climate related information is mixed with other topics. 5 the netherlands portugal „climate-related financial disclosures of the banco de portugal’s own financial assets“. 14 slovakia „climate-related disclosures of národná banka slovenska’s non-monetary policy portfolio“. 16 slovenia “climate-related disclosure of banka slovenije’s own financial assets“. 23 source: done by authors using central banks’ reports published online. https://www.nbb.be/en/about-national-bank/information-investors/sustainable-and-responsible-investment-charter https://www.nbb.be/en/about-national-bank/information-investors/sustainable-and-responsible-investment-charter https://www.nbb.be/en/about-national-bank/information-investors/sustainable-and-responsible-investment-charter https://www.nbb.be/en/about-national-bank/information-investors/sustainable-and-responsible-investment-charter https://www.nbb.be/en/publications-and-research/annual-reports https://www.nbb.be/en/publications-and-research/economic-and-financial-publications/climate-dashboard eurosystem central banks' climate-related financial disclosures of nonmonetary policy portfolios 162 table 2 the results of governance disclosure in euro area central banks based on tcfd recommendations. describe the board’s oversight of climaterelated risks and opportunities l t i e a t b e e e e l e s it c y h r l v l u m t n l p t f r s k si fi d e ‒ processes and frequency by which the board and/or board committees (e.g., audit, risk, or other committees) are informed about climaterelated issues n o n o n o ye s1 n o n o ye s3 no ye s n o y es y es y es ye s ye s3 y es n o ye s ye s3 y es ‒ whether the board and/or board committees consider climate-related issues when reviewing and guiding strategy, major plans of action, risk management policies, annual budgets, and business plans as well as setting the organization’s performance objectives, monitoring implementation and performance, and overseeing major capital expenditures, acquisitions, and divestitures y e s y e s y e s ye s n o n o ye s ye s ye s n o y es y es y es ye s ye s y es n o ye s ye s y es ‒ how the board monitors and oversees progress against goals and targets for addressing climate-related issues n o n o n o ye s n o n o ye s no ye s n o n o y es y es ye s no y es n o no no y es describe management’s role in assessing and managing climate-related risks and opportunities whether the organization has assigned climate-related responsibilities to management-level positions or committees; and, if so, whether such management positions or committees report to the board or a committee of the board and whether those responsibilities include assessing and/or managing climate-related issues y e s n o y e s ye s n o n o ye s ye s ye s n o y es y es y es ye s ye s y es n o ye s ye s y es ‒ a description of the associated organizational structure(s) n o n o n o ye s2 n o n o ye s2 ye s4 ye s2 n o n o y es y es ye s2 no y es n o ye s2 ye s2 y es ‒ processes by which management is informed about climate-related issues n o n o n o ye s n o n o ye s no ye s n o n o y es y es ye s ye s y es n o ye s ye s y es ‒ how management (through specific positions and/or management committees) monitors climate-related issues n o n o n o ye s n o n o ye s no ye s n o n o y es y es ye s no y es n o no no y es notes: 1on regular basis;2there is no organizational chart, but explained functions quite well;3lack of frequency, process clear;4 good and clear organizational structure; *the best practice in disclosing source: done by authors using central banks’ reports published online. governance table 1 and table 2 present the analysis of 20 euro area central banks' reports on sustainable investments and climate-related risks. the results show that reports are not very transparent, as we see a lot of information that central banks do not disclose. ahmad kaab omeir, deimante vasiliauskaite 163 figure 2 countries ranked by pages of climate-related information disclosure source: done by authors using central banks’ reports published online. based on our research presented in figure 2, we can group all countries into four groups based on information about climate change impact disclosure in their reports. in the first group, we can add italy, france, germany, and malta as countries presenting the most information. we can also consider that central banks in these countries are the most transparent regarding climate-related information disclosure of non-monetary portfolios. for the second group of transparency, we can appoint finland, ireland, belgium, slovenia, and spain, so the central banks of these countries are a bit less transparent in disclosing climate-related information about non-monetary portfolios. the third group comprises slovakia, luxembourg, portugal, austria, lithuania, latvia and cyprus central banks. and the fourth group (netherlands, estonia, croatia, greece) of central banks are with very short reports and a poor amount of climate related information in their non-monetary portfolios. after analyzing all the reports, we tried to evaluate the quality of governance disclosure based on tcfd recommendations. we decided to rank all the central banks from 0 to 7 based on the disclosure aspects which are presented in table 2. the ranking results are placed in figure 3. from the results in figure 3, we can see that some countries disclosure all recommended information (belgium, spain, cyprus, luxembourg, malta, netherlands, france, and germany) about the governance while others do not disclosure all main aspects (estonia, greece, croatia, slovakia). looking at the length of reports and the level of the disclosure of information about climate risk governance, we can see that countries with concise reports do not focus on the disclosure of governance aspects. the only exception was the netherlands, where all recommended aspects were disclosed, and the report of climate-related information about nonmonetary portfolios was very short and concentrated (figure 4). 52 45 43 40 27 27 25 23 22 16 15 14 13 13 13 12 10 6 5 5 0 10 20 30 40 50 60 italy france germany malta finland ireland belgium slovenia spain slovakia luxembourg portugal austria lithuania latvia cyprus greece croatia estonia the netherlands eurosystem central banks' climate-related financial disclosures of nonmonetary policy portfolios 164 figure 3 countries ranked by the level of governance disclosure. note: 7 points – the highest level of governance information disclosure, 0 – the lowest level of governance information disclosure source: done by authors using central banks’ reports published online. figure 4 relationship between the length of climate-related information disclosure report and the level of governance information disclosure source: done by authors using central banks’ reports published online. after a deep analysis of the reports, we can conclude that the governance part in disclosure about climate risk is fragile, with no precise frequency for reporting to the board. the best governance disclosure practices are identified in malta, france, and germany. metrics after analyzing all the reports of central banks, we have summarized the results in figure 5. based on the ecb rules, waci, total carbon emissions, and carbon footprint are mandatory metrics, so all central banks disclose them. all other metrics are disclosed voluntarily. 7 7 7 7 7 7 7 7 5 5 4 3 3 2 2 1 0 0 0 0 0 1 2 3 4 5 6 7 0 1 2 3 4 5 6 7 52 45 43 40 27 27 25 23 22 16 15 14 13 13 13 12 10 6 5 5 ahmad kaab omeir, deimante vasiliauskaite 165 table 3 shows the results of metrics disclosed by euro area central banks. the required metrics are only three: weighted average carbon intensity (waci), total carbon emissions, and carbon footprint. two extra metrics are disclosed in half of all central banks: green and thematic bond share and carbon intensity. other measures are disclosed only in some banks. from the reports, it was clear that central banks tend to disclose more metrics next year, so the results for 2023 can be better with more efforts for disclosing information. figure 5 metrics used to assess and manage relevant climate-related risks and opportunities in euro area central banks source: done by authors using central banks’ reports published online. table 3 calculated metrics at the bank level metric banks waci 20 all euro area central banks total carbon emissions 20 all euro area central banks carbon footprint 20 all euro area central banks green and thematic bond share 12 ireland (thematic and green), italy (green), belgium, slovenia, slovakia, portugal, malta, luxembourg, spain, germany, netherlands, finland carbon intensity 10 finland, croatia, cyprus, france, greece, italy, ireland, portugal, malta, spain implied temperature rise 5 france, belgium, finland, germany, malta green bond impact 4 malta, germany, france, belgium carbon risk rating 4 belgium, germany, slovenia, malta scope 3 emissions metrics 3 belgium, finland, germany share of issuers with climate targets 3 finland, slovenia, malta exposure to physical risks 2 france, germany green and brown revenue share 1 germany share of carbon production volume to gdp 1 germany 20 20 20 12 10 5 4 4 3 3 2 1 1 1 1 1 1 0 2 4 6 8 10 12 14 16 18 20 eurosystem central banks' climate-related financial disclosures of nonmonetary policy portfolios 166 esg scores 1 france biodiversity related metrics 1 france social related metrics 1 france climate var 1 italy source: done by authors using central banks’ reports published online. central banks tend to report minimum metrics to assess climate-related risks and opportunities. most metrics of climate issues are explained in the central banks of france and germany reports. eurosystem members were encouraged to enhance their disclosures with voluntary metrics, and in their 2023 reports, they included 14 different categories of such metrics. these voluntary metrics were both backward-looking and forward-looking. the most commonly reported backward-looking metrics included the shares of green and thematic bonds and carbon intensity. among the forward-looking metrics, the most popular were the implied temperature rise, carbon risk rating, and the share of issuers with climate targets. introducing mandatory carbon intensity metrics could enhance reporting for certain central banks. these metrics provide additional insights into the emissions associated with holdings by normalizing emissions relative to the level of financed economic activity (i.e., revenue). carbon intensity metrics are widely used in the financial sector and preferred by some investors for tracking portfolio decarbonization. most nmpp portfolios should have sufficient data availability, and the calculation process is operationally straightforward. but at the moment, for the 2022 reporting year, only half of all central banks disclosed and calculated this metric. however, the added value of carbon intensity depends on specific investment strategies, raising questions about its usefulness as a mandatory metric. the tcfd recommends disclosing precise, comparable, and consistent information about climate-related risks and opportunities. portfolio managers select climate metrics based on their investment strategies and the applied scope. adequate climate-related metric disclosure aids understanding; thus, adding the complex carbon intensity metric to the already mandatory waci, total carbon emissions, and carbon footprint metrics might complicate reporting without significantly increasing informative value. pcaf (partnership for carbon accounting financials) does not explicitly recommend the carbon intensity metric. integrating forward-looking metrics into the reporting framework is desirable, but the lack of methodological standardization currently weakens the case for inclusion. while these metrics enrich reporting and are conceptually appealing, ongoing debates about methodological aspects and the lack of standardization argue against their mandatory inclusion at this stage. the availability and standardization of data should improve with the implementation of the csrd (corporate sustainability reporting directive). central banks are encouraged to share their experiences to define best practices for voluntary reporting of forward-looking metrics. reporting on green bond-avoided emissions remains challenging. three distinct approaches for reporting avoided emissions—relying on data provider estimates, collecting issuer impact reports, and collecting third-party impact reports—each has pros and cons. current guidance and data are insufficient to ensure accurate estimates for green bonds’ avoided emissions. among the three approaches, relying on data provider estimates appears superior in terms of practicality and feasibility, but data coverage must improve before collective disclosure by the eurosystem. harmonizing methodologies used by data providers would also enhance metric quality. ahmad kaab omeir, deimante vasiliauskaite 167 reporting portfolios’ green bond share could enhance transparency about portfolios’ contribution to the low-carbon transition, stimulating the supply of crucial transition financing. green bonds are a popular tool for fixed-income investors to support low-carbon projects. several central banks already report the share of green bond holdings in their portfolios. identifying green bonds is straightforward, as bloomberg provides a classification flag based on the green bond principles (gbp) of the international capital market association (icma), reducing greenwashing risks. addressing the impact of inflation on financial data remains unresolved. financial measures such as revenue and evic are affected by inflation, which can lead to "artificial" greening over time. while correcting for inflation in metrics is theoretically desirable, it is complex in practice. pcaf (partnership for carbon accounting financials) does not recommend adjusting for inflation to maintain comparability across institutions. the eu climate benchmark regulation prescribes an "enterprise value inflation adjustment factor," which does not distinguish between causes of enterprise value fluctuations. this metric is complicated to correct for inflation's impact, but it should be reviewed in the future due to its relevance for setting interim targets. biodiversity aspects are likely to gain prominence in climate reporting. the taskforce on nature-related financial disclosure (tnfd), announced in july 2020, released its complete framework for market adoption on 18 september 2023. eu environmental standards being developed by efrag (e4 – biodiversity) build on tnfd recommendations. if deemed material, the csrd will require major eu companies to report on certain nature-related kpis starting in 2025. while biodiversity disclosures should remain voluntary for now, it should be considered to include them in the standard reporting framework later. metrics should be updated retroactively as new climate data becomes available. emissions and financial data for issuers typically have a delay of one to two years, causing reference year mismatches in recent portfolio reporting. we recommend making these limitations transparent and updating metrics in the next reporting round when new data with matching reference years becomes available. most recent metrics would likely need only one update. because of calculation challenges, most central banks at the moment do not want to make other metrics to disclosure mandatory and tend to remain voluntary. conclusions after analyzing 20 central banks‘ climate-related financial disclosure reports, it can be concluded that euro area central banks do not disclose transparent processes by which the bank boards are informed about climate-related issues. the other important point is that most central banks do not identify the reporting frequency. monitoring climate-related issues for central banks is essential, and if the central banks have no transparent processes, they can face difficulties in managing climate risk and adding value to sustainable development. in climate-related financial disclosure reports, central banks explain how the board supervises and manages risks and opportunities related to climate change. at the same time, it outlines how management evaluates and handles risks and opportunities associated with climate change. small central banks based on foreign reserves portfolios tend to make concise reports about governance without profound explanation. eurosystem central banks' climate-related financial disclosures of nonmonetary policy portfolios 168 central banks, from 2023, have to disclose metrics by which they assess climate-related risks and opportunities. the research has shown that most central banks tend to disclose only metrics based on minimum requirements (waci, total carbon emissions, carbon footprint), especially small central banks. by disclosing other metrics, there is no transparent system of providing information. the main recommendation for central banks would be to report more transparent disclosures in governance, focusing on tcfd recommendations. processes and frequency by which the board and/or board committees (e.g., audit, risk, or other committees) are informed about climate-related issues are essential to ensure proper climate risk management in the organization. the other aspect for central banks is to have a transparent monitoring of climate-related issues system. the other recommendation is to include more measures than the minimum in disclosing climate-related risks and opportunities and present it clearly by explaining the calculation and targets for the future. references 1. bonato, m., cepni, o., gupta, r., & pierdzioch, c. (2023). climate risks and realized volatility of major commodity currency exchange rates. journal of financial markets, 62(june 2022). https://doi.org/10.1016/j.finmar.2022.100760 2. campiglio, e., dafermos, y., monnin, p., ryan-collins, j., schotten, g., & tanaka, m. (2018a). climate change challenges for central banks and financial regulators. nature climate change, 8(6), 462–468. https://doi.org/10.1038/s41558-018-0175-0 3. campiglio, e., dafermos, y., monnin, p., ryan-collins, j., schotten, g., & tanaka, m. (2018b). climate change challenges for central banks and financial regulators. nature climate change, 8(6), 462–468. https://doi.org/10.1038/s41558-018-0175-0 4. canesi, r., & gallo, b. (2024). risk assessment in sustainable infrastructure development projects: a tool for mitigating cost overruns. land, 13(1). https://doi.org/10.3390/land13010041 5. chenet, h., ryan-collins, j., & van lerven, f. (2021a). finance, climate-change and radical uncertainty: towards a precautionary approach to financial policy. ecological economics, 183, 106957. https://doi.org/10.1016/j.ecolecon.2021.106957 6. chenet, h., ryan-collins, j., & van lerven, f. (2021b). finance, climate-change and radical uncertainty: towards a precautionary approach to financial policy. ecological economics, 183. https://doi.org/10.1016/j.ecolecon.2021.106957 7. coskun, c., dikmen, i., & birgonul, m. t. (2023). sustainability risk assessment in mega construction projects. built environment project and asset management, 13(5), 700–718. https://doi.org/10.1108/bepam-10-2022-0153 8. curcio, d., gianfrancesco, i., & vioto, d. (2023). climate change and financial systemic risk: evidence from us banks and insurers. journal of financial stability, 66(april). https://doi.org/10.1016/j.jfs.2023.101132 9. ecb. (2023). climate-related financial disclosures of the ecb ’ s non-monetary policy portfolios (issue march). 10. eliza, e. (2024). sustainable investment practices: assessing the influence of esg factors on financial performance. global international journal of innovative research, 2(7), 1445– 1454. https://doi.org/10.59613/global.v2i7.228 ahmad kaab omeir, deimante vasiliauskaite 169 11. engle, r. f., giglio, s., kelly, b., lee, h., & stroebel, j. (2020). hedging climate change news. review of financial studies, 33(3), 1184–1216. https://doi.org/10.1093/rfs/hhz072 12. habib, a., anwar, s., hussain, w., & fenyves, v. (2024). the role of sustainable investment practices in maintaining efficient working capital management. journal of international studies, 17(2), 206–219. https://doi.org/10.14254/2071-8330.2024/17-2/11 13. khalfaoui, r., mefteh-wali, s., viviani, j. l., ben jabeur, s., abedin, m. z., & lucey, b. m. (2022). how do climate risk and clean energy spillovers, and uncertainty affect u.s. stock markets? technological forecasting and social change, 185, 122083. https://doi.org/10.1016/j.techfore.2022.122083 14. liang, c., umar, m., ma, f., & huynh, t. l. d. (2022). climate policy uncertainty and world renewable energy index volatility forecasting. technological forecasting and social change, 182, 121810. https://doi.org/10.1016/j.techfore.2022.121810 15. ma, f., lu, x., liu, j., & huang, d. (2022). macroeconomic attention and stock market return predictability. journal of international financial markets, institutions and money, 79(april). https://doi.org/10.1016/j.intfin.2022.101603 16. o’sullivan, n. (2024). sustainable investment. in and c. i. lee matthews, lara bianchi (ed.), concise encyclopedia of corporate social responsibility (pp. 207–214). https://doi.org/https://doi.org/10.4337/9781800880344 17. stroebel, j., & wurgler, j. (2021). what do you think about climate finance? journal of financial economics, 142(2), 487–498. https://doi.org/10.1016/j.jfineco.2021.08.004 18. sun, x., shen, y., guo, k., & ji, q. (2023). sovereign ratings change under climate risks. research in international business and finance, 66(april). https://doi.org/10.1016/j.ribaf.2023.102040 19. task force on climate related financial disclosures. (2017). recommendations of the task force on climate-related financial disclosures (issue june). 20. yang, x., wei, l., deng, r., cao, j., & huang, c. (2023). can climate-related risks increase audit fees?–evidence from china. finance research letters, 57(april). https://doi.org/10.1016/j.frl.2023.104194 21. yunus, y. a., & nanda, s. (2024). exploring sustainable finance: a qualitative inquiry into responsible investment and esg risk evaluation. golden ratio of finance management, 4(1), 01–13. https://doi.org/10.52970/grfm.v4i1.429 22. zhang, z. (2023). are climate risks helpful for understanding inflation in brics countries? finance research letters, 58. https://doi.org/10.1016/j.frl.2023.104441 agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 18, no. 2 (2024), pp. 300-319 300 the experience of illness: emotional and economic impacts p. teresiute, d. vasiliauskaite paulina teresiute1, deimante vasiliauskaite2 1faculty of medicine, vilnius university, lithuania https://orcid.org/0009-0000-9152-5715 e-mail: paulina.teresiute@mf.stud.vu.lt 2business school, vilnius university, lithuania https://orcid.org/0000-0002-8107-1964 e-mail: deimante.vasiliauskaite@vm.vu.lt abstract: this study examines the complex emotional and economic consequences of illness, focusing on individuals' subjective experiences and their broader societal impact. employing a multi-level methodological approach, it combines theoretical insights with wavelet transform analysis to investigate long-term sickness trends in the uk. the findings highlight a significant increase in economically inactive individuals due to long-term sickness, driven by factors such as mental health conditions, chronic diseases, and the covid-19 pandemic. the emotional aspects of illness are explored through their influence on relationships, personal identity, and societal attitudes, underscoring the necessity of patient-centered care that addresses both psychological and social needs. the economic analysis reveals the substantial burden of illness manifested in decreased labor force participation, rising healthcare costs, and productivity losses. wavelet transform analysis captures both short-term variations and long-term patterns, offering valuable insights into the dynamic, non-stationary nature of sickness-related economic inactivity. this research emphasizes the critical need for proactive healthcare policies, workplace accommodations, and robust mental health support to reduce the adverse effects of illness on individuals and economies. by integrating advanced analytical methods and interdisciplinary perspectives, the study enhances our understanding of the intricate connections between illness, emotional health, and economic resilience. keywords: economic impact of illness; emotional impact; experience of illness. introduction the world is facing a persistent global mental health crisis exacerbated by the covid19 pandemic, rising living costs, and increasing global challenges. these factors have intensified pre-existing issues and created more significant uncertainty for many. according to the world health organization, approximately 15% of the global working-age population experiences mental illness, impacting not only individual well-being and relationships but also the workplace. depression and anxiety are estimated to cost the global economy $1 trillion annually, equating to 12 billion lost workdays. a recent deloitte study highlights the significant mental health challenges faced by gen z and millennials, who comprise a large portion of the workforce. the research found that 40% of gen zs and 35% of millennials report feeling stressed or anxious most of the time, with nearly half experiencing workplace burnout. https://orcid.org/0009-0000-9152-5715 mailto:paulina.teresiute@mf.stud.vu.lt https://orcid.org/0000-0002-8107-1964 mailto:deimante.vasiliauskaite@vm.vu.lt paulina teresiute, deimante vasiliauskaite 301 the experience of illness is a highly relevant topic with profound implications for healthcare, policy, and society. exploring this subject can deepen our understanding of how illness affects individuals physically, emotionally, and socially beyond what traditional biomedical models capture. it can also highlight the diversity of personal responses to illness and the role of cultural, psychological, and social factors in shaping those experiences. from a scientific perspective, studying the experience of illness can lead to improved patient-centered care, as it helps healthcare professionals recognize and respond to patients' unique needs and perspectives. it can inform interventions that address not only the symptoms but also the psychosocial aspects of illness, improving overall quality of life for patients. the experience of illness is a multifaceted phenomenon encompassing many personal, social, and cultural dimensions. it is not merely about the physical symptoms but also involves the individual's subjective experience, which includes changes in self-identity, time perception, and existential meaning, as highlighted by havi carel's phenomenological analysis (carel, 2015). the diagnosis process plays a crucial role in shaping the illness experience, as it involves navigating complex power dynamics and social interactions that can significantly impact how patients perceive and manage their conditions (jeske et al., 2023). moreover, the experience of illness is deeply intertwined with the search for meaning as individuals and caregivers grapple with questions about the purpose of life amidst suffering. this search for meaning can lead to either despair or a heightened sense of awareness and responsibility, serving as a therapeutic resource (bruzzone, 2021). the social construction of illness further complicates this experience, as it is influenced by cultural norms and societal values, which shape how individuals interpret and respond to their conditions (skrzypek, 2014). illness narratives, which are personal stories about living with illness, provide valuable insights into these experiences, though they must be critically examined for their epistemological properties to ensure they accurately reflect the realities of the individuals' experiences (lucius-hoene et al., 2018). additionally, the patient experience is a complex construct that includes determinants such as the quality of healthcare services and the politics of healthcare, which influence patient satisfaction and engagement (zakkar, 2019). overall, understanding the experience of illness requires a holistic approach that considers the interplay of personal, social, and systemic factors, as well as the narratives and meanings individuals ascribe to their experiences (locock et al. (2017), cipolletta, (2020), palmeira & gewehr (2018)). the experience of illness is a profoundly personal and often life-altering journey, shaped by a range of physical, emotional, and psychological challenges. unlike clinical definitions that focus on biological abnormalities and diagnostic criteria, the experience of illness is subjective, encompassing how individuals perceive, interpret, and react to their health conditions. this viewpoint enlightens the lived reality of patients, revealing how illness interrupts daily routines, reshapes identities, and affects relationships (shrout et al., 2024). studying the experience of illness uncovers symptoms and treatments and the intricate connections between the body, mind, and society. while healthcare professionals focus on diagnosis and treatment, the experience of illness highlights how individuals interpret their suffering and adapt to the changes it brings. this process involves many emotions—from fear and uncertainty to resilience and acceptance—and emphasizes the significant influence of culture, family, and personal beliefs on how illness is understood. acknowledging the the experience of illness: emotional and economic impacts 302 experience of illness is crucial for healthcare providers, as it bridges the divide between clinical care and patient-centered support, promoting empathy and comprehensive approaches that consider both medical and personal dimensions. this paper aims to identify theoretical aspects of the emotional and economic impacts of illness and create a methodology to value the effect of covid-19 on illness and stress. this paper is organized as follows: section 2 gives insights into the theoretical basis of understanding illness's emotional and economic impact. section 3 analysing the research methodology focusing on the idea of wavelet transformation. section 4 describes the results and discussion, and finally, we present our conclusions and recommendations. literature review emotional impact illness significantly impacts relationships, often transforming them in complex ways. long-term illness can lead to positive and negative social network changes, as individuals may experience increased support from family and friends. at the same time, some relationships may become distant or dissolve due to the strain of illness. long-term illnesses can lead to shifts in social networks, with some relationships becoming more supportive while others diminish, reflecting the complex nature of social support during illness (espvall & dellgran, 2016). chronic illness, mainly when concealable, can challenge couples' communication and relational well-being, often resulting in lower satisfaction and increased burden. however, when couples engage in open communication and dyadic coping strategies, they can enhance their relational satisfaction and closeness (shrout et al., 2023). emotionally focused therapy has been shown to help couples enrich their emotional quality, allowing them to express deepseated emotions and meet each other's needs despite the challenges posed by chronic illness (chawla & kafescioglu, 2012). the stress of illness can also lead to role changes within relationships, where partners may need to take on additional responsibilities, potentially leading to feelings of resentment and grief on both sides (campling & sharpe, 2008). communication-debilitating illnesses further complicate relationships by necessitating adjustments in how individuals interact with loved ones, often requiring new strategies to maintain relational bonds (bute et al., 2007). in young adults, chronic illness can disrupt normative relationship development, leading to insecure attachments and lower relationship satisfaction compared to healthy peers (cole & karantzas, 2006). family dynamics are also affected, as serious illness can lead to protective behaviors that isolate family members from one another when mutual support is most needed. chronic illness in children also affects family dynamics, with older children experiencing weaker family relationships, although these relationships can be strengthened by better health and reduced anxiety or depressive symptoms (cox et al., 2021). despite these challenges, sharing personal narratives and life challenges can help individuals with chronic illnesses redefine their identities and foster healthier relationships with family and friends (huang et al., 2018). chronic illness profoundly transforms relationships, highlighting the resilience and adaptability of individuals and their social networks as they navigate evolving challenges and roles. individuals experiencing illness frequently exhibit diverse emotional responses characterized by complexity and nuance. common emotional responses include feelings of paulina teresiute, deimante vasiliauskaite 303 depression, anxiety, fatigue, and a desire to limit social interactions, collectively known as the sickness response, which is an adaptive behavior aimed at conserving energy and improving survival during illness (lekander, 2022). this response is functionally similar to classical emotions like fear and can be exacerbated by low-grade inflammation, contributing to symptoms in both somatic and mental health contexts (lekander, 2022). emotional reactions to illness are not only individual but also relational, affecting family dynamics and manifesting in themes such as denial versus acceptance, despair versus hope, and isolation versus connection (mcdaniel et al., 2000). the phenomenological perspective, as discussed by madeira et al. (2019), introduces the concept of the "uncanny" in illness, where individuals experience a disconcerting shift in their sense of being, leading to feelings of fear and loss of control (madeira et al., 2019). the severity of the illness does not always correlate with the intensity of psychological reactions, as even minor illnesses require lifestyle adjustments and can lead to significant emotional distress, including anxiety and depression (g. g. lloyd, 2007). a lack of empathy from others can further exacerbate the emotional burden of illness, leading to feelings of isolation and frustration (havi, 2008). the author reflects on the emotional toll of experiencing rapid physical decline at a young age, noting the anxiety and dread that accompany each deterioration in health. this includes concerns about losing the ability to engage in once-manageable activities, leading to a shrinking world and a sense of helplessness (havi, 2008). while fear and sadness are common, they are often normal emotional responses to the threat posed by illness, and understanding these emotions can aid in better patient adaptation and management (bowman, 2001). the paper concludes that the traditional psychopathological paradigm, which primarily emphasizes anxiety and depression as indicators of patient reactions to acute illness, is insufficient due to the considerable variability in how these emotions are measured and interpreted across different populations. it calls for a shift in perspective, advocating for recognizing emotional responses to illness as normal reactions rather than pathological ones, and suggests that future research should adopt this approach to enhance the understanding of patient experiences. (bowman, 2001) individuals facing illness often experience a complex spectrum of emotions, including fear, sadness, anger, guilt, and isolation, alongside moments of hope, gratitude, and acceptance. these emotions, shaped by personal and social contexts, evolve and reflect the profound psychological impact of living with illness. understanding the emotional responses to illness is crucial for improving patient care and support, as it directly influences patient outcomes and satisfaction. recognizing and addressing patients' emotional reactions, such as fear, anger, sadness, joy, and compassion, can enhance the provider-patient relationship and facilitate better health outcomes (naidorf (2024), beale (2017). by recognizing patients' emotions, addressing their concerns, and involving them in treatment decisions, healthcare providers can enhance patient outcomes and create a more compassionate and collaborative healthcare environment (naidorf, 2024). emotional responses can profoundly influence a patient's capacity to understand and act on health information, frequently posing obstacles to accessing healthcare services (beale, 2017). integrating technology, including intelligent support systems and biofeedback sensors, offers valuable tools for evaluating and managing patients' emotional states, delivering emotional support and practical assistance in their daily lives (maj et al., (2024), wilson et al. (2016). the system will the experience of illness: emotional and economic impacts 304 facilitate communication between patients and doctors, allowing for preliminary diagnoses and tailored treatment plans based on collected data. it will also provide patients with health reports and treatment recommendations to aid their recovery (maj et al., 2024). moreover, incorporating psychotherapeutic teaching into medical education can enhance communication skills among healthcare providers, enabling them to understand better and address the emotional aspects of illness (groves, 2015). emotional support is vital to patient satisfaction but is frequently underemphasized in healthcare settings. by recognizing and implementing practical strategies for providing emotional support, healthcare organizations can enhance patient satisfaction and elevate the overall quality of care. (adamson et al., 2012) moreover, the emotional impact of illness and care, particularly in chronic conditions like advanced kidney disease, emphasizes the need for healthcare providers to acknowledge and address patients' emotional experiences. neglecting these aspects can foster mistrust and isolation, adversely affecting the care experience (o’hare et al., 2018). patients often struggle with feelings of personal responsibility for their illness, commonly blaming themselves for their kidney disease and believing it was preventable. this tendency toward self-blame underscores the importance of healthcare providers addressing the emotional dimensions of chronic illness to enhance overall patient care and support (o’hare et al., 2018). illness requires adaptations in communication and roles, making effective management and open dialogue essential for sustaining and strengthening relationships in the face of challenges associated with chronic and mental health conditions (bute et al., 2007). a comprehensive understanding of patients' emotional responses to illness can lead to more effective, empathetic, and patientcentered care, ultimately enhancing the healing process and patient satisfaction (picton, 2011). addressing and understanding the emotional aspects of illness are crucial for improving patient care and satisfaction. by incorporating empathy, clear communication, innovative technologies, and comprehensive provider training, healthcare systems can develop a more compassionate, patient-focused approach that fully acknowledges the emotional impact of illness. this approach enhances the provider-patient relationship, supports better health outcomes, builds trust, and elevates the overall quality of care. economic impact the economic impact of illness is multifaceted, affecting individuals, households, and broader economies in various ways. mental health illnesses, for instance, impose a significant economic burden, as evidenced by studies from countries like canada, where costs are projected to increase six-fold over the next 30 years, potentially exceeding a$2.8 trillion (doran & kinchin, 2017). in nigeria, mental health issues are prevalent and pose a threat to economic stability without robust policy interventions (owoeye, 2024). chronic illnesses also have profound economic implications, particularly in lowand middle-income countries. in nigeria, chronic illnesses lead to substantial direct and indirect costs, with many households spending over 10% of their income on health, often resorting to borrowing or selling assets to cope (okediji et al., 2017). similarly, catastrophic health expenditures in korea are rising, especially among lowincome groups, highlighting the inadequacy of current health safety nets. despite universal health coverage in thailand, severe illness significantly increases out-of-pocket expenses and paulina teresiute, deimante vasiliauskaite 305 reduces household labor income by nearly a third, forcing reliance on informal financial support (neelsen et al., 2015). the impact of illness on employment is also notable; in australia, illness-related early retirement results in significant income loss, increased government support payments, and reduced tax revenue, amounting to billions annually (schofield et al., 2011). in rural india, adult illness reduces workforce participation and earnings, though households attempt to mitigate these effects through increased labor participation by non-sick members (alam et al., 2018). furthermore, illnesses like hypercholesterolemia contribute to the economic burden of cardiovascular diseases, with direct costs ranging significantly, underscoring the need for updated research and public health strategies (ferrara et al., 2021). overall, the economic impact of illness is substantial, necessitating comprehensive policy responses to mitigate these effects and support affected individuals and economies. mental health illnesses contribute significantly to the economic burden across various countries, impacting both direct and indirect costs. in south america, mental health conditions, along with other noncommunicable diseases, are projected to cost approximately 7.3trillion from 2020 to 2050, equating to about 47.3 trillion from 2020 to 2050, equating to about 42.5 trillion, with indirect costs, such as lost productivity, being particularly substantial (ferranna et al., 2023). in developed countries, mental health issues account for around 4% of gdp, with significant productivity losses, as mental illness is prevalent among working-age populations (frank, (2022), doran & kinchin (2020)). in canada, the economic costs of mental illness are expected to increase six-fold over the next 30 years, highlighting the growing financial impact (layard, 2016). in germany, mental illnesses accounted for societal costs of 146 billion euros in 2015, representing 4.8% of gdp, with a significant portion attributed to direct health costs (doran & kinchin, 2017). the economic burden is not limited to direct healthcare expenses but extends to lost productivity, social exclusion, and reduced educational attainment, which are common across various regions, including europe and nigeria (lambert et al., (2023), agboola et al. (2018)). mental disorders such as depression, anxiety, and schizophrenia are particularly burdensome, necessitating increased investments in mental health care and costeffective interventions to mitigate these impacts (turk & albreht, 2010). the economic implications of mental health are profound, affecting individuals, families, and national economies, and underscore the need for comprehensive policy responses to address these challenges effectively (razzouk, 2017). the economic costs associated with mental health illnesses are substantial and multifaceted, encompassing both direct and indirect expenses across various countries. direct costs primarily include healthcare expenditures such as hospital stays, medication, and therapy, which in germany alone amounted to 44.4 billion euros in 2015, representing a significant portion of the country's gdp (lambert et al., 2023). indirect costs, however, often surpass direct costs and include loss of productivity, unemployment, and social exclusion, which collectively contribute to a global financial burden estimated at 2.5 trillion annually, projected to rise to 2.5 trillion annually, projected to rise to 6 trillion by 2030 (frank (2022), sowers et al. (2019)). in the united states, mental illnesses affect about 20% of the population, with social costs growing more rapidly than healthcare costs, highlighting the broader societal impact (r. frank & glied, 2023). in south america, the macroeconomic burden of the experience of illness: emotional and economic impacts 306 noncommunicable diseases, including mental health conditions, is estimated to reduce gdp by about 4% over the period from 2020 to 2050 (ferranna et al., 2023) (ferranna et al., 2023). the indirect costs are further exacerbated by factors such as poverty, low educational levels, and gender inequity, which are prevalent in many regions (razzouk, 2017). in nigeria, the economic burden on households is significant, with many individuals unable to afford even essential goods due to the high costs associated with managing mental illnesses (agboola et al., 2018). these costs burden individuals, families, and national economies, necessitating increased investments in mental health care and implementing cost-effective interventions to mitigate these impacts (razzouk (2017), martini & attallah (2019). the complexity of estimating these costs is compounded by variations in definitions, populations studied, and incomplete data, yet improved methodologies are helping to provide a clearer picture of the economic impact of mental disorders (trautmann et al., 2016). overall, the economic costs of mental health illnesses are profound, affecting not just healthcare systems but also the broader economic and social fabric of societies worldwide. methodology the methodologies used to estimate the economic burden of mental health illnesses vary significantly across different regions, reflecting diverse approaches and challenges. one common method is the human capital approach, which considers both direct costs, such as healthcare expenses, and indirect costs, including productivity losses due to disability or death (frank, 2022). this approach is complemented by the value of the statistical life (vsl) method, which assesses the economic impact of mental health by evaluating trade-offs between risks and capital, similar to methods used for other major diseases like cardiovascular conditions (frank, 2022). in canada, a comprehensive measure of the economic burden incorporates medical resource use, productivity losses, and reductions in health-related quality of life (hrqol), highlighting the significant role of indirect costs (lim et al., 2008). the economic evaluation frameworks often used in these studies include cost-of-illness studies, which are crucial for informing resource allocation decisions by comparing costs and outcomes to assess efficiency (patel, 2018). however, these evaluations face methodological challenges, such as determining the appropriate perspective (e.g., societal or health service) and the measurement of costs and outcomes, with debates surrounding the use of quality-adjusted life years (qalys) in mental health studies (mccrone, 2011). in europe, the economic burden of mental disorders like depression is primarily driven by indirect costs, such as productivity losses, which account for a significant portion of the total costs. variations in definitions further compound the complexity of estimating these costs, populations studied, and cost components, necessitating more standardized approaches to achieve consensus (jacobs et al., 2018). additionally, the multidisciplinary nature of mental health interventions requires consideration of diverse cost categories, including social care, informal care, and education, which are often impacted by mental health issues (shearer et al., 2016). overall, while methodologies differ, there is a consensus on the substantial economic burden posed by mental health illnesses, underscoring the need for improved methods and increased investment in mental health care (razzouk, 2017), trautmann et al. (2016)). our research design is placed in figure 1. paulina teresiute, deimante vasiliauskaite 307 figure 1. methodological framework source: done by authors wavelet transforms are typically categorized into two main types: 1. continuous wavelet transform (cwt): provides a highly detailed time-frequency representation by continuously scaling and shifting the wavelet. the results are often visualized as a scalogram, which shows the signal’s energy distribution across time and scales (mallat (1999), torrence & compo (1998)). 2. discrete wavelet transform (dwt): uses discrete scales and translations for computational efficiency, making it widely used in practical applications like signal denoising and compression. advantages of wavelet transform analysis  time-frequency localization: captures transient features and patterns that occur only at specific times.  multiscale analysis: decomposes signals into components at different resolutions, allowing simultaneous analysis of global trends and local details.  noise robustness: effectively separates noise from meaningful signal components, enhancing data interpretability (mallat, 1999). wavelet transform analysis is a robust mathematical technique used to decompose a signal into components localized in both time and frequency domains. unlike fourier analysis, which provides a global frequency representation, wavelet analysis can reveal transient and time-varying features within a signal. this makes it particularly useful for analyzing nonstationary data across various scientific and engineering domains. wavelet analysis usually consists of transforms, variance decomposition, thresholding, and outlier detection. results and discussion: overview of the uk situation. for our analysis, we have taken the uk as a case because in this country people unable to work due to long-term illness peaked a lot. overall, it is estimated that nearly one-fifth of the uk’s working-age population has a condition that limits their ability to work. the think tank suggests that this issue has grown so severe that it now poses a significant threat to the country's economic potential. 1 step overview of uk trends: *the number of people in the uk unable to work due to long-term illness (from 2000 q1 to 2024 q3) *the number of workers reporting work-related stress, depression or anxiety (period 2008/092022/23) 2 step descriptive statistics one-way tabulation 3 step wavelet transform analysis: *orthogonal transform *overlap *mra as seasonal adjustment the experience of illness: emotional and economic impacts 308 in early 2024, the number of people in the uk unable to work due to long-term illness peaked at 2.82 million, though this figure declined slightly in subsequent months. this marks a significant rise from just over 2 million in 2019. before 2022, the previous high of 2.38 million occurred in late 2021 and early 2022. at that time, caregiving for family members was the leading cause of inactivity. since late 2021, however, long-term and temporary illnesses have become the dominant factors, comprising 32.2% of the economically inactive population by q3 2024. figure 2. the number of people in the uk unable to work due to long-term illness source: done by authors using data from statista the reasons behind this increase remain uncertain if we want to focus on the causes of rising long-term illness. as of 2022, mental health conditions were the leading causes, with 313,000 citing mental illness and 282,000 naming depression-related issues. the covid-19 pandemic also likely played a role; in april 2022, 1.8 million people reported experiencing long covid. while long-term sickness remains most prevalent among those over 50, younger groups have seen notable increases. between 2019 and 2022, the number of individuals aged 16–34 on long-term sick leave rose by 140,000, compared to a 32,000 increase for those aged 35–49. the uk labor market has remained tight in recent years, favoring job seekers. in 2022, unemployment hit its lowest level since the 1970s, with job vacancies peaking at 1.3 million in may. although wage growth was robust during this time, high inflation led to real-term pay reductions between late 2021 and mid-2023. by december 2023, redundancies reached their highest levels since april 2021 at 116,000, signaling potential cooling in 2024. despite this, the labor market remains resilient by historical standards. figure 3. number of workers reporting work-related stress, depression or anxiety in great britain from 2008/09 to 2022/23 (in 1,000s) source: done by authors using data from statista 414 439 402 430 488 442 488 526 595 602 828 823 914 875 0 500 1.000 2 0 0 8 /0 9 2 0 0 9 /1 0 2 0 1 0 /1 1 2 0 1 1 /1 2 2 0 1 3 /1 4 2 0 1 4 /1 5 2 0 1 5 /1 6 2 0 1 6 /1 7 2 0 1 7 /1 8 2 0 1 8 /1 9 2 0 1 9 /2 0 2 0 2 0 /2 1 2 0 2 1 /2 2 2 0 2 2 /2 3 paulina teresiute, deimante vasiliauskaite 309 from 2008/09 to 2022/23, the number of workers in great britain reporting workrelated stress, depression, or anxiety has shown a significant upward trend. in 2008/09, approximately 415,000 workers reported such conditions. this figure increased over the years, reaching around 602,000 in 2014/15. a notable rise occurred during the covid-19 pandemic, with reports peaking at approximately 914,000 in 2021/22. in 2022/23, the number slightly decreased to about 875,000 workers. these statistics underscore the escalating concern of work-related mental health issues in the uk workforce over the past decade and a half. descriptive statistics and one way tabulation we start our quantitative analysis by calculating the main descriptive statistics parameters. analyzing the data from 2000 q1 until 2024 q3, we can see that the maximum number of economically inactive people due to long-term sickness in the united kingdom was at the highest level in 2024 q1 and reached 2 820 (in 1,000s) while the quarterly average was 2227,404 (more data of descriptive statistics in table 1). table 1. results of descriptive statistics. mean 2227,404 median 2209 maximum 2820 minimum 1959 std. dev. 198,3388 skewness 1,30528 kurtosis 4,730509 jarque-bera 40,46496 probabibility 0 observations 99 source: done by authors using eviews and data from statista the descriptive statistics provide an overview of the patterns and characteristics of economically inactive individuals due to long-term sickness, offering insights into the uk's health and labor market challenges. the data reveals trends, variability, and anomalies that are critical for understanding the broader socio-economic implications. the mean value of 2227.404 thousand people represents the average number of economically inactive individuals due to long-term sickness per quarter across the dataset. the median value of 2209 thousand people is slightly below the mean, indicating that the dataset includes some higher values (outliers) that increase the mean. this reflects periods where sickness-related inactivity spiked, likely during major health crises or demographic shifts. the dataset spans from a minimum of 1959 thousand people to a maximum of 2820 thousand people, a range of 861 thousand. this range highlights the variability in inactivity levels over time, likely influenced by underlying factors such as chronic illness prevalence, healthcare accessibility, demographic trends, and external shocks like the covid-19 pandemic. the standard deviation of 198.34 thousand people reflects moderate variation around the mean, indicating that while inactivity levels were generally consistent, there were notable fluctuations during the observed period. the positive skewness of 1.30528 suggests that the the experience of illness: emotional and economic impacts 310 distribution is right-skewed, with a few quarters experiencing significantly higher levels of inactivity. this likely reflects acute events, such as pandemics or systemic health crises. the kurtosis value of 4.730509 indicates a leptokurtic distribution, with a sharper peak and heavier tails than a normal distribution. this suggests that while most observations are close to the mean, extreme values (outliers) are more common than in a normal distribution. the jarquebera test statistic of 40.46496 with a probability of 0 indicates a significant departure from normality. this non-normality can be attributed to the presence of outliers, skewness, and kurtosis in the dataset. with 99 observations, the dataset covers a substantial period, likely capturing long-term trends and episodic events affecting economic inactivity. the distribution indicates a relatively stable baseline of economically inactive individuals due to long-term sickness, with the mean and median close in value. however, the positive skew and leptokurtic nature suggest the influence of episodic events, such as the covid-19 pandemic, that temporarily elevated inactivity levels. the variability in the data highlights the dual challenge for policymakers: addressing the steady baseline of long-term sickness through healthcare improvements and chronic disease management while preparing for and mitigating the impact of acute health crises. the high mean value reflects a significant and persistent economic burden on the labor market and public resources. this underscores the need for targeted interventions to reduce long-term sickness-related inactivity, including preventive healthcare, workplace accommodations, and mental health support programs. the data's non-normal distribution and right skew call for further investigation into the drivers of extreme values. time-series methods, such as wavelet analysis, could be employed to identify periodicity, trends, and the impact of specific events (e.g., pandemic waves, policy changes). the descriptive statistics highlight the substantial and variable burden of long-term sickness on economic inactivity in the uk. the findings emphasize the importance of sustained efforts to improve public health infrastructure and resilience, addressing both chronic and acute factors influencing labor market participation. in the next step, we will conduct a one-way tabulation, which offers a detailed dataset summary by presenting the frequency distribution of a single variable. this analysis is particularly useful for understanding data distribution, as it helps identify how data points are spread across different categories or values. it also assists in detecting outliers by spotting values that occur infrequently, which may indicate anomalies. the results of a one-way tabulation can be found in table 2. table 2. results of one way tabulation. value count percent cumulative count cumulative percent [1800,2000) 8 8,08 8 8,08 [2000,2200) 38 38,38 46 46,46 [2200,2400) 44 44,44 90 90,91 [2400,2600) 1 1,01 91 91,92 [2600,2800) 5 5,05 96 96,97 [2800,3000) 3 3,03 99 100,00 total 99 100,00 99 100,00 source: done by authors using eviews and data from statista paulina teresiute, deimante vasiliauskaite 311 based on the results in table 2 the tabulated results provide a detailed distribution of the quarterly number of economically inactive individuals due to long-term sickness, highlighting both the concentration and variability within the dataset. this analysis is critical for understanding patterns and trends in economic inactivity caused by health conditions. the majority of observations (82.82%) fall within the [2000,2400) range, with the [2200,2400) category being the most prevalent (44.44%). this concentration indicates that, over the observed period, the typical number of inactive individuals remained relatively stable. the lower range [1800,2000) accounts for only 8.08%, suggesting that values below 2000 were rare, potentially reflective of either improved health or a smaller affected population in earlier years. the upper ranges [2400,2600), [2600,2800), and [2800,3000) collectively represent 9.09% of the dataset. these values likely correspond to significant disruptions, such as the covid-19 pandemic that temporarily increased long-term sickness rates. the scarcity of values in the [2400,2600) (1.01%) and [2800,3000) (3.03%) ranges highlights that deviations from the central trend, whether due to health improvements or crises, were limited in duration and frequency. by the [2200,2400) range, the cumulative percentage reaches 90.91%, indicating that most periods were characterized by relatively moderate levels of long-term sickness-related inactivity. this suggests that fluctuations occurred but were generally confined to predictable limits. the clustering of data within the [2000,2400) range reflects temporal stability in the number of individuals inactive due to sickness, which may align with long-term trends in chronic illness prevalence, healthcare access, and demographic factors. the relatively few observations in higher ranges, especially [2800,3000), may signify the influence of significant but short-lived events like the covid-19 pandemic, which temporarily elevated inactivity rates. this finding highlights the importance of monitoring and mitigating such disruptions. the relatively consistent mid-range values suggest that targeted policies to improve healthcare access and manage chronic conditions could significantly reduce the burden of long-term sickness. however, the occurrence of high-end values underscores the need for preparedness to address unexpected health crises that can strain the labor market. in conclusion, this distribution analysis provides valuable insights into the dynamics of long-term sickness-related economic inactivity in the uk. it underscores the importance of a dual approach: addressing the steady baseline of chronic illness while preparing for and mitigating the effects of health crises on the labor force. wavelet transform analysis wavelet analysis typically begins with a wavelet transform of the time series of interest, a process conceptually similar to a fourier transform. in this step, the time series is broken down into its spectral (frequency) components across different scales. in wavelet analysis, the concept of scale is analogous to frequency in fourier analysis. this process re-expresses the time series data from its time-domain representation to its frequency-domain behavior. this transformation helps identify the signal's activity's most prominent scales (or frequencies). we made wavelet transform analysis based on decomposition: orthogonal transform –dwt, filter class – haar. wavelet transform analysis can be practically applied to study the number of economically inactive people due to long-term sickness by examining how the patterns and trends in this data evolve over time, particularly when complex, non-stationary factors like economic conditions, health crises, or policy changes influence these patterns. the experience of illness: emotional and economic impacts 312 figure 4. wavelet transform analysis: orthogonal transform figure 4. indicates a summary of the wavelet transformation performed. the first plot in the output is a plot of the original series and the padded values in case a dyadic adjustment was applied. the last 7 plots are, respectively, the wavelet coefficients. at the first scale of wavelet decomposition, the frequency spectrum is effectively divided into two equal parts: low and high-frequency components. the low-frequency portion corresponds to the scaling coefficients (vv), while the high-frequency portion corresponds to the wavelet coefficients (ww). notably, the spectra associated with the wavelet coefficients are significantly less pronounced than those of the scaling coefficients, suggesting that the number of economically inactive people due to long-term sickness in the united kingdom series may be non-stationary. additionally, the wavelet plot includes two dashed red lines, which denote the ±1 standard deviation range for the coefficients at that scale. this visualization aids in identifying wavelet coefficients that should be shrunk to zero as part of wavelet shrinkage applications, highlighting the insignificant coefficients. coefficients that exceed a specific threshold—here, the standard deviation—are retained, while the rest are shrunk to zero. from this, it becomes clear that most wavelet coefficients at scale 1 can be disregarded, providing further evidence that high-frequency components in the number of economically inactive people due to longterm sickness in the united kingdom series are not prominent. paulina teresiute, deimante vasiliauskaite 313 figure 5. wavelet transform analysis: overlap although wavelet decomposition is not a formal statistical test, it provides an excellent method for identifying which scales (or frequencies) dominate the behavior of the underlying series. this analysis is not restricted to the first scale. to illustrate this, we will repeat the abovementioned process using the maximum overlap discrete wavelet transform (modwt) with the daubechies (daublet) filter of length 6. the transform will be applied up to the maximum possible scale, indicating which and how many wavelet coefficients are influenced by boundary conditions. figure 6. wavelet transform analysis: mra as seasonal adjustment the experience of illness: emotional and economic impacts 314 wavelet analysis helps identify patterns and uncover trends in long-term sicknessrelated inactivity (e.g., seasonal effects, economic cycles). the results reveal that certain times of the year show spikes in inactivity due to sickness, which may be linked to flu seasons or other health-related phenomena. from our analysis, we see that the covid-19 pandemic had a huge impact on uk number of economically inactive people due to long-term sickness. at the same time, we see a significant change in the number of workers reporting work-related stress, depression or anxiety in the uk. by analyzing low-frequency components, wavelet transforms identify broader trends, such as a gradual increase or decrease in long-term sickness rates over decades, potentially linked to aging populations or healthcare accessibility. analyzing short-term fluctuations, high-frequency components are used to detect abrupt changes, such as those caused by significant events (e.g., a pandemic, economic downturns, or policy changes like stricter sick leave regulations). wavelet-based models help forecast future inactivity rates by understanding past patterns, aiding policymakers and healthcare providers in preparing for potential increases in long-term sickness. our results show that the level after the covid-19 pandemic has changed significantly and can affect future trends considerably. it is essential to initiate changes in social security or healthcare policies which can help to create shifts in inactivity rates. wavelet analysis can help pinpoint when these changes occurred and assess their immediate and long-term effects. the main findings of this research identify that an increase in economically inactive people due to long-term sickness over the last years from 2020 can be due to aging populations or chronic diseases; extreme weather conditions, which can be related to climate change challenges, but the most probable is the covid-19 pandemic highlighting the need for targeted healthcare interventions. on the other side, we think that one of the reasons, but not the main factor, can be the attitude towards sickness, which has changed after the covid-19 pandemic because, before it, many people continued working even after being sick. by understanding these dynamics, policymakers can design better health and labor policies, allocate resources more effectively, and implement preventive measures to mitigate future risks associated with long-term sickness and economic inactivity. the uk must take serious decisions to manage this problem as it can start affecting economic trends and increase health problems. conclusions the uk has witnessed a substantial rise in the number of economically inactive individuals due to long-term sickness, with the highest levels recorded in early 2024. this increase, from approximately 2 million in 2019 to over 2.8 million in 2024, highlights a pressing issue affecting the nation’s workforce. the trend suggests that a combination of factors, including aging populations and the increasing prevalence of chronic diseases, drive this growth. notably, the data indicates a demographic shift in long-term sickness, with younger populations also exhibiting higher rates of inactivity. this phenomenon underscores the need for comprehensive health monitoring systems and proactive intervention strategies to manage the impacts of these changes on economic productivity. wavelet transform analysis was instrumental in decomposing the time-series data of economically inactive individuals, revealing complex, multi-scale patterns of change over time. this method effectively captured short-term fluctuations linked to transient factors such as seasonal health issues and acute paulina teresiute, deimante vasiliauskaite 315 economic disruptions by isolating high-frequency components. simultaneously, low-frequency components illustrated the underlying long-term trends, enabling a clearer understanding of persistent factors like chronic illnesses and systemic changes in health and labor market conditions. this dual analysis provided nuanced insights, allowing policymakers and researchers to identify the causes of sickness-related inactivity and the optimal time frames for implementing policy interventions. the covid-19 pandemic was a significant catalyst for the rise in long-term sickness rates, with lasting repercussions beyond the immediate health crisis. the pandemic's direct impacts, such as long covid symptoms affecting an estimated 1.8 million people in april 2022, compounded pre-existing health challenges. moreover, the pandemic induced broader societal shifts, including heightened awareness and sensitivity toward illness and a greater propensity for individuals to prioritize health over economic activity. this marked change in attitudes likely contributed to a reduction in the normalization of working while unwell, suggesting that covid-19 has permanently altered societal and workplace norms regarding health and productivity. mental health conditions have emerged as a leading cause of long-term sickness-related economic inactivity, particularly among younger demographics. between 2019 and 2022, individuals aged 16–34 reported a sharp increase in mental health-related sickness, reflecting a growing vulnerability among younger workers to conditions such as anxiety, depression, and work-related stress. this trend aligns with broader findings that mental health challenges have surged globally, fueled by post-pandemic recovery pressures, economic uncertainty, and workplace burnout. these findings underscore the urgency of integrating mental health support into employment policies, including initiatives for stress management, flexible working conditions, and workplace mental health programs, to prevent further deterioration of the labor force's well-being. the rising levels of long-term sickness-related economic inactivity present a critical challenge to the uk’s economic potential. a smaller active labor force, increased healthcare expenditures, and social security demands could constrain economic growth. policymakers must prioritize investments in healthcare infrastructure and social safety nets to address the root causes of long-term sickness. simultaneously, labor market policies should incentivize businesses to adopt flexible and inclusive employment practices, enabling individuals with chronic or mental health conditions to remain economically active. addressing these challenges will require cross-sector collaboration, integrating healthcare, social policy, and economic strategies to mitigate the adverse effects of long-term illness on both individuals and the broader economy. wavelet-based models demonstrated their utility as a forecasting tool, highlighting both immediate and long-term trends in sickness-related inactivity. by analyzing historical patterns, these models can predict future surges in inactivity rates, aiding in strategic resource allocation. for example, the models identified the covid-19 pandemic as a pivotal event that disrupted historical trends and set a new trajectory for inactivity levels. policymakers can use these insights to anticipate potential shocks, such as future pandemics or climate-related health crises, and proactively design interventions to reduce their impact. this approach ensures public health and economic resilience by enabling a rapid, informed response to emerging challenges. the experience of illness: emotional and economic impacts 316 to develop effective solutions for the rising rates of long-term sickness, further research must explore the interplay between various contributing factors, including demographic shifts, climate change, mental health, and socioeconomic conditions. longitudinal studies could provide deeper insights into how these elements interact and evolve over time. additionally, a focus on regional disparities and vulnerable populations would ensure that policies address the specific needs of diverse groups. policymakers should emphasize preventive healthcare measures, such as regular health screenings, mental health education, and community-based wellness programs, to reduce the incidence of long-term sickness. furthermore, economic policies must consider the financial implications of inactivity and incentivize businesses to proactively support employee health and well-being. references 1. agboola, a. a., esan, o. t., afolabi, o. t., soyinka, t. a., oluwaranti, a. o., & adetayo, a. (2018). economic burden of the therapeutic management of mental illnesses and its effect on household purchasing power. plos one, 13(9), e0202396-. https://doi.org/10.1371/journal.pone.0202396 2. alam, k., renzaho, a., & mahal, a. (2018). impacts of adult illness on employment outcomes of rural households in india. journal of global health, 8. https://doi.org/10.7189/jogh.08.020408 3. beale, l. (2017). human disease and health promotion. http://scioteca.caf.com/bitstream/handle/123456789/1091/red2017-eng8ene.pdf?sequence=12&isallowed=y%0ahttp://dx.doi.org/10.1016/j.regsciurbeco.2008.06.005 %0ahttps://www.researchgate.net/publication/305320484_sistem_pembetungan_terp usat_strategi_melestari 4. bowman, g. (2001). emotions and illness. journal of advanced nursing, 34, 256–263. https://doi.org/10.1046/j.1365-2648.2001.01752.x 5. bruzzone, d. (2021). meaning-making and narrative in the illness experience: a phenomenological-existential perspective. encyclopaideia, 25(59), 19–41. https://doi.org/10.6092/issn.1825-8670/11731 6. bute, j. j., donovan-kicken, e., & martins, n. (2007). effects of communication-debilitating illnesses and injuries on close relationships: a relational maintenance perspective. health communication, 21(3), 235–246. https://doi.org/10.1080/10410230701307675 7. campling, f., & sharpe, m. (2008). chronic fatigue syndrome (second edi). oxford university. 8. carel, h. (2015). illness and its experience: the patient perspective. in t. schramme & s. edwards (eds.), handbook of the philosophy of medicine (pp. 1–13). springer netherlands. https://doi.org/10.1007/978-94-017-8706-2_4-1 9. chawla, n., & kafescioglu, n. (2012). evidence-based couple therapy for chronic illnesses: enriching the emotional quality of relationships with emotionally focused therapy. journal of family psychotherapy, 23(1), 42–53. https://doi.org/10.1080/08975353.2012.654080 10. cipolletta, s. (2020). understanding illness experience from the perspective and practice of personal construct psychology. journal of constructivist psychology, 35, 1–14. https://doi.org/10.1080/10720537.2020.1805072 11. cole, s., & karantzas, g. (2006). the impact of chronic illness on relationships in early adulthood: a comparison study between health and arthritic young adults. 12. cox, e. d., palta, m., lasarev, m., binder, a. t., connolly, j. r., & flynn, k. e. (2021). paulina teresiute, deimante vasiliauskaite 317 influences of health and environmental deprivation on family relationships among children with chronic disease. quality of life research, 30(5), 1337–1346. https://doi.org/10.1007/s11136-02002737-6 13. doran, c., & kinchin, i. (2017). a review of the economic impact of mental illness. australian health review, 43. https://doi.org/10.1071/ah16115 14. doran, c., & kinchin, i. (2020). economics of mental health: providing a platform for efficient mental health policy. applied health economics and health policy, 18. https://doi.org/10.1007/s40258-020-00569-6 15. espvall, m., & dellgran, p. (2016). for better or for worse? transformation of social network relations due to long-term illness. european journal of social work, 19(5), 795–813. https://doi.org/10.1080/13691457.2015.1057107 16. ferranna, m., cadarette, d., chen, s., ghazi, p., ross, f., zucker, l., & bloom, d. (2023). the macroeconomic burden of noncommunicable diseases and mental health conditions in south america. plos one, 18, e0293144. https://doi.org/10.1371/journal.pone.0293144 17. ferrara, p., di laura, d., cortesi, p., & mantovani, l. (2021). the economic impact of hypercholesterolemia and mixed dyslipidemia: a systematic review of cost of illness studies. plos one, 16, e0254631. https://doi.org/10.1371/journal.pone.0254631 18. frank, b. (2022). approximation to general economic costs of mental illness. european journal of economics, 2(1 se-articles), 25–38. https://doi.org/10.33422/eje.v2i1.157 19. frank, r., & glied, s. (2023). america’s continuing struggle with mental illnesses: economic considerations. journal of economic perspectives, 37, 153–178. https://doi.org/10.1257/jep.37.2.153 20. groves, p. (2015). learning about emotions in illness: integrating psychotherapeutic teaching into medical education. bjpsych bulletin, 39, 150. https://doi.org/10.1192/pb.bp.114.048785 21. havi, c. (2008). the social world of illness. in h. carel (ed.), illness (pp. 37–60). acumen publishing. https://doi.org/doi: 10.1017/upo9781844654215.004 22. huang, y., hickman, j. e., & wu, s. (2018). impacts of enhanced fertilizer applications on tropospheric ozone and crop damage over sub-saharan africa. atmospheric environment, 180, 117–125. https://doi.org/10.1016/j.atmosenv.2018.02.040 23. jacobs, p., knoops, f., & lesage, a. (2018). a review of measures of aggregate mental health costs in canada. canadian journal of community mental health, 36, 1–17. https://doi.org/10.7870/cjcmh-2017-032 24. jeske, m., james, j., & joyce, k. (2023). diagnosis and the practices of patienthood: how diagnostic journeys shape illness experiences. sociology of health & illness, 46. https://doi.org/10.1111/1467-9566.13614 25. keith adamson lydia pantea, jessica tyrhwitt, george tolomiczenko and terry mitchell, j. b. (2012). understanding the patients’ perspective of emotional support to significantly improve overall patient satisfaction . healthcare quarterly, 15(4), 63–69. https://www.longwoods.com/product/23193 26. lambert, m., karow, a., schulz, h., & gallinat, j. (2023). gestufte, evidenzbasierte, integrierte versorgung. monitor versorgungsforschung, 2023, 38. https://doi.org/10.24945/mvf.04.23.1866-0533.2526 27. layard, r. (2016). the economics of mental health. iza world of labor. https://doi.org/10.15185/izawol.321 28. lekander, m. (2022). the sickness response. in m. lekander (ed.), the inflamed feeling: the the experience of illness: emotional and economic impacts 318 brain’s role in immune defence (p. 0). oxford university press. https://doi.org/10.1093/oso/9780198863441.003.0004 29. lim, k.-l., jacobs, ) ; p, ohinmaa, ) ; a, & cs dewa, ) ; (2008). chronic diseases in canada (vol. 28). www.statcan.ca, 30. lloyd, g. g. (2007). understanding psychological reactions to physical illness. in g. lloyd & e. guthrie (eds.), handbook of liaison psychiatry (pp. 64–82). cambridge university press. https://doi.org/doi: 10.1017/cbo9780511543975.005 31. locock, l., lehman, r., & epstein, r. (2017). sharing experiences of illness and care. jama internal medicine, 177. https://doi.org/10.1001/jamainternmed.2017.1935 32. lucius-hoene, g., holmberg, c., & meyer, t. (eds.). (2018). illness narratives in practice: potentials and challenges of using narratives in health-related contexts. oxford university press. https://doi.org/10.1093/med/9780198806660.001.0001 33. madeira, l., leal, b., filipe, t., rodrigues, m., & figueira, m. l. (2019). the uncanny of the illness experience: can phenomenology help? psychopathology, 52, 1–8. https://doi.org/10.1159/000504141 34. maj, m., kowalski, m., gnat, m., łukasiewicz, j., & pliszczuk, d. (2024). an intelligent support system and emotional state tests for people who are sick or recovering. journal of modern science, 57, 371–387. https://doi.org/10.13166/jms/191148 35. mallat, s. (1999). a wavelet tour of signal processing. 36. martini, d., & attallah, t. (2019). health economics: the hidden costs of mental illness (pp. 3–16). https://doi.org/10.1007/978-3-030-12665-0_1 37. mccrone, p. (2011). mental health economics: current methodological issues. epidemiology and psychiatric sciences, 20(3), 239–243. https://doi.org/doi: 10.1017/s2045796011000485 38. mcdaniel, s., hepworth, j., & doherty, w. (2000). the shared emotional themes of illness. journal of family psychotherapy, 10, 1–8. https://doi.org/10.1300/j085v10n04_01 39. naidorf, j. (2024). how do sick and injured people feel and act? healthcare administration leadership & management journal, 2(3), 129–130. https://doi.org/https://doi.org/10.55834/halmj.3080819943 40. neelsen, s., limwattananon, c., o’donnell, o., & doorslaer, e. (2015). economic impact of illness with health insurance but without income insurance. ssrn electronic journal. https://doi.org/10.2139/ssrn.2608856 41. o’hare, a. m., richards, c., szarka, j., mcfarland, l. v, showalter, w., vig, e. k., sudore, r. l., crowley, s. t., trivedi, r., & taylor, j. s. (2018). emotional impact of illness and care on patients with advanced kidney disease. clinical journal of the american society of nephrology, 13(7). https://journals.lww.com/cjasn/fulltext/2018/07000/emotional_ impact_of_illness_and_care_on_patients.11.aspx 42. okediji, p. t., ojo, a. o., ojo, a. i., ojo, a. s., ojo, o. e., & abioye-kuteyi, e. a. (2017). the economic impacts of chronic illness on households of patients in ile-ife, south-western nigeria. cureus. https://doi.org/10.7759/cureus.1756 43. owoeye, a. b. (2024). the economic impact of mental health illness and public perceptions: a critical investigation of the nigerian state. international journal for multidisciplinary research, 6(1), 1–21. www.ijfmr.com 44. palmeira, a. b. p., & gewehr, r. b. (2018). the place of the experience of illness in the understanding of ailments: medical discourse and subjectivity. ciencia e saude coletiva, 23(8), 2469–2478. https://doi.org/10.1590/1413-81232018238.15842016 paulina teresiute, deimante vasiliauskaite 319 45. patel, a. (2018). economic costs of mental illness (pp. 25–34). https://doi.org/10.1093/med/9780198792994.003.0003 46. picton, c. (2011). psychosocial aspects of care. emergency nurse the journal of the rcn accident and emergency nursing association, 19(4). https://doi.org/10.7748/en2011.07.19.4.3.p5778 47. razzouk, d. (2017). burden and indirect costs of mental disorders. in mental health economics: the costs and benefits of psychiatric care (pp. 381–391). https://doi.org/10.1007/978-3-319-55266-8_25 48. schofield, d. j., shrestha, r. n., percival, r., passey, m. e., kelly, s. j., & callander, e. j. (2011). economic impacts of illness in older workers: quantifying the impact of illness on income, tax revenue and government spending. bmc public health, 11(1), 418. https://doi.org/10.1186/14712458-11-418 49. shearer, j., mccrone, p., & romeo, r. (2016). economic evaluation of mental health interventions: a guide to costing approaches. pharmacoeconomics, 34(7), 651–664. https://doi.org/10.1007/s40273-016-0390-3 50. shrout, m. r., buehler, e. m., lee, d. g., & renna, m. e. (2024). illness-related partner communication predicts better health, covid, and social-contextual outcomes amid the covid19 pandemic: a longitudinal study of students with concealable chronic health conditions. journal of social and personal relationships, 41(11), 3359–3384. https://doi.org/10.1177/02654075241264852 51. shrout, m. r., weigel, d., & laurenceau, j.-p. (2023). couples and concealable chronic illness: investigating couples’ communication, coping, and relational well-being over time. journal of family psychology, 38. https://doi.org/10.1037/fam0001136 52. skrzypek, m. (2014). the social origin of the illness experience an outline of problems. annals of agricultural and environmental medicine : aaem, 21, 654–660. https://doi.org/10.5604/12321966.1120619 53. sowers, k. m., dulmus, c. n., & linn, b. k. (2019). mental illness: worldwide. nasw press and oxford university press. https://doi.org/10.1093/acrefore/9780199975839. 013.1154 54. torrence, c., & compo, g. p. (1998). a practical guide to wavelet analysis. 55. trautmann, s., rehm, j., & wittchen, h. (2016). the economic costs of mental disorders. embo reports, 17(9), 1245–1249. https://doi.org/10.15252/embr.201642951 56. turk, e., & albreht, t. (2010). economic burden of mental diseases. in zdravniski vestnik (vol. 79). 57. wilson, a. s., prescott, j., & krasniewicz, j. (2016). using technology for evaluation and support of patients’ emotional states in healthcare. in emotions, technology, and health (pp. 3–21). elsevier. https://doi.org/10.1016/b978-0-12-801737-1.00001-9 58. zakkar, m. (2019). patient experience: determinants and manifestations. international journal of health governance, 24. https://doi.org/10.1108/ijhg-09-2018-0046 agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 19, no. 1 (2025), pp. 77-86 77 the impact of socio-economic factors on the effectiveness of public accountability frameworks in the eu a.-m. coatu, f.-a. popescu, l. petrila ana-maria coatu¹, felix-angel popescu², laurențiu petrila³ ¹ ² faculty of economic sciences, agora university of oradea, romania ¹ e-mail: anamaria.coatu@gmail.com ² https://orcid.org/0000-0002-3020-2098, e-mail: felixangelpopescu@gmail.com ³ faculty of juridical and administrative sciences, agora university of oradea & faculty of history, international relations, political sciences & communication sciences, university of oradea, romania. https://orcid.org/0000-0001-8415-3327, e-mail: lauren.petrila@gmail.com abstract: this study explores how socio-economic factors affect the effectiveness of public accountability frameworks in eu member states, with romania as a case study. using data from the world bank, eurobarometer, and cross-country comparisons, it identifies five key determinants: income inequality, education, healthcare access, political participation, and economic stability. grounded in institutional theory, the research shows that inclusive institutions and lower disparities lead to stronger accountability, while weaker frameworks often reinforce inequality and corruption. for romania, the study recommends boosting transparency, enforcing anti-corruption measures, improving rural-urban equity, and enhancing civic education to strengthen the link between citizens and institutions. keywords: public accountability, socio-economic factors, european union, governance, institutional theory, romania, income inequality, transparency introduction democratic governance relies fundamentally on effective public accountability— mechanisms that ensure governments remain transparent, responsive, and answerable to their citizens. within the european union’s complex, multi-level governance structure, the relationship between socio-economic development and the functionality of accountability frameworks has become increasingly important for understanding variations in governance quality among member states. despite the eu’s formal commitment to transparency, good governance, and democratic accountability, significant disparities persist in how effectively these principles are implemented across member countries. while states such as those in the nordic region consistently demonstrate high levels of institutional trust and citizen engagement, several eastern european countries, including romania, continue to face structural challenges such as corruption, weak institutional capacity, and low public confidence in governance. these differences suggest that institutional design alone does not account for variations in accountability effectiveness. rather, underlying socio-economic factors—such as income inequality, education levels, economic stability, and social cohesion—play a critical role in shaping how accountability mechanisms are perceived, accessed, and enforced. in contexts mailto:anamaria.coatu@gmail.com https://orcid.org/0000-0002-3020-2098 mailto:felixangelpopescu@gmail.com https://orcid.org/0000-0001-8415-3327 mailto:lauren.petrila@gmail.com the impact of socio-economic factors on the effectiveness of public accountability frameworks in the eu 78 marked by high inequality or weak public services, even well-designed frameworks may fail to function effectively. this study investigates how socio-economic conditions influence the effectiveness of public accountability mechanisms across eu member states, with a particular focus on romania as a post-transition case. grounded in institutional theory, the research explores how socio-economic contexts affect the legitimacy and performance of governance structures. the study addresses the following research questions:  what socio-economic factors explain cross-national variations in accountability effectiveness within the eu?  how do income inequality, education, economic conditions, and social cohesion interact to shape governance outcomes? by combining comparative analysis with a focused case study, this research contributes to the broader understanding of democratic accountability in the eu. it aims to inform both scholarly debates on governance and practical efforts to strengthen institutional performance, especially in countries where socio-economic disparities undermine accountability. romania’s experience offers valuable insights into the challenges and opportunities of building more effective accountability frameworks in post-transition settings. governance structures are deeply influenced by historical choices, with institutions playing a pivotal role in shaping outcomes. countries with inclusive institutions tend to channel socio-economic development into equitable and sustainable governance, promoting transparency and fairness. in contrast, nations with emerging institutions often reinforce cycles of inequality and corruption, undermining public trust and hindering long-term progress. recognizing the importance of institutional inclusivity is critical for understanding governance challenges and opportunities in diverse socio-economic contexts. the effectiveness of governance frameworks hinges on the strength and adaptability of institutions. robust checks and balances, such as independent judicial systems, transparent public financial management, and active civil society organizations, are essential for translating socio-economic resources into effective governance practices. institutions that fail to evolve in response to socio-economic changes, such as globalization, technological advancements, or demographic shifts, risk becoming rigid and unresponsive, fuelling public discontent. institutional adaptability is therefore not only a mechanism for resilience, but also a prerequisite for legitimacy and public trust. addressing socio-economic inequalities is equally vital for fostering better governance. programs that reduce income disparities and improve access to education create an environment where governance frameworks can thrive. by empowering marginalized groups and enhancing public awareness, these efforts contribute to more equitable and inclusive systems of governance. moreover, empowering civil society strengthens accountability, ensuring that governance reflects the diverse needs and expectations of the population. building institutions that are transparent, inclusive, and adaptive remains fundamental to effective governance. transparency mitigates corruption, inclusivity fosters equitable representation, and adaptability ensures institutions remain relevant amid changing socioeconomic dynamics. by incorporating these principles into policy, the european union and its member states can address the complex interplay between socio-economic development and governance, fostering more effective and equitable public accountability frameworks. ana-maria coatu, felix-angel popescu, laurențiu petrila 79 exploring the link between socio-economic development and governance socio-economic development and governance are intricately connected, with the effectiveness of governance frameworks often shaped by the socio-economic environment in which they operate. understanding this relationship requires a deep dive into theoretical foundations, particularly institutional theory, which provide valuable insights into how socioeconomic factors influence governance. institutional theory places institutions—understood as shared beliefs, norms, rules, and symbols—at the core of organizational analysis. it examines how organizations adopt practices and designs to gain legitimacy, align with societal norms, and ensure survival in their environments. this theory emphasizes that organizations are not isolated entities but are deeply influenced by external cultural, legal, and normative forces. institutional theory focuses on how institutions mediate the relationship between socioeconomic factors and governance. institutional theory has significantly contributed to understanding why organizations adopt specific practices. however, one may consider it obsolete for its perceived determinism and oversimplification of human agency. despite these challenges, the theory remains a powerful framework for analysing organizational behaviour, particularly in contexts where legitimacy and cultural alignment are critical for survival. public accountability is a cornerstone of effective governance, ensuring that governments and public institutions remain answerable to their citizens. within the european union (eu), the complexity of multi-level governance structures presents unique challenges and opportunities for fostering accountability. a significant body of research has explored the socio-economic determinants that influence public accountability in the eu, offering valuable insights into how these factors shape governance outcomes. numerous studies have identified key socio-economic factors that play a critical role in shaping public accountability frameworks within the eu. these factors include economic development, income inequality, education levels, and cultural diversity. below, we review some of the most relevant findings. research consistently highlights a positive correlation between economic development and public accountability. economically prosperous member states tend to have stronger institutional frameworks, greater transparency, and higher levels of civic participation. for instance, a study by charron et al. (2017) found that wealthier eu countries exhibit lower levels of corruption and higher public trust in institutions. studies such as those by rothstein and uslaner (2005) argue that high levels of income inequality erode social trust and weaken public accountability. in the eu, countries with lower income inequality, such as sweden and denmark, tend to score higher on accountability metrics compared to more unequal states like romania and bulgaria. education is a critical driver of civic engagement and public accountability. according to a study by deakin and reed (2019), higher education levels are associated with greater demand for transparency and better oversight of public resources. this trend is particularly evident in northern european countries, where investments in education have fostered a culture of accountability. cultural and social norms significantly influence public accountability. research by hofstede et al. (2010) suggests that individualistic cultures, prevalent in western europe, are more likely to prioritize accountability compared to collectivist cultures. additionally, cultural attitudes toward corruption and nepotism vary across the eu, affecting the effectiveness of accountability mechanisms. the impact of socio-economic factors on the effectiveness of public accountability frameworks in the eu 80 the eu's diverse socio-economic landscape creates significant regional variations in public accountability. studies have categorized member states into distinct clusters based on their accountability performance: countries such as sweden, germany, and the netherlands consistently rank high in public accountability indices. these nations benefit from strong institutions, robust legal frameworks, and high levels of socio-economic development. southern european countries, including italy, greece, and spain, face challenges related to corruption and bureaucratic inefficiency. however, recent reforms aimed at enhancing transparency and reducing inequality have shown promising results. eastern european states, including romania, bulgaria, and hungary, often struggle with weak institutions and low public trust. research by mungiu-pippidi (2015) highlights the role of historical legacies and socio-economic disparities in shaping these outcomes. the role of transparency, integrity, and accountability in governance transparency, integrity, and accountability are foundational to effective governance in the european union (eu). these principles are enshrined in eu treaties, emphasizing open decision-making processes, citizen participation, and the accessibility of information. such frameworks are critical for building trust in public institutions and ensuring that socioeconomic policies serve the common good. for example, mechanisms like the eu's transparency register and parliamentary oversight help scrutinize interactions between policymakers and lobbyists, ensuring that policies align with citizens' interests rather than private agendas. there is an uneven implementation of transparency and accountability measures across eu institutions and member states, shaped by socio-economic disparities. in wealthier countries with robust economies, these frameworks function more effectively, supported by stronger institutions and greater public trust. conversely, in countries with weaker economies or higher levels of corruption, such as romania or bulgaria, public accountability mechanisms often face greater challenges. socio-economic inequality exacerbates these issues, making it harder to ensure fair representation and equitable policy implementation. despite significant progress, the eu faces challenges in ensuring consistent application of accountability frameworks. institutions such as the european parliament and commission have adopted codes of conduct, mandatory transparency requirements, and measures to regulate lobbying. however, gaps remain in areas like enforcement, particularly for the council of the eu, which lags in transparency compared to other institutions. recent reforms aim to address these gaps, including the introduction of stricter codes of conduct for european commissioners and measures to mitigate conflicts of interest. a recurring theme in the report is the role of citizen engagement in strengthening public accountability. eu treaties mandate that institutions act “as closely as possible to the citizen,” reflecting the need for participatory governance. this principle aligns with the broader socioeconomic goal of reducing disparities by involving marginalized communities in the decisionmaking process. such participation fosters trust and ensures that governance frameworks address diverse needs effectively. in the european union (eu), policymaking has shifted away from traditional, hierarchical structures toward more complex, decentralized processes. these include networks ana-maria coatu, felix-angel popescu, laurențiu petrila 81 of political, public, and private actors, forming informal and formal groups that collaborate on policy formulation and implementation. these interactions take place across multiple levels of governance, and often involve a diverse range of actors, from bureaucracies to interest groups and private companies. however, this networked form of governance raises critical concerns about accountability. one of the central issues in multi-level governance is the accountability of the various actors involved. these actors, such as bureaucrats, interest groups, non-governmental organizations (ngos), and experts, may not have a democratic mandate, which complicates the accountability process. while they are accountable to different entities, these relationships are often weak or ambiguous. for instance, bureaucrats, though subject to political oversight, may not face sufficient scrutiny due to the complex layers of governance. similarly, interest groups often only answer to their members or donors, and ngos may struggle with internal accountability and external representation of their constituencies. experts, who are seen as independent, are usually held accountable by their peers but do not face political accountability. the lack of direct political oversight in these networks leads to what some describe as "accountability gaps," where decision-making processes are obscure and hard to scrutinize by the public. this lack of visibility is particularly evident in formal networks, like european regulatory agencies, which deal with technical matters that don’t attract media attention. as a result, public scrutiny is limited, and accountability can become fragmented. the complexity of multi-level networks also creates competing accountability demands. actors within the network must navigate multiple forums, each with different expectations, which can lead to conflicting priorities and a lack of clarity about who is responsible for what. as accountability procedures become more intricate, they risk becoming ineffective or misunderstood. these networks, though a response to the complexity of modern governance, face challenges in ensuring that all actors are properly held to account, creating a paradox of "excess accountability" without adequate political oversight. while eu governance networks offer flexibility and inclusivity, they also present significant challenges for political accountability. the lack of transparency and the fragmentation of responsibility can make it difficult for citizens and other stakeholders to hold decision-makers accountable, undermining trust in the eu’s policymaking processes. the impact of socio-economic factors on the effectiveness of public accountability frameworks in the eu: a focus on romania the effectiveness of public accountability frameworks across european union (eu) member states varies significantly, with socio-economic factors playing a critical role in shaping institutional performance. disparities in income distribution, education, healthcare access, political participation, and economic stability directly influence public trust, civic engagement, and the ability of governance systems to ensure transparency and responsiveness. this section explores these dynamics, with a particular focus on romania as a representative post-transition state. income inequality the impact of socio-economic factors on the effectiveness of public accountability frameworks in the eu 82 income inequality is a major barrier to effective accountability. societies with pronounced economic disparities often exhibit lower levels of trust in public institutions and reduced civic engagement. in the eu, nordic countries such as sweden and denmark— characterized by lower gini coefficients and strong welfare systems—demonstrate high accountability standards and robust citizen involvement. conversely, romania, with a gini coefficient of 31 (above the eu average of 29.6), experiences weakened public trust, limited political participation, and persistent perceptions of corruption. these dynamics illustrate how inequality not only restricts access to power but also erodes the social cohesion necessary for holding institutions accountable. education and literacy educational attainment is closely linked to civic awareness and the capacity to demand accountability. countries with high literacy rates and well-developed education systems, such as finland and denmark, tend to have more informed populations that actively engage in public affairs. romania, while improving in educational access, still faces marked disparities between urban and rural areas. these gaps hinder the development of a well-informed citizenry, particularly in marginalized communities, and limit the effectiveness of accountability mechanisms. access to healthcare equitable access to healthcare contributes to social trust and institutional legitimacy. in countries like germany and france, well-funded healthcare systems support positive citizenstate relations, reinforcing accountability structures. in contrast, romania struggles with systemic healthcare challenges, including underfunding and regional disparities. limited access to quality medical services in rural areas exacerbates public dissatisfaction and reinforces perceptions of governmental neglect, thereby reducing citizen engagement in oversight processes. political and civic participation citizen participation in political life is essential for the functioning of accountability frameworks. in high-participation countries such as sweden and denmark, strong civic cultures underpin institutional transparency and responsiveness. romania, by contrast, records lowerthan-average voter turnout and civic engagement. this disengagement is often driven by public disillusionment with political elites and widespread perceptions of corruption. when citizens feel alienated from decision-making processes, the legitimacy and effectiveness of accountability mechanisms are undermined. economic stability a stable and inclusive economy provides the material foundation for strong governance. states with diversified and resilient economies—such as germany and the netherlands—tend to have the institutional capacity to deliver high-quality public services, which in turn reinforces public trust and accountability. romania, despite experiencing consistent economic growth, continues to face high levels of poverty and regional economic ana-maria coatu, felix-angel popescu, laurențiu petrila 83 disparities. these challenges limit institutional performance and hinder citizen participation, particularly in economically disadvantaged areas. together, these socio-economic factors create distinct accountability landscapes across the eu. romania’s experience underscores how formal institutional reforms may fall short when underlying socio-economic inequalities persist. a deeper understanding of these structural factors is essential for designing effective, context-sensitive accountability frameworks in both newer and older eu member states. the effectiveness of public accountability frameworks across eu member states is deeply influenced by socio-economic factors, including income inequality, education, access to healthcare, political participation, and economic stability. romania, with its high levels of income inequality, disparities in education, and challenges in healthcare access, faces significant hurdles in fostering public trust and ensuring effective accountability. in contrast, eu member states with lower socioeconomic disparities, such as the nordic countries, tend to have more effective accountability mechanisms due to greater public trust, higher political participation, and stronger social safety nets. for romania to enhance the effectiveness of its public accountability systems, it must focus on addressing socio-economic inequalities, improving education outcomes, and ensuring broader access to public services, particularly healthcare. by doing so, romania can foster greater citizen engagement, improve trust in government institutions, and strengthen the overall accountability framework. in our research on public accountability in the eu we have used quantitative analyses, based on data from indices such as the world bank’s worldwide governance indicators (wgi), and eurobarometer surveys to measure accountability levels and their socio-economic determinants and statistics on gdp per capita, economic growth rates, and education levels affect public accountability frameworks. the eurobarometer 101 survey sheds light on public perceptions across the european union (eu), offering valuable insights into governance and socio-economic trends. in romania, the findings highlight citizens' attitudes toward eu governance, trust in institutions, and socio-economic challenges that influence governance effectiveness. romanian respondents demonstrated moderate trust in eu institutions, reflecting alignment with broader eu trends. however, trust in national institutions remains relatively low, indicating ongoing governance challenges. corruption, perceived inefficiencies in public administration, and a lack of transparency are among the key concerns influencing public opinion. these findings emphasize the need for stronger accountability mechanisms and more transparent governance practices at the national level. the survey revealed a growing interest among romanian citizens in participating in eu decision-making processes. with over 70% of respondents expressing interest in the upcoming european elections, this highlights a positive shift toward civic engagement and political participation. however, barriers such as limited awareness of eu policies and their local impact remain challenges to further engagement. economic disparities and income inequality significantly affect governance in romania. the survey highlights that citizens from economically disadvantaged regions express higher dissatisfaction with governance compared to those in urbanized and wealthier areas. the impact of socio-economic factors on the effectiveness of public accountability frameworks in the eu 84 this underscores the importance of targeted socio-economic policies to reduce disparities and improve trust in public institutions. to address these challenges, romania could focus on enhancing transparency, reducing corruption, and fostering greater civic participation. promoting educational initiatives about eu governance and creating platforms for citizen feedback could further bridge the gap between citizens and institutions. by addressing these concerns, romania has the opportunity to strengthen both national and eu-level governance, ensuring that public trust is rebuilt and democratic engagement continues to grow. the world bank's worldwide governance indicators (wgi) offer a comprehensive framework to evaluate governance across six key dimensions: voice and accountability, political stability and absence of violence/terrorism, government effectiveness, regulatory quality, rule of law, and control of corruption. these indicators provide insight into the governance performance of countries worldwide, including romania, by combining data from diverse sources such as surveys, reports, and expert assessments. romania's performance on the world bank's worldwide governance indicators (wgi) from 2013-2023 reveals a nuanced picture of governance progress. romania demonstrates strongest performance in voice and accountability (71st percentile in 2023) and regulatory quality (73rd percentile), reflecting successful democratic institutions and eu regulatory alignment. however, significant challenges persist in political stability (53rd percentile) and control of corruption (54th percentile), indicating ongoing governance weaknesses that affect public trust. government effectiveness remains a critical area where romania struggles. the inefficiency of public administration, bureaucratic hurdles, and inconsistent policy implementation have hindered progress. these issues are particularly evident in areas like healthcare, education, and infrastructure development. in regulatory quality, romania’s efforts to align with eu standards have been significant, but challenges in enforcement and administrative delays remain obstacles. the rule of law in romania presents a mixed picture. while the judiciary has made significant strides in recent years, including tackling high-profile corruption cases, public trust in judicial impartiality remains fragile. this ties directly to the control of corruption, a key governance metric where romania has faced persistent challenges. despite notable anticorruption campaigns and increased scrutiny of public officials, corruption continues to erode public confidence in governance, affecting both domestic and foreign investment. to improve its wgi scores and overall governance, romania must focus on strengthening public institutions, improving transparency, and enhancing the efficiency of public services. addressing corruption requires not only robust enforcement of anti-corruption laws but also fostering a culture of integrity within public administration. furthermore, investing in civic education and fostering public participation in governance can help bridge the gap between citizens and institutions. by addressing these governance challenges, romania has the potential to not only improve its wgi rankings but also build a stronger, more resilient society that can better align with eu norms and foster sustainable development. ana-maria coatu, felix-angel popescu, laurențiu petrila 85 conclusions this study has demonstrated that the effectiveness of public accountability frameworks across european union member states is deeply intertwined with broader socio-economic conditions. while formal institutional design and legal frameworks remain essential, they are insufficient on their own to ensure accountability in contexts marked by persistent inequality, low civic participation, and uneven access to public services. by applying institutional theory and drawing on comparative data from eu countries, with a specific focus on romania, this research has identified five key socio-economic determinants—income inequality, education, healthcare access, political participation, and economic stability—as central to shaping governance outcomes. the romanian case illustrates how post-transition countries continue to struggle with entrenched governance challenges despite formal alignment with eu standards. socioeconomic disparities, especially between rural and urban regions, weaken public trust and hinder citizen engagement, thereby reducing the legitimacy and efficacy of accountability mechanisms. while romania has made progress in areas such as regulatory alignment and democratic participation, gaps remain in corruption control, public service delivery, and government effectiveness. the findings underscore the importance of adopting an integrated approach to governance reform—one that combines institutional strengthening with targeted socioeconomic interventions. improving access to education and healthcare, reducing income inequality, and fostering civic engagement are not only social imperatives but also prerequisites for building accountable and transparent governance systems. for romania and other eu member states facing similar challenges, future progress depends on policies that prioritize institutional inclusivity, citizen empowerment, and adaptive governance. in doing so, the eu as a whole can better ensure that its public accountability frameworks are both equitable and resilient, supporting democratic legitimacy and policy coherence across its diverse socio-political landscape. acknowledgement: this research has been conducted with the support of the erasmus+ programme of the european union, within the project 101127024, jean monnet module enmodemo enhancing and monitoring democracy in romania as a eu member state, cofinanced by european commission in the framework of jean monnet action references 1. charron, n., dijkstra, l., & lapuente, v. (2017). measuring quality of government in eu regions. regional studies, 51(4), 833-847. 2. deakin, m., & reed, g. (2019). education and public accountability in the eu. european journal of education, 54(2), 221-234. 3. hofstede, g., hofstede, g. j., & minkov, m. (2010). cultures and organizations: software of the mind. (3rd ed.). mcgraw-hill. 4. mungiu-pippidi, a. (2015). the quest for good governance: how societies develop control of corruption. cambridge university press. 5. papadopoulos, y. (2021). political accountability in eu multi-level governance: the glass half-full. swedish institute for european policy studies, 2021:4. the impact of socio-economic factors on the effectiveness of public accountability frameworks in the eu 86 6. reuters. (2025, january 21). eu approves romania’s seven-year deficit reduction plan at https://www.reuters.com/markets/europe/eu-approves-romanias-seven-yeardeficit-reduction-plan-2025-01-21/ 7. reuters. (2025, january 24). romania eyeing bond sales, fights to avoid ‘fallen angel’ junk rating at https://www.reuters.com/markets/europe/romania-eyeing-bond-salesfights-avoid-fallen-angel-junk-rating-2025-01-24/ 8. reuters. (2024, october 25). romanian firms wary of post-election ‘shock therapy’ to cut budget deficit at https://www.reuters.com/markets/europe/romanian-firms-warypost-election-shock-therapy-cut-budget-deficit-2024-10-25/ 9. rothstein, b., & uslaner, e. m. (2005). all for all: equality, corruption, and social trust. world politics, 58(1), 41-72. 10. european parliament voter turnout statistics: https://www.europarl.europa.eu/atyour-service/en/20190201pvl00001 11. oecd education at a glance: https://www.oecd.org/education/ 12. transparency international corruption perceptions index: https://www.transparency.org/en/cpi 13. world bank: https://www.worldbank.org/en/publication/worldwide-governanceindicators https://www.reuters.com/markets/europe/eu-approves-romanias-seven-year-deficit-reduction-plan-2025-01-21/ https://www.reuters.com/markets/europe/eu-approves-romanias-seven-year-deficit-reduction-plan-2025-01-21/ https://www.reuters.com/markets/europe/romania-eyeing-bond-sales-fights-avoid-fallen-angel-junk-rating-2025-01-24/ https://www.reuters.com/markets/europe/romania-eyeing-bond-sales-fights-avoid-fallen-angel-junk-rating-2025-01-24/ https://www.reuters.com/markets/europe/romanian-firms-wary-post-election-shock-therapy-cut-budget-deficit-2024-10-25/ https://www.reuters.com/markets/europe/romanian-firms-wary-post-election-shock-therapy-cut-budget-deficit-2024-10-25/ https://www.europarl.europa.eu/at-your-service/en/20190201pvl00001 https://www.europarl.europa.eu/at-your-service/en/20190201pvl00001 https://www.oecd.org/education/ https://www.transparency.org/en/cpi https://www.worldbank.org/en/publication/worldwide-governance-indicators https://www.worldbank.org/en/publication/worldwide-governance-indicators agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 19, no. 1 (2025), pp. 132-144 132 the importance of tour guides training in adjara region, georgia t. karbaia tamari karbaia caucasus university, georgia https://orcid.org/0009-0005-2945-0210, email: tkarbaia@cu.edu.ge abstract: the aim of the study was to analyze the influence of training on guides’ job satisfaction, as well as the relationship between service satisfaction and demographic variables. the research was conducted among independent tour guides, agency-based tour guides, and customers. although the relationships among these variables have been widely studied by scholars, there is a lack of empirical data specifically in the context of georgia’s adjara region. adjara is one of the most visited destinations in georgia (georgian tourism association 2024). considering the region’s geographical, political and diverse religious characteristics, tour guides require relevant qualification, particularly, in terms of providing precise information. it is also quite interesting to examine the international practice about managing tour guides. in various countries, such as singapore (board, n.d.), japan (huang & weiler 2010; (thomson, tanaka, & morikoshi, 2021) and so on, tour guides are well-trained and licensed (huang, s. & weiler, b. 2010). empirical findings claim that training influences employee performance and job satisfaction (nauman, bhatti, jalil, & riaz, 2021) (okechukwu, 2017). the research employed a mixed-methods approach as it consists of quantitative as well as qualitative components. the collected data was analyzed by widely applied software spss that gives scholars the opportunity to process large numerical data through performing various analytical approaches. despite the contributions of the research, it has certain limitations. keywords: tour guides, training, job satisfaction, challenges. introduction the study examines the influence of tour guides’ training on the level of their job satisfaction and also the impact of demographic variables on customer satisfaction. moreover, it was identified certain challenges faced in the sector. there is much theoretical findings describing the relationship, however, research novelty is applying the empirical approach in the specific regional context. literature review includes the theoretical overview about the international practices regarding managing guides’ competences, the empirical findings about the relationship among job satisfaction and tour guides training, the influence of job satisfaction. the research is designed based on mixed approach, including application of focus groups and surveys. the first hypotheses about the relationship among tour guide training and their job satisfaction. it was also interesting to find the influence of demographic variables on the customer satisfaction. https://orcid.org/0009-0005-2945-0210 mailto:tkarbaia@cu.edu.ge tamari karbaia 133 despite the research limitations, specifically, the lack of generalizability on the country level, findings can be interesting for the local context and has certain implication for the relevant stakeholders to promote sustainable tourism. literature review local context of adjara region adjara is an autonomous region located in the southwestern part of georgia (georgia, n.d.) near black sea and turkey. it is unique due to its cultural, political, religious context. it combines georgian and turkish elements expressed by diverse religions, customs, architecture, cuisine, music and so on. it has a status of an autonomous republic within georgia. the region itself is diverse in terms of landscape as it consists with mountainous districts. government of adjara provides different trainings for hospitality sector, including guides (www.adjara.gov.ge) however, this approach is not obligatory for them, important topics and, finally, there is not utilized by all guides. the city batumi is strategically important due to tourism, transportation, and trade. satisfaction level of international tourists was significantly increased from 2022 till 2023. statistics of international nonresident tourists from 15 years old are increasing from 2022 till 2023 according to (geostat, 2024). in the first quarter of 2023, 1,208,462 international visits, which is the 74.7% of the data before pandemics 74.7%-ით international practice of managing tour guides (administration, n.d.) international practices international practices regarding the licensing of tour guides vary significantly from country to country. they ensure that tour guides have the necessary knowledge and skills to provide high-quality experiences for travelers while also upholding safety and professionalism standards. here are some common examples and practices found internationally:  the uk has a professional body called the institute of tourist guiding (itg, 2024), which offers certification for tour guides. guides can obtain badges in specific regions such as london or scotland after completing training and passing exams. these badges signify that the guide has met certain standards of knowledge and professionalism.  in some european countries, tour guide licensing is regulated at the national level, while in others, it may be managed at the regional or local level. the european federation of tourist guide associations (feg, 2024) works to promote professional standards and cooperation among tour guides across europe.  in australia, tour guide licensing requirements vary by state and territory. for example, in new south wales, guides need to complete a training course and obtain accreditation from the state tourism authority. similar requirements exist in other parts of the country (tga, n.d.).  in japan, tour guide licensing is managed by local governments. guides must pass exams administered by their local tourism authority and obtain a license to operate legally. the japan national tourism organization (jnto, 2024) provides information on licensing requirements and training programs for guides. http://www.adjara.gov.ge/ the importance of tour guides training in adjara region, georgia 134 tour guides’ competences there are verious references covering various aspects related to the importance of training for tour guides, including interpretation, trip planning, tourism management, tourism impacts, and the role of guides in delivering quality experiences to tourists. the article "the role of the tour guide in interpretation: a case study from the australian outback" underscores the importance of tour guides in providing interpretation services that enhance visitor experiences and contribute to the sustainable management of tourism destinations, using the australian outback as a case study to illustrate these points. (prideaux & carson, the role of the tour guide in interpretation: a case study from the australian outback, 2003). another piece of empirical work article provides insights into the shifting dynamics of travel planning in the digital age and offers valuable implications for destination marketers, travel service providers, and researchers in the field of tourism. (xiang, wang, o'leary, & fesenmaier, 2007). the article "progress in tourism management: from the geography of tourism to geographies of tourism – a review" offers a comprehensive review of the evolution of tourism management, particularly focusing on the transition from a geographical perspective to a more holistic understanding of tourism as a multidisciplinary field. the author introduces the concept of tourism management and highlights its interdisciplinary nature, drawing from fields such as geography, economics, sociology, and environmental studies. (leask, 2005). a book "tourism: principles, practices, philosophies" covers various areas of the tourism, including the dirverse practices and components of the industry, such as transportation, accommodation, attractions, tour operations, and hospitality services. it examines the operational aspects of tourism businesses and their role in delivering quality experiences to travelers (goeldner & ritchie, tourism: principles, practices, philosophies, 2009). training and job satisfaction there are strong empirical findings about the realationship among employee training and their job satisfaction. zawistowska (2020) explores the potential application of the sectoral qualifications framework for tourism (sqft) in developing descriptions related to tourism. it is a comprehensive framework designed to outline the qualifications, skills, and knowledge required for various roles within the tourism sector. it may encompass different levels of proficiency and expertise, catering to the diverse needs of the industry (zawistowska, 2020). tour guide training can have a positive influence on job satisfaction by enhancing guides' skills, providing professional recognition, fostering career advancement opportunities, improving performance, promoting a sense of purpose, creating a supportive work environment, and encouraging continuous learning. the article “effect of tour guide service quality on tourist satisfaction: the mediating role of tourist–tour guide rapport” includes discussion about the implications of the findings for tour guide training and management practices. it emphasizes the importance of equipping tour guides with not only technical skills and knowledge but also interpersonal skills to establish rapport and enhance the overall tourist experience (li, wang, jia, & li, 2016). the meta-analysis about effectiveness of training provides insights into the overall effectiveness of training programs in organizations. it identifies factors that contribute to successful training outcomes, such as clear learning objectives, active learning methods, and opportunities for practice and feedback (arthur, bennett, edens, & bel, 2003). various scholars underline the importance of training for tamari karbaia 135 employee satisfaction (colquitt, lepine, & noe, 2000). noe introduces in his book a comprehensive coverage of employee training and development practices, including the role of training in enhancing job satisfaction, motivation, and performance (noe, 2013). numerous authors explore the relationship between tour guide competency, service quality, and tourist satisfaction specifically among chinese tourists (ninpradith, viriyasuebphong, & voraseyanont). customer satisfaction in other words, tour guide competence is expected to positively influence tour quality, which in turn enhances tourist satisfaction and loyalty (wang, li, li, & wang, 2017). studies state, that tour guide performance has influence on tourist satisfaction (zhang, deng, & wang, 2016) as they are co-creators of tourist experience (sotiriadis & shen, 2017). moreover, tourists' perceptions of tour guide performance are found to be influenced by factors such as the quality of information provided, the clarity and enthusiasm of delivery, the ability to engage and interact with tourists, and the level of personalization and attention to individual tourists' interests (kontogeorgopoulos & palmer, 2010). at the same time, key factors that contribute to customer loyalty include employees' customer service skills, responsiveness to customer needs, personalized interactions, and the organization's overall commitment to customer satisfaction (nepomuceno & laroche, 2014). sustainable tourism and tour guides different scientific literature is dedicated to supporting guides (prideaux, the role of the tour guide in sustainable tourism, 2000)) .to be specific, “sustainable tourism: a small business handbook for success" (dodds, 2010) offers practical guidance for small tourism businesses, including tour guides, while, "the responsible tourist guide: tourism, responsibility, and sustainability" examines the role of tour guides in promoting responsible tourism practices and fostering sustainability (gössling & hall, the responsible tourist guide: tourism, responsibility, and sustainability, 2010). moreover, "tourism and hospitality: issues and developments" edited by manuel rivera, salvador anton clavé, and josé luis gonzález-sánchez (2018) includes chapters on sustainable tourism and the role of tour guides in destination management and interpretation. it provides insights into the challenges and opportunities facing tour guides in promoting sustainability. a book "tourism ethics" (fennel, 2016) explores ethical issues in tourism, including the role of tour guides as interpreters of culture, heritage, and environmental issues. it discusses the ethical responsibilities of tour guides in promoting sustainable tourism practices and minimizing negative impacts on destinations. another textbook "tourism management: an introduction" includes a chapter on sustainable tourism management, which covers topics such as destination planning, stakeholder engagement, and the role of tour guides in delivering sustainable tourism experiences (page s. , 2019). their role is also important in promoting community-based tourism, ecotourism, and cultural heritage conservation (mowforth & munt, 2009) and interpreting environmental and cultural resources (page s. j., 2011), therefore, it is important to educate tourists about environmental and social issues, as well as engaging with local communities to minimize negative impacts (gössling & hall, the responsible tourist guide: the importance of tour guides training in adjara region, georgia 136 tourism, responsibility, and sustainability, 2010). in order to “ shape destination competitiveness” (ritchie & crouch, 2003), tour guide training and certification programs ensure quality standards and professionalism within the tourism industry. to be specific, formal trainings acquire the necessary knowledge, communication skills, and cultural competence to effectively lead tours and enhance visitor experiences (goeldner & ritchie, tourism: principles, practices, philosophies, 2009). research design the research considered mixed approach as it consisted of quantitative as well as qualitative components. tour guides job satisfaction was studied by utilization of a survey (brayfield & rothe, 1954) with 19 research items. these criteria aims to determine whether employees experienced job satisfaction. their performance was measured based on their costumers’ evaluations through filling out the survey (meng & sirakaya-turk, 2010). training evaluation was assessed by the adapted version of the instrument introduced by francis (kabii, okello, & kipruto, 2017) the regional context and challenges characterized for the specific geographical location was identified by approaching focus group of tour guides and tourists. the respondents for focus group were identified with nonprobability approach, specifically, snowball method introduced by dave ramsey. potential respondents received the informed consent letter with description of the research objectives and rights of the respondents. several research instruments were translated into georgian language and vice versa, were slightly modified and adapted to georgian context, several research items were added, specifically, questions about demographic characteristics. as mentioned previously, data was collected from independent as well as agency-based tours guides working in adjara region and their customers. the respondents for the quantitative data were selected randomly. the links with uploaded research items were sent to potential respondents electronically. the sample size was 190 tour guides and 190 costumers. research ethics the respondents were sent and asked to sign the form of informed consent to approve the participation in the research after obtaining information about the research objectives. the research was conducted based on the research ethical standards. data analysis two focus groups were performed with 15 individuals presenting tour guides and costumers. focus group identified certain challenges and trends faced by the tour guides and tourists to have more comprehensive overview of the situation. there are numerous services and entertainment activities for tourists, but more diverse opportunities for young people. due to the climate with abundant precipitation in the region, the utilization of outdoor activities becomes limited. moreover, in some village’s infrastructure is not fully available, specifically, proper roads and bridges limits the inclusive access. moreover, it was stated, some of the guides had the lack of educational background and experienced lots of challenges related to customer satisfaction. vast majority of the guides stated that capacity building activities, such as trainings tamari karbaia 137 will promote their performance. one tourist mentioned that some georgian political facts were misinterpreted, most of them relate low level of their job satisfaction due to their lack of knowledge and proper guidance. quantitative as well as qualitative data was prepared, cleaned from missing values as well as outliers and microsoft excel file was imported to analyze by widely known and scholarly utilized spss to process big numeric data through performing various approaches. the response rate was quite high, specifically, approximately, 65 percent. the respondents were balanced in terms of sex, age, education level, tenure. fifty percent of the respondents represented tour agency and the rest – individual tour guides. data was obtained from individual tour guides and the rest of them – from agency-based guides. tour guides’ job satisfaction data was analyzed through different statistical approaches, specifically, descriptive statistics and univariate statistics (frequency, central tendency measurement, variation measurements, t-test, correlation analysis, regression analysis). h1: the relationship of tour guides training and their job satisfaction. table 1.1 distribution of parameters and mean 1 2 3 4 5 6 7 6+7, in inverses1+2 the mean characteristic is reversed in inverses q1.1 there are some conditions concerning my job that could be improved 0.0% 0.0% 0.0% 0.5% 18.0% 53.4% 28.0% 81.5% 6.1 q1.2 my job is like a hobby to me 0.0% 0.0% 0.5% 23.3% 42.9% 15.3% 18.0% 33.3% 5.3 q1.3 my job is usually interesting enough to keep me from getting bored 0.0% 0.0% 1.1% 11.6% 24.3% 39.2% 23.8% 63.0% 5.7 q1.4 seems that my friends are more interested in their jobs 19.0% 39.2% 32.3% 9.5% 0.0% 0.0% 0.0% 58.2% 5.7 q1.5 i consider my job rather unpleasant 40.2% 37.0% 20.1% 2.1% 0.0% 0.5% 0.0% 77.2% 6.1 q1.6 i enjoy my work more than my leisure time 5.3% 7.4% 19.0% 34.9% 24.3% 8.5% 0.5% 9.0% 3.9 q1.7 i am often bored with my job 37.0% 28.6% 18.5% 12.7% 0.0% 3.2% 0.0% 65.6% 5.8 q1.8 i feel fairly well satisfied with my present job 0.0% 6.9% 10.1% 36.0% 31.2% 6.9% 9.0% 15.9% 4.5 q1.9 most of the time i have to force myself to go to work 35.4% 38.6% 21.2% 1.1% 0.5% 0.0% 3.2% 74.1% 5.9 q1.10 i am satisfied with my job for the time being 0.0% 0.5% 5.3% 16.9% 26.5% 26.5% 24.3% 50.8% 5.5 q1.11 i feel that my job is no more interesting than others i could get 10.1% 11.1% 28.6% 22.8% 16.4% 7.9% 3.2% 21.2% 4.4 q1.12 i definitely dislike my work 53.4% 40.2% 2.6% 0.5% 0.0% 0.0% 3.2% 93.7% 6.3 q1.13 i feel that i am happier in my work than most other people 0.0% 0.0% 3.7% 19.6% 33.9% 32.8% 10.1% 42.9% 5.3 the importance of tour guides training in adjara region, georgia 138 q1.14 most days i am enthusiastic about my work 0.0% 0.0% 7.9% 29.6% 40.2% 14.8% 7.4% 22.2% 4.8 q1.15 each day of work seems like it will never end 30.2% 41.8% 16.9% 7.9% 2.6% 0.0% 0.5% 72.0% 5.9 q1.16 i like my job better than the average worker does 0.0% 0.5% 3.2% 10.1% 38.6% 33.9% 13.8% 47.6% 5.4 q1.17 my job is pretty uninteresting 45.5% 38.6% 13.2% 2.6% 0.0% 0.0% 0.0% 84.1% 6.3 q1.18 i find real enjoyment in my work 0.0% 0.0% 0.0% 16.9% 30.7% 36.5% 15.9% 52.4% 5.5 q1.19 i am disappointed that i ever took this job 60.8% 38.1% 1.1% 0.0% 0.0% 0.0% 0.0% 98.9% 6.6 here are inverse parameters, where 1 and 2 answers are positive. from the first table, it can be seen that the problematic parameters are: table 1.2 6+7, in inverses1+2 the mean characteristic is reversed in inverses q1.6 1.6 i enjoy my work more than my leisure time 9.0% 3.9 q1.8 1.8 i feel fairly well satisfied with my present job 15.9% 4.5 q1.11 1.11 i feel that my job is no more interesting than others i could get 21.2% 4.4 q1.14 1.14 most days i am enthusiastic about my work 22.2% 4.8 q1.2 1.2 my job is like a hobby to me 33.3% 5.3 q1.13 1.13 i feel that i am happier in my work than most other people 42.9% 5.3 q1.16 1.16 i like my job better than the average worker does 47.6% 5.4 q1.10 1.10 i am satisfied with my job for the time being 50.8% 5.5 from the 19 parameters mentioned above, we created a job satisfaction index, which becomes a minimum value of 0 or a maximum value of 1. the average value of the job satisfaction index is equal to: 71.46% which is high enough. let's find its average characteristic in terms of trainings: table 1.3 the index of job satisfaction among respondents who have undergone trainings is 75.07%, and the index of job satisfaction among respondents who have not undergone trainings is equal to 69.66%. that is, the satisfaction index among trained respondents is 5% higher, and this difference is statistically significant p=0.001<0.05. according to the findings, respondents indicated that they have not received training on tour planning and pricing (65%). they think that training in history and culture(65%), foreign language (66%) reptiles and marine ecosystems (51%), eco-tourism (62%), customer service, communication (82%) and computer (56%) skills can improve their job performance. it can be seen that the majority of the respondents evaluate the trainings positively. having received training on tour planning and pricing job satisfaction (js) 1 yes 75.07% 2 no 69.66% total 71.46% p 0.001 tamari karbaia 139 let’s take a look on demographic data: table 1.5 sex table 1.4. age group frequency percent valid percent cumulative percent valid 2 competed basic education 35 18.5 18.5 18.5 3 ba 97 51.3 51.3 69.8 4 ma 57 30.2 30.2 100.0 total 189 100.0 100.0 table 1.6 educational level frequency percent valid percent cumulative percent valid 2 from 2 up to 5 years 64 33.9 33.9 33.9 3 from 5 up to 10 years 98 51.9 51.9 85.7 4 more than 10 years 27 14.3 14.3 100.0 total 189 100.0 100.0 table 1.7 tenure frequency percent valid percent cumulative percent valid 1 i am tour agency-based guide 95 50.3 50.3 50.3 2 i am an independent guide 94 49.7 49.7 100.0 total 189 100.0 100.0 table 1.8 choose one from the following list relationship of the job satisfaction index with demographic variables: it can be seen from the table that respondents aged 45-54 have the highest job satisfaction (83.65%), and respondents aged 55-64 have the lowest satisfaction (50.20%). table 1.9 mean the more experience the guide has, the higher the satisfaction with the trainings. job satisfaction does not have an influence on gender, profession, education, type of guide. table 1.10 frequency percent valid percent cumulative percent valid 1 18-24 41 21.7 21.7 21.7 2 25-34 57 30.2 30.2 51.9 3 35-44 59 31.2 31.2 83.1 4 45-54 23 12.2 12.2 95.2 5 55-64 9 4.8 4.8 100.0 total 189 100.0 100.0 frequency percent valid percent cumulative percent valid 1 female 103 54.5 54.5 54.5 2 male 86 45.5 45.5 100.0 total 189 100.0 100.0 age group js/job satisfaction 1 18-24 69.19% 2 25-34 70.47% 3 35-44 72.49% 4 45-54 83.65% 5 55-64 50.20% total 71.46% p 0.001 tenure js/ job satisfaction 2 from 2 up to 5 years 68.47% 3 from 5 up to 10 years 72.32% 4 more than 10 years 75.44% total 71.46% p 0.01 the importance of tour guides training in adjara region, georgia 140 costumers satisfaction h2: the relationship of costumers’ satisfaction and demographic variables. univariate analysis and statistics 2 4 5 6 7 6+7 mean attending my needs promptly 0.00% 1.05% 32.11% 47.37% 19.47% 66.84% 5.85 interested in solving my problems 0.00% 0.53% 26.84% 53.16% 19.47% 72.63% 5.92 understanding my specific needs 0.00% 0.00% 16.32% 48.95% 34.74% 83.68% 6.18 made traveling more enjoyable/ 0.00% 0.00% 17.37% 47.37% 35.26% 82.63% 6.18 pre-tour briefing (references to shopping; food, fees etc.) 0.00% 0.00% 11.58% 42.11% 46.32% 88.42% 6.35 visiting scenic spots (manner and content of the guide's interpretation of scenic-spots, additions or deductions of scenic-spots) 0.00% 0.00% 8.42% 43.68% 47.89% 91.58% 6.39 got things right first time 0.00% 0.00% 23.68% 49.47% 26.84% 76.32% 6.03 travel guide never too busy to respond 0.00% 0.00% 17.89% 46.32% 35.79% 82.11% 6.18 delivered services on time 0.00% 0.00% 8.95% 42.63% 48.42% 91.05% 6.39 knowledgeable guide 0.00% 12.11% 38.42% 34.21% 15.26% 49.47% 5.53 consistently courteous 0.00% 0.00% 7.37% 40.53% 52.11% 92.63% 6.45 guide made me to feel secure 0.00% 0.00% 9.47% 42.11% 48.42% 90.53% 6.39 staff always willing to help 0.00% 0.00% 6.84% 48.42% 44.74% 93.16% 6.38 travelers' best interests at heart 0.00% 0.00% 10.53% 38.42% 51.05% 89.47% 6.41 individualized attention to travelers 0.00% 4.74% 13.68% 42.11% 39.47% 81.58% 6.16 guide kept customers informed 0.53% 4.74% 13.16% 42.63% 38.95% 81.58% 6.14 no excessive waiting time 0.00% 0.00% 12.11% 44.74% 43.16% 87.89% 6.31 table 2.1 from listed provisions, three research items received a relatively low rating the rest of the provisions received a fairly high rating. accordingly, the index consisting of these 17 variables received a sufficiently high value of 6.19 on a 7-point scale, i.e. 77.38% of the maximum value which is quite a high indicator. table 2.2 job satisfaction index mean 6.19 77.38% table 2.3 consider the correlation of the satisfaction ratio with demographic data: the satisfaction index has a statistically significant correlation with age (p=0.01<0.05), while the correlation coefficient is negative r=-0.197, that is, a negative relationship with age means that respondents of younger age are more satisfied. table 2.4. correlations 6+7 sum of evaluation percentage mean knowledgeable guide 49.47% 5.53 attending my needs promptly 66.84% 5.85 interested in solving my problems 72.63% 5.92 got things right first time 76.32% 6.03 age_gr 18. please indicate the age group/ satisfaction pearson correlation -0.197 sig. (2-tailed) 0.01 n 190 **. correlation is significant at the 0.01 level (2-tailed). tamari karbaia 141 the satisfaction index has a statistically significant correlation with age (p=0.01<0.05), while the correlation coefficient is negative r=-0.197, that is, a negative relationship with age means that respondents of younger age are more satisfied. the average index of satisfaction in women is 6.2, and in men 6.19, the difference between them is not statistically significant p=0.76>0.05. that is, satisfaction does not differ by gender. table 2.5 sex satisfaction index in relation with a1.20 is not statistically significant as p=0.74>0.05 and are not different. distribution of demographic research items table 2.7 age group frequency percent valid percent cumulative percent valid 1 18-24 44 23.2 23.2 23.2 2 25-34 23 12.1 12.1 35.3 3 3544 52 27.4 27.4 62.6 4 45-54 38 20.0 20.0 82.6 5 55-64 9 4.7 4.7 87.4 6 65+ 24 12.6 12.6 100.0 total 190 100.0 100.0 table 2.8 sex frequency percent valid percent cumulative percent validvalid 1 female 94 49.5 49.5 49.5 2 male 96 50.5 50.5 100.0 total 190 100.0 100.0 table 2.9 please choose one from the options below frequency percent valid percent cumulative percent valid 1 service was provided by independent guide 95 50.0 50.0 50.0 2 service was provided by tour agency-based guide 95 50.0 50.0 100.0 total 190 100.0 100.0 satisfaction index 1 female 6.20 2 male 6.19 total 6.19 p 0.76 table 2.6 please choose one from the options below satisfaction index 1 service was provided by independent guide 6.19 2 service was provided by tour agency-based guide 6.20 total 6.19 p 0.74 the importance of tour guides training in adjara region, georgia 142 research findings and implications according to the findings, there is higher level of job satisfaction for those that have undergone the trainings compared with others. only age influences the level of costumers’ satisfaction. the findings can be interesting and beneficial for representatives of the management of the tourism sector in adjara region to plan the relevant intervention or prevention mechanisms to promote development of tourism in adjara region. to conclude, there can be drawn several recommendations to promote sustainability.  to provide relevant infrastructure, roads, bridges in rural areas to make the destinations inclusive.  managing the competencies of independent as well as agency-based tour guides. if we consider, that in adjara region, there is a high demand of providing service for international tourists, it is crucial to equip guides with proper information about our history, political, cultural contexts.  introducing mandatory training and certification courses for guides.  performing research systematically to focus on total quality control and improvement of guides’ service.  providing more diverse touristic services for older generation. limitations and future research despite the reliability and validity of the research instruments, as they have been utilized in other studies, major limitation is about the sample size, which is not significantly big. even though all the statistical procedures were performed properly, there is still the issue of social desirability of the tour guides that could negatively influence the responses. also, the findings are relevant for regional context and might need additional research in different context. moreover, the qualitative instrument, discussion plan about the challenges in the field is created by the author and has lack of generalizability as well as validity. references austin, a., & gamson, z. (1983). academic workplace : new demands, heightened tensions betty weiler & sam h. ham (2002) tour guide training: a model for sustainable capacity building in developing countries, journal of sustainable tourism, 10:1, 52-69, doi: 10.1080/09669580208667152 black, r., & weiler, b. (2005). quality assurance and regulatory mechanisms in the tour guiding industry: a systematic review. journal of tourism studies, 16(1), 24–37. https://search.informit.org/doi/10.3316/ielapa.200509017 brayfield, a. h., & rothe, h. f. (1954). an index of job satisfaction. nursing research, 2(3), 139. https://doi.org/10.1097/00006199-195402000-00016 chunyan w., & chunyan w., (2017) a study on the job satisfaction of tour guides and its influencing factors, proceedings of the 2017 7th international conference on education, management, computer and society (emcs 2017), atlantis press, doi: 10.2991/emcs17.2017.256 administration, g. t. (n.d.). georgian tourism administration. from georgian tourism administration https://doi.org/10.1080/09669580208667152 https://doi.org/10.2991/emcs-17.2017.256 https://doi.org/10.2991/emcs-17.2017.256 tamari karbaia 143 arthur, w., bennett, w., edens, s., & bel, s. (2003). effectiveness of training in organizations: a meta-analysis of design and evaluation features. journal of applied psychology, 88(2), 234– 245. board, s. t. (n.d.). from https://www.stb.gov.sg/content/stb/en/assistance-and-licensing/licensingoverview/tourist-guide-licence.html colquitt, a., lepine, a., & noe, a. (2000). toward an integrative theory of training motivation: a meta-analytic path analysis of 20 years of research. journal of applied psychology, 85(5), 678–706. dodds, r. (2010). sustainable tourism: a small business handbook for success. feg. (2024). https://www.feg-touristguides.com/about.php. from feg: https://www.fegtouristguides.com/about.php fennel, d. a. (ed.). (2016). tourism ethics. routledge. georgia, l. h. (n.d.). matsne. from https://matsne.gov.ge/en/document/view/30442?publication=2 geostat. (2024). geostat. from https://www.geostat.ge/ka/modules/categories/102/utskhoel-vizitortastatistika goeldner, c., & ritchie, j. (2009). tourism: principles, practices, philosophies. john wiley & sons. goeldner, c., & ritchie, j. (2009). tourism: principles, practices, philosophies (vol. (11th ed.)). john wiley & sons. gössling, s., & hall, c. (2010). the responsible tourist guide: tourism, responsibility, and sustainability. routledge. gössling, s., & hall, m. (2010). the responsible tourist guide: tourism, responsibility, and sustainability. greenberg, j., & baron, r. a. (2000). behavior in organizations (vol. 7th edition). prentice-hall, newjersey. itg. (2024). institute of tourist guiding. from https://www.itg.org.uk/ jnto. (2024). jnto. from https://www.japan.travel/en/uk/ kabii, f., okello, m., & kipruto, n. (2017). effects of tour guides training on their performance in kenya. journal of tourism hospitality management, 5, 10.17265/2328-2169/2017.12.003. kontogeorgopoulos, n., & palmer, a. (2010). tour guide performance and tourist satisfaction: a study of the athens sightseeing tour. tourism management, 31(3), 354-355. leask, a. (2005). progress in tourism management: from the geography of tourism to geographies of tourism – a review. tourism management, 26(1), 95-109. li, x., wang, d., jia, c., & li, b. (2016). effect of tour guide service quality on tourist satisfaction: the mediating role of tourist–tour guide rapport. journal of travel research, 55(1), 78-89. locke, e. (. (1976). the nature and causes of job satisfaction (vol. 1). dunnette: m.d. ed. meng, f., & sirakaya-turk, e. (2010). customer mood and service quality evaluation of tour operators. international chrie conference-refereed track (pp. 8-9). university of massachusetts amherst. mowforth, m., & munt, i. (2009). tourism and sustainability: development, globalisation and new tourism in the third world. routledge. nauman, s., bhatti, s., jalil, f., & riaz, m. (2021). how training at work influences employees’ job satisfaction: roles of affective commitment and job performance. nternational journal of training research(19:1), 61-76. doi: 10.1080/14480220.2020.1864444. nepomuceno, m., & laroche, m. (2014). building customer loyalty through individual and organizational customer orientation. journal of business research, 67(1), 2228-2234. ninpradith, n., viriyasuebphong, p., & voraseyanont, p. (n.d.). a study of tour guide competency, service quality, and tourist satisfaction of chinese tourist. 7(2561). noe, r. a. (2013). employee training and development (vol. 6). mcgraw-hill education. the importance of tour guides training in adjara region, georgia 144 okechukwu, w. (2017). influence of training and development, employee performance on job satisfaction among the staff. journal of technology management and business, 4(1), 5-9. page, s. (2019). tourism management (vol. 6th edition). routledge. page, s. j. (2011). tourism management: managing for change. elsevier. prideaux, b. (2000). the role of the tour guide in sustainable tourism. in g. m. (ed.), the tourist as a metaphor of the social world (pp. 181-200). cab international. prideaux, b., & carson, d. (2003). the role of the tour guide in interpretation: a case study from the australian outback. d.tourism management, 24(3), 279-288. ritchie, b., & crouch, g. (2003). the competitive destination: a sustainable tourism perspective. cabi. sotiriadis, m., & shen, s. (2017). tour guides as co-creators of tourist experience, satisfaction and destination image: the moderating role of interactivity. journal of destination marketing & management, 9, 308-313. tga. (n.d.). tga. from https://tga.org.au/about/become-a-guide/ thomson, h., tanaka, n., & morikoshi, k. (2021). journal of hospitality, leisure, sport & tourism education, 2-5. wang, d., li, x., li, y., & wang, j. (2017). the influence of tour guide competence on tourist satisfaction and loyalty: the mediating role of tour quality. journal of travel researc, 56(7), 855-867. xiang, z., wang, d., o'leary, j., & fesenmaier, d. (2007). adapting to the internet: trends in travelers' use of the web for trip planning. journal of travel research, 46(2), 139-150. zawistowska, h. (2020). the possibility of using the sectoral qualifications framework for tourism (sqft) in preparing the description of qualification and its registrations in the integrated qualification system (iqs) on the example of tour leaders and tour guides. folia turistica, 54(https://doi.org/10.5604/01.3001.0014.0515), 129-143. zhang, j., deng, j., & wang, m. (2016). the influence of tour guide performance on tourist satisfaction and destination image: the mediating role of tourist–tour guide interaction. ,. journal of travel research, 55(1), 78-89. introduction literature review local context of adjara region international practices tour guides’ competences training and job satisfaction customer satisfaction sustainable tourism and tour guides research design research ethics data analysis tour guides’ job satisfaction h1: the relationship of tour guides training and their job satisfaction. costumers satisfaction research findings and implications limitations and future research references agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 19, no. 1 (2025), pp. 399-404 399 time value of money in the lithuanian credit market: a practical analysis of consumer loan offers m. pryšmantaitė, a. markauskas, j. kartašova mantė pryšmantaitė¹, astijus markauskas², jekaterina kartašova3 ¹ ² ³ business school of vilnius university, lithuania ¹ e-mail: mante.prysmantaite@vm.stud.vu.lt ² e-mail: astijus.markauskas@vm.stud.vu.lt 3 https://orcid.org/0000-0003-3774-1817, e-mail: jekaterina.kartasova@vm.vu.lt abstract: this report uses the time value of money (tvm) framework to evaluate and compare consumer loan offers from three lithuanian credit providers: inbank, artea, and saldo bank. focusing on a loan amount of €5000, the study examines repayment terms of 12, 24, and 36 months, each with different interest rates and administrative fees. by calculating key financial indicators such as monthly payments (pmt), total repayment, total interest paid, and present value (pv), the analysis identifies differences in the actual cost of borrowing. the results show that inbank offers the most financially favorable terms overall, yet borrowers may still choose more expensive options based on short-term affordability. these findings emphasize the value of using tvm principles in personal finance and highlight the importance of transparent loan structures in helping consumers make informed financial decisions in the lithuanian credit market. keywords: tvm, consumer loans, lithuanian credit market, personal finance 1. introduction in the recent decade, borrowing has become increasingly popular in lithuania, explained by rising consumer demand and easy credit access through banks and non-bank lenders (kanapickienė et al., 2022). according to publicly accessible data on theglobaleconomy website, total consumer credit in lithuania has been recorded at 2.79 billion euros in march 2025, with a clear positive trend. lithuania has numerous credit companies offering varying interest rates, fees, and repayment terms. this environment of high lender variety and complex loan structures places importance on reliable evaluation methods. consumers may be drawn to attractive monthly payments or promotional interest rates without fully understanding how additional fees or longer repayment periods affect the real cost of borrowing (johnson, 2022). to address this problem, applying the time value of money (tvm) concept may become instrumental. tvm allows individuals to assess the real value of future loan payments in today's terms, which enables them to compare offers by their full financial impact over time, not only surface rates (kahn & baum, 2019). as borrowing becomes more embedded in everyday financial behavior, the ability to interpret complex loan structures can influence not only individual financial well-being but also broader economic stability (lin & bates, 2022). additionally, financially informed consumers are less likely to become overindebted and are better equipped to make optimized borrowing decisions (lusardi, 2019). the purpose of this report is to apply the principles of the time value of money (tvm) to evaluate and compare three consumer loan offers from lithuanian credit providers inbank, artea, and saldo bank. by analyzing loans of equal amounts (€5000) across varying repayment terms, the study aims to determine how differences in interest fees, administrative fees, and loan durations affect the total cost of borrowing. through this assessment, the report seeks to mailto:mante.prysmantaite@vm.stud.vu.lt mailto:astijus.markauskas@vm.stud.vu.lt mailto:jekaterina.kartasova@vm.vu.lt time value of money in the lithuanian credit market: a practical analysis of consumer loan offers 400 identify the most financially efficient loan offer and to demonstrate how the concept of tvm can serve as a tool for consumers to make informed borrowing decisions. 2. literature analysis the concept of the time value of money (tvm) is a foundational principle in finance, which claims that a monetary unit in the present time is worth more than the same unit received in the future. the principle explains the potential of current funds earning returns over time, which is a central notion in financial decision-making (fabozzi, 2021). in finance, the tvm is used not only as a theoretical foundation but also as a practical tool to evaluate loans, investments, and annuities understanding tvm is necessary to accurately determine the value of financial assets with cash flows (brigham & ehrhardt, 2017). similarly, ross, westerfield, and jordan (2003) present the tvm as a framework through which all future cash flows are evaluated, mainly in the context of investment appraisal and capital budgeting. the authors emphasize that without appropriate discounting of future values, financial analysis becomes flawed. to reinforce this perspective, gitman and zutter (2015) describe tvm as a foundation to financial rationality, a tool that allows decision-makers to track the trade-off between immediate consumption and deferred investment. the quantitative foundation of tvm comprises several key formulas that enable the valuation of cash flows occurring at different points in time. present value (pv) reflects the current worth of money that will be paid or received in the future. the calculation of pv involves discounting the future cash flows back to today’s terms by accounting for the opportunity cost of capital or interest rate (brealey et al., 2000). future value (fv) represents the amount an initial investment will grow to at a specified point in the future, assuming it earns interest or returns over time. it captures the compounding effect, where interest is earned not only on the original principal but also on accumulated interest from prior periods (gitman & zutter, 2006). payment (pmt) explains the regular, fixed amount of money paid or received in each period of a financial agreement, such as a loan or an annuity. it is calculated based on the loan amount or investment principal, the interest rate per period, and the total number of payment periods (bracker & lin, 2018). interest rate is used to discount or grow money over time. it represents the cost of borrowing or the return on investment, and is expressed as an annual percentage, though in most cases it needs to be adjusted to match the frequency of the payment (monthly, quarterly, etc.) (westerfield et. al., 2019). as for total repayment and total interest paid, the former is the sum of all payments made over the entire term of a loan or investment, representing the full amount returned by the borrower to the lender, and the latter indicates how much additional money is paid over the original amount borrowed or invested, due to interest accumulation (mishkin & eakins, 2018). the concept of tvm is implemented in structuring loan repayment schedules. once a borrower takes out a loan, the lender will use tvm principles to calculate the fixed periodic payments needed to fully repay the loan over time, factoring in the interest rate and the number of payment periods, which ensures that the lender recovers both the interest and the principal (dahlquist & knight, 2022). borrowers are often faced with multiple loan options with differing interest rates, fees, and payment terms. applying tvm principles allows them to differentiate between lenders by calculating the present value or effective cost of each loan, revealing which loan is truly less expensive when accounting for timing and size of payments (gould, 2021). 3. study sample three consumer credit companies – inbank, artea, and saldo bank – were selected for their active presence in the lithuanian lending market and diverse consumer loan offerings. on mantė pryšmantaitė, astijus markauskas, jekaterina kartašova 401 each of their websites, an amount of 5000 eur was chosen and found their annual interest rates respectively: 7.90%, 9.90%, 12%. although this paper analyses three different repayment periods (36 months, 24 months, 12 months) for the same three companies, the annual interest rate did not change for all three terms. additionally, all three companies have administration fees: inbank – monthly 0.29% of the borrowed amount; artea – monthly 0.25% of the borrowed amount; saldo bank – 8,95 € / month. 4. methodology this analysis applies time value of money (tvm) principles to evaluate and compare three consumer loan offers from inbank, artea, and saldo bank. all three companies were analyzed assuming an identical loan amount of 5000 eur, with varying repayment terms (36,24, and 12 months) and their fixed annual interest rates. the goal was to assess how loan structure affects total repayment cost and the financial burden on the borrower over time. to conduct the comparison, the following financial indicators were calculated: periodic payment amount (pmt) the amount the borrower must pay each month to repay the loan. calculated using the standard formula: 𝑃𝑀𝑇 = 𝑃𝑉 × 𝑟(1 + 𝑟)𝑛 (1 + 𝑟)𝑛 − 1 pv – present value r – monthly interest rate n – number of periods real pmt most credit companies have administration fees that are added each month to the pmt and influence the total repayment amount. calculated by simply adding: 𝑅𝑒𝑎𝑙 𝑃𝑀𝑇 = 𝑃𝑀𝑇 + 𝑓𝑒𝑒𝑠 fees – monthly administration fees found on each company’s website total repayment the total amount repaid over the life of the loan. in this study, real pmt is used because of the monthly fees. calculated: 𝑇𝑅 = 𝑟𝑒𝑎𝑙 𝑃𝑀𝑇 × 𝑛 total interest the total cost of borrowing. calculated: 𝑇𝐼 = 𝑇𝑅 − 𝑃𝑉 present value used to confirm that the value of all three loan offers, when discounted at different rates, results in the same financial value at the time of borrowing. this analysis does not include external costs. pv is also used to illustrate how future payments are valued today using: 𝑃𝑉 = 𝑃𝑀𝑇 × 1 − (1 + 𝑟)−𝑛 𝑟 by calculating and comparing these values, the analysis demonstrates how the loan term affects the total cost to the borrower when the present value is constant but interest rates are different. all calculations were performed manually and cross-verified using a financial calculator and excel. time value of money in the lithuanian credit market: a practical analysis of consumer loan offers 402 5. results monthly payment (pmt) and administration fees the tables present the monthly payment amounts (pmt) and the monthly payment, including administrative fees for a €5000 loan over 36, 24, and 12-month terms from inbank, artea, and saldo bank. table 1. pmt and real pmt of a 36-month repayment term term company pmt (€) pmt incl. admin (€) 36 months inbank 156.45 170.95 36 months artea 161.1 173.6 36 months saldo bank 166.07 175.02 table 2. pmt and real pmt of a 24-month repayment term term company pmt (€) pmt incl. admin (€) 24 months inbank 225.91 240.41 24 months artea 230.49 242.99 24 months saldo bank 235.37 244.32 table 3. pmt and real pmt of a 12-month repayment term term company pmt (€) pmt incl. admin (€) 12 months inbank 434.71 449.21 12 months artea 439.35 451.85 12 months saldo bank 444.24 453.19 data shows a consistent pattern throughout all three loan terms (12, 24, and 36 months): saldo bank offers the highest base monthly payments (pmt) due to its higher interest rate, while inbank generally has the lowest pmt. however, when administrative fees are included, the total monthly cost differences narrow, and in some cases, the company with the lowest interest rate does not offer the lowest total monthly burden. total repayment and interest paid table 4. total repayment and total interest paid of a 36-month repayment term term company total repayment (€) total interest paid (€) 36 months inbank 6154.25 1154.25 36 months artea 6249.65 1249.65 36 months saldo bank 6300.78 1300.78 table 5. total repayment and total interest paid of a 24-month repayment term term company total repayment (€) total interest paid (€) 24 months inbank 5769.80 769.80 24 months artea 5831.85 831.85 24 months saldo bank 5863.62 863.62 table 6. total repayment and total interest paid of a 12-month repayment term term company total repayment (€) total interest paid (€) 12 months inbank 5390.53 390.53 12 months artea 5422.16 422.16 12 months saldo bank 5438.33 438.33 mantė pryšmantaitė, astijus markauskas, jekaterina kartašova 403 the tables show that while all three companies offer the same amount of €5000, the total repayment and interest paid increase with both the loan term and the interest rate. saldo bank consistently has the highest total cost, while inbank offers the most cost-effective option across all terms. shorter terms significantly reduce the total interest paid, demonstrating that borrowers who can afford higher monthly payments benefit from lower overall loan costs. 6. discussions and recommendations 6.1 financial evaluation using time value of money based on the time value of money (tvm) calculations, inbank is the most financially favorable option across all repayment periods. despite having slightly higher administrative fees than its competitors, inbank consistently offers the lowest base monthly payment (pmt) and lowest total interest paid, which directly translates to a lower total cost of borrowing when measured in present value terms. since all three loans have an equal present value, the differences in total repayment are solely influenced by interest rates, repayment terms, and administrative fees. this confirms the central tvm insight that the longer and more expensive the repayment schedule, the greater the overall costs. saldo bank, in contrast, offers the least favorable loan terms, with the highest interest rate (12%), leading to the highest pmts and total repayment values. artea falls between the two but remains closer to saldo bank in overall cost than to inbank. 6.2 likely consumer behavior from a behavioral standpoint, typical consumers may prioritize monthly affordability over total cost. in this case, saldo bank’s longer-term loans with lower apparent administrative fees may seem attractive, despite being more expensive in the long run. borrowers focusing on short-term financial comfort might choose a 36-month option, where monthly payments are more manageable, even though it leads to higher cumulative interest paid. thus, while inbank is financially optimal using tvm, a typical borrower might still choose a less cost-effective option due to cash flow constraints or a lack of awareness about the real cost of borrowing. 6.3 limitations of the analysis this study is based on clear, objective tvm metrics, but it does have several limitations. subjective weights were not assigned to factors such as risk tolerance, income stability, or borrower preferences. the analysis does not account for penalties, early repayment conditions, or promotional offers, which may affect the real cost it assumes borrowers are fully rational, while consumer behavior is often influenced by emotions, financial literacy, or marketing tactics. monthly administrative fees were treated as fixed, though in practice, they may vary based on conditions not publicly disclosed. 6.4 recommendations for borrowers: if financial flexibility allows, choosing shorter-term loans — especially from inbank — results in lower overall borrowing costs. borrowers should not focus solely on monthly payments but should also compare total repayment amounts and interest paid. for lenders: transparency about total cost, including fees, can build trust. providing visual comparisons or tvm-based breakdowns may improve financial literacy and client satisfaction. for future research: including qualitative assessments, borrower profiles, or simulations with varying income levels would provide a more comprehensive picture of borrowing decisions. time value of money in the lithuanian credit market: a practical analysis of consumer loan offers 404 7. conclusions this report applied the time value of money (tvm) framework to compare three consumer credit offers from inbank, artea, and saldo bank. although each company offered the same loan amount (€5000), differences in interest rates, repayment terms, and administrative fees significantly influenced the total cost of borrowing. the analysis showed that inbank consistently provided the most cost-effective option, while saldo bank was the most expensive, particularly over longer terms. the findings confirm that both the length of the loan and the interest rate are critical in determining a loan’s true financial impact. while borrowers often prioritize low monthly payments, this study highlights the importance of considering total repayment and interest paid over time. by using tvm principles, borrowers can make more informed financial decisions and better evaluate the real cost of credit. references 1. bracker, kevin, and fang lin. "–time value of money." business finance essentials (2018). 2. brealey, richard a, and stewart c myers. principles of corporate finance / richard a. brealey, stewart c. myers. 6th ed. boston [mass.] [etc: irwin/mcgraw-hill., 2000. print. 3. fabozzi, frank j., and francesco a. fabozzi. bond markets, analysis, and strategies. mit press, 2021. 4. gould, marie. "time value for money." (2021) 5. johnson, alicia m. the effects of consumer loan application formats and advertised terms on consumer borrowing decisions. university of arkansas, 2022. 6. jordan, bradford d., stephen a. ross, and randolph w. westerfield. "fundamentals of corporate finance." (2003): 167. 7. julie dahlquist, rainford knight. (2022). principles of finance. houston, texas: openstax. 8. kahn, marc j., and neil baum. "time value of money, or what is the real financial value of an opportunity?." the business basics of building and managing a healthcare practice. cham: springer international publishing, 2019. 9-12. 9. kanapickienė, rasa, et al. "macroeconomic determinants of credit risk: evidence on the impact on consumer credit in central and eastern european countries." sustainability 14.20 (2022): 13219. 10. lawrence, gitman j., and chad j. zutter. principles of: managerial finance. pearson addison wesley, 2006. 11. lin, chien-an, and timothy c. bates. "smart people know how the economy works: cognitive ability, economic knowledge and financial literacy." intelligence 93 (2022): 101667. 12. lusardi, annamaria. "financial literacy and the need for financial education: evidence and implications." swiss journal of economics and statistics 155.1 (2019): 1-8. 13. mishkin, frederic s., eakins, stanley g.. (2018). financial markets and institutions (9th ed.). milan: pearson. 14. westerfield, randolph w., ross, stephen a., jordan, bradford d.. (2019). fundamentals of corporate finance, 12th ed. (12). new york: mcgraw hill education. agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 18, no. 2 (2024), pp. 134-147 134 agro-economic synergy: enhancing food security through innovative agricultural practices in azerbaijan h. ismayilova, s. hajiyeva hijran ismayilova¹, sona hajiyeva² ¹ azerbaijan university of technology, azerbaijan https://orcid.org/0009-0001-3974-8732, e-mail: h.ismayilova@atu.edu.az ² university of bologna, italy https://orcid.org/0000-0002-7787-3892, e-mail: sona.hajiyeva2@unibo.it abstract: this paper examines the critical role of agro-economic synergy in enhancing food security in azerbaijan. amid global challenges such as climate change, population growth, and economic uncertainty, azerbaijan has significant potential to modernize its agricultural sector through innovative practices like precision agriculture, biotechnology, and sustainable farming techniques. the research highlights the country's strategic initiatives, including the "state program for ensuring food safety in the republic of azerbaijan for 20192025," which emphasizes the integration of technological advancements and economic strategies to boost agricultural output while reducing environmental impact. by employing a qualitative methodology based on secondary data from governmental and global organizations, the study explores how advanced agricultural practices can improve both food availability and export potential. case studies such as the development of agroparks and partnerships with international institutions further demonstrate azerbaijan's efforts to modernize its food systems and achieve long-term sustainability. despite facing infrastructural and policy challenges, the paper underscores the importance of continued innovation and investment to secure food sovereignty and strengthen azerbaijan’s position in global markets. the findings contribute to a broader understanding of how agricultural modernization can drive economic growth while ensuring food security. keywords: azerbaijan, agriculture, food security, economic development, agricultural practices introduction in recent years, food security has become a critical global concern, driven by challenges such as climate change, population growth, and economic uncertainty, all of which have raised questions about the sustainability and effectiveness of agricultural systems. amid these global challenges, azerbaijan finds itself at a pivotal point, with the opportunity to harness its distinctive geographic, climatic, and economic attributes to build a resilient agricultural sector. the concept of agro-economic synergy—integrating modern farming techniques with economic sustainability—is increasingly seen as essential for enhancing food security, particularly in azerbaijan, where agriculture plays a significant role in both gdp and employment. food security, encompassing the availability, accessibility, and effective use of food, has emerged as a strategic priority for the azerbaijani government. agriculture, vital for https://orcid.org/0009-0001-3974-8732 mailto:h.ismayilova@atu.edu.az https://orcid.org/0000-0002-7787-3892 mailto:sona.hajiyeva2@unibo.it hijran ismayilova, sona hajiyeva 135 meeting domestic needs and generating export revenues, is central to achieving this objective. as azerbaijan continues its commitment to sustainable development, exploring how agroeconomic synergies can enhance agricultural output while reducing environmental impact is crucial. tackling these challenges will not only safeguard the nation’s food sovereignty but also bolster its standing in global agricultural markets. the key lies in modernizing the sector in a way that ensures sustainability and inclusivity. contemporary research in agricultural economics has highlighted the importance of integrating technological innovations with robust economic policies. studies indicate that the adoption of innovations like precision agriculture, climate-resilient farming, and biotechnology can substantially improve both productivity and resource efficiency. in azerbaijan, such practices are gaining ground, particularly in areas like digital agriculture, water resource management, and the cultivation of high-value crops. however, the potential of these innovations is not yet fully realized, as the country continues to face challenges in policy development, infrastructure enhancement, and capacity building. the republic of azerbaijan has consistently prioritized food security as a critical component of its national policy, ensuring that the population has access to sufficient, safe, and nutritious food. to this end, the "state program for ensuring food safety in the republic of azerbaijan for 2019-2025," approved by presidential order no. 1143 on april 29, 2019, serves as a strategic framework to bolster the country’s agricultural sector and safeguard its food systems against potential vulnerabilities. the 2020 impact assessment report published by the center for analysis of economic reforms and communication offers a detailed review of the progress achieved in implementing the program’s objectives and highlights both successes and areas for further improvement. (state program, 2020) the 2020 impact assessment report highlights several milestones achieved under the state program. one of the major successes has been the significant improvement in the country’s agricultural output. enhanced irrigation systems, coupled with the promotion of precision agriculture technologies, have contributed to higher yields in key crops such as wheat, cotton, and fruits. the use of digital agriculture platforms, allowing farmers to monitor soil health, crop growth, and weather patterns, has further optimized farming practices. additionally, the establishment of several food safety agencies and laboratories has improved the capacity to monitor and regulate food quality standards across azerbaijan. the increased focus on training and certifying food producers to meet international standards has also facilitated the expansion of azerbaijani agricultural products into foreign markets, boosting the country’s export revenues. methodology this research employs a qualitative methodology to explore agro-economic synergies that enhance food security in azerbaijan. utilizing secondary data from reputable sources, including the state statistical committee and world bank reports, the study aims to analyze the interplay of agricultural practices, economic strategies, and environmental factors. key data sources include the "state program for ensuring food safety in azerbaijan" and relevant scholarly articles. the methodology incorporates content analysis to identify themes related to innovation and policy strategies, alongside comparative analysis to benchmark azerbaijan’s agricultural performance. agro-economic synergy: enhancing food security through innovative agricultural practices in azerbaijan 136 literature review several scholars have underscored the significant role that agriculture plays in fostering economic development and ensuring food security, particularly in developing nations such as azerbaijan. schultz (1964) posits that agriculture in traditional societies must undergo modernization to become more productive and contribute effectively to economic progress. (schultz, 1964) he emphasizes that with proper investments in areas like education, infrastructure, and technology, even subsistence farming can be transformed into a dynamic sector. this argument holds particular relevance for azerbaijan, where agricultural productivity has yet to reach its full potential due to outdated farming methods and fragmented landholdings. schultz’s ideas on modernizing traditional agriculture resonate strongly with azerbaijan's current needs. lipton (2009) builds upon this by stressing the essential role agriculture plays in reducing poverty, particularly in rural areas. (lipton, 2009)he argues that improvements in agricultural productivity can drive economic growth by creating demand for non-agricultural products and services, thus contributing to rural industrialization. given that a large portion of azerbaijan's population resides in rural areas, policies aimed at increasing agricultural output—especially in important agricultural regions like ganja-dashkasan and shaki-zagatala—could yield significant economic benefits. lipton’s theory supports the idea that well-targeted agricultural investments can create positive ripple effects throughout the economy, promoting sustainable development and enhancing food security. mellor (1995) also highlights agriculture's critical role in boosting overall economic development. he asserts that increased productivity in the agricultural sector can lead to higher incomes while simultaneously lowering food prices, thereby improving food security. mellor’s insights are particularly pertinent to azerbaijan, where rising food costs have the potential to disproportionately impact the most vulnerable segments of society. by boosting agricultural efficiency and productivity, azerbaijan can make food more affordable—a key factor in improving nutrition and alleviating poverty, according to mellor’s framework. (mellor, 1995) the value chain development approach, as discussed by kaplinsky and morris (2001), further supports the notion that integrating farmers into larger regional and global markets is vital for agro-economic growth. in azerbaijan, developing value chains could significantly boost the production and export of high-value agricultural products like fruits, vegetables, and hazelnuts. according to kaplinsky and morris, improving farmers' market access and product quality can raise incomes and strengthen the broader agricultural economy. this is particularly relevant for regions such as absheron-khizi and lankaran-astara, where horticulture and export-oriented agriculture are emerging as key growth areas. chayanov's (1966) theory of the peasant economy offers additional insights into the challenges faced by azerbaijan’s rural farmers. chayanov notes that smallholders tend to be risk-averse, often prioritizing subsistence over market-based production. (chavanov, 1966) this is particularly applicable in azerbaijan, where fragmented landholdings and limited access to credit and technology frequently hinder smallholders from scaling up production. however, the adoption of cooperative farming models—successfully employed in countries like switzerland—could help azerbaijani farmers pool resources, share risks, and gain better access to markets. hijran ismayilova, sona hajiyeva 137 in the realm of innovative agricultural practices, pretty et al. (2018) advocate for sustainable agricultural intensification, which focuses on boosting productivity while minimizing environmental impact. they argue that practices such as organic farming, conservation agriculture, and integrated pest management are crucial for achieving long-term food security. azerbaijan, where challenges like climate change and land degradation are significant, can benefit greatly from this approach. for instance, the introduction of waterefficient irrigation technologies, successfully implemented in germany, aligns with pretty's recommendations for sustainable farming. germany's experience in adopting eco-friendly practices while maintaining high levels of productivity offers valuable lessons for azerbaijan as it seeks to transition toward sustainable agriculture. furthering the discussion, ellis and biggs (2001) emphasize the importance of agricultural innovation systems in promoting technological advancements and improving farm productivity. they argue that successful agricultural transformation requires not only technological innovation but also robust institutional support, including policies that facilitate access to credit, markets, and agricultural services. azerbaijan’s ongoing modernization efforts, which include partnerships with international organizations and government initiatives, align with the principles outlined by ellis and biggs. the development of modern greenhouse technologies in regions like mil-mughan and shirvan-salyan exemplifies how technological advancements, combined with supportive policy frameworks, can bolster food security and economic resilience. (ellis & biggs, 2001). finally, pingali (2012) underscores the importance of diversifying agricultural production systems to ensure food security and economic stability. he warns that monoculture farming systems are highly vulnerable to environmental and market fluctuations and advocates for diversification into high-value crops, livestock, and agroforestry as a means of building resilience. in azerbaijan, particularly in regions like guba-khachmaz and karabakh, diversifying crop production aligns with pingali’s recommendations. encouraging the cultivation of fruits, vegetables, and nuts not only reduces the country's dependence on staple crops but also increases its export potential, contributing both to food security and overall economic development. (pingali, 2012) discussion the establishment of agro parks, like those in baku and khachmaz, plays a pivotal role in these reforms, facilitating large-scale, high-tech agricultural production across the country. these parks are equipped with advanced irrigation systems, modern greenhouse technologies, and support services for local farmers, enabling them to increase productivity while maintaining environmentally sustainable practices. (agroparks,2024) agroparks not only increase food production but also contribute to economic development by creating jobs, fostering local entrepreneurship, and enabling rural communities to engage in profitable agricultural activities. they serve as vital nodes in the country’s food supply chain, ensuring year-round production and improving azerbaijan’s food security. agro dairy operates in various regions of azerbaijan, including key agricultural zones in the country’s western and southern districts. with access to vast tracts of fertile land, the company primarily focuses on crop production, livestock farming, and dairy production. the company’s large-scale agro-economic synergy: enhancing food security through innovative agricultural practices in azerbaijan 138 operations are aligned with azerbaijan’s broader agricultural strategy, which aims to develop export-oriented, high-yielding agricultural enterprises that contribute significantly to national food security. (agro diary, 2024) one of the primary innovations brought in by agro dairy is the use of precision agriculture, which involves applying data-driven technology to optimize farming practices. this includes soil analysis, the use of advanced irrigation systems, and gps-guided machinery, all of which help to maximize crop yields while minimizing environmental impact. the company has been instrumental in introducing smart farming technologies in azerbaijan, which include automated systems for planting, irrigation, and harvesting. with access to vast agricultural land, agro dairy has introduced precision farming technologies, which optimize farming processes through data-driven decision-making. this includes the use of satellite imagery, gps-guided machinery, and soil sensors to monitor crop health, manage water usage, and improve yields. these technologies are crucial for maximizing productivity while reducing environmental impact. one of agro dairy’s primary focuses is sustainable agriculture, ensuring that the farming methods employed preserve soil health and promote long-term land productivity. the company’s use of automated drip irrigation systems conserves water in azerbaijan’s arid regions, while crop rotation practices help maintain soil fertility. by integrating these modern farming techniques, agro dairy plays a crucial role in boosting the country's agricultural output, particularly in grain, dairy, and livestock production. (agro diary, 2024) figure 1. economic indicators of agricultural enterprises in azerbaijan (2018-2023) source: state statistical committee of the republic of azerbaijan the figure 1 provides a comprehensive overview of key financial metrics related to the agricultural sector in azerbaijan over six years. the indicators represented in the chart include profit (thsd. manat), loss (thsd. manat), total profit (thsd. manat), revenue from sales (thsd. hijran ismayilova, sona hajiyeva 139 manat), profit (losses in crop production and animal breeding, thsd. manat), and total production of agriculture (by factual sale prices, thsd. manat). the most prominent upward trends can be observed in total production of agriculture and revenue from sales, which show continuous growth throughout the years. the total production of agriculture by factual sale prices rises steeply, almost doubling from 2018 to 2023. similarly, revenue from sales follows a steady increase, reflecting a growing demand for agricultural products or improved market conditions. in contrast, the values for profit and loss remain much lower in comparison but display a subtle, consistent rise until 2022, after which they slightly dip in 2023. despite fluctuations, profits in crop production and profits in animal breeding stay relatively stable, with no significant changes throughout the years, though a slight growth is visible towards the end of the period. this chart underscores the overall positive financial trajectory of the agricultural sector in azerbaijan between 2018 and 2023, driven primarily by increased production and sales revenue, despite more moderate changes in profit and loss figures. figure 2. total agricultural harvest by region of azerbaijan source: state statistical committee of the republic of azerbaijan figure 2 illustrates the agricultural harvest performance in thousand manats across various economic regions of azerbaijan from 2005 to 2021. key regions, including baku city, nakhchivan autonomous republic, absheron-khizi, daghlig shirvan, ganja-dashkasan, karabakh, gazakh-tovuz, guba-khachmaz, lankaran-astara, mil-mughan, central aran, shaki-zagatala, eastern zangazur, and shirvan-salyan, are represented, offering insights into agricultural productivity over time. during this period, some regions showed steady growth in agricultural output, reflecting regional development and investment in the agricultural sector. agro-economic synergy: enhancing food security through innovative agricultural practices in azerbaijan 140 for example, the central aran and ganja-dashkasan regions demonstrated notable increases, likely due to improved infrastructure and government policies promoting agricultural advancement. lankaran-astara, a traditionally fertile region, maintained relatively high productivity throughout the years, benefiting from its favorable climate for subtropical crops. eastern zangazur and karabakh regions saw fluctuations due to historical conflicts, but the data post-2020 reflects a revitalization of agricultural activities following azerbaijan’s control over these territories. regions like baku city had relatively lower agricultural contributions due to urbanization. figure 3. agricultural production (2015-2023) in central asia and azerbaijan source: state statistical committee of the republic of azerbaijan figure 3 represents the agricultural production from 2018 to 2023 in central asia countries (kazakhstan, kyrgyzstan, uzbekistan, tajikistan) and azerbaijan, based on the economic indicators you provided. the chart visualizes the economic growth trends in these countries, reflecting their agricultural outputs. the government of azerbaijan has actively supported agricultural development through reforms and the establishment of agro parks—large-scale agricultural zones that integrate advanced technology with modern farming practices. agro parks serve as hubs for innovation, allowing both domestic and foreign companies to invest in high-tech farming solutions. one of the most prominent agroparks is the baku agropark, located in the zira settlement, known for its high-quality tomato production. the park covers more than 10 hectares and includes state-of-the-art greenhouses that employ 4th-generation technology to grow several hundred tons of tomatoes monthly. the facility’s greenhouses are equipped with modern climate control systems, ensuring optimal growing conditions year-round. baku agropark also operates a quality control laboratory that ensures all crops meet stringent hygienic standards, making its produce fully ecological. agroparks like the baku agropark and others in khachmaz are hijran ismayilova, sona hajiyeva 141 crucial for enhancing azerbaijan’s agricultural output. these parks not only contribute to local food production but also play a significant role in exporting agricultural products to cis and european markets. (agro parks, 2024) 1.1. revitalized karabakh and agriculture sector the revitalization of karabakh following the second karabakh war in 2020 is a key priority for the azerbaijani government, especially in terms of developing the agricultural sector. before the conflict, karabakh was known for its high agricultural productivity, contributing significantly to the country’s grain, cotton, grape, meat, and silk production. now, the azerbaijani government is focusing on reclaiming and restoring these areas to their former agricultural prominence, while also aiming for export-oriented farming. the government has started leasing agricultural land in karabakh to several companies, many of which have connections to top officials. according to an investigation by abzas media, in 2021, 8,376.5 hectares of land were leased to five companies, including agroinkishaf-2017, agro fresh, agro dairy, azersun, and kraun ko. notably, these companies are either directly linked to or are close to high-ranking officials, with some being owned by individuals related to the president’s family. large agricultural enterprises such as azersun and agro dairy have been given prime land for agro-business development in districts like gubadli, zangilan, and fuzuli. azersun, for example, received a 9,000 square meter plot for a project worth 40 million manats. these lands are being developed for agricultural production, especially in strategic sectors such as grain cultivation, vineyards, and livestock farming. (sacci, 2024) the azerbaijani government has committed to prioritizing food security and is pushing forward with various agricultural initiatives in karabakh. according to president ilham aliyev, a 2021 plan aimed to cultivate around 40,000 to 50,000 hectares of land to ensure national food security. the ministry of agriculture has been temporarily tasked with managing the leasing of agricultural lands and ensuring that the new projects are aligned with azerbaijan’s broader agricultural goals. the revitalization efforts extend beyond agriculture, with major investments being made into infrastructure like roads, airports, and “smart villages” in regions such as zangilan. these efforts are also designed to support the eventual return of displaced azerbaijanis to their homelands, a process that will go hand-in-hand with agricultural and economic recovery. the establishment of agro-businesses in karabakh also aligns with azerbaijan’s postconflict development strategy, where large-scale reconstruction is underway, and foreign and domestic investments are encouraged. agricultural initiatives are seen as a key driver in boosting the region’s economy and creating jobs for future residents. (republic of azerbaijan, 2024, state program, 2021) local farmers, many of whom were displaced during the conflict, are eager to return to their land. with plans to revive grape production, wheat farming, and animal husbandry, these former residents represent the broader agricultural revival in the region. the azerbaijani government’s efforts to rebuild the agricultural sector in karabakh are underpinned by the creation of the karabakh revival fund, aimed at supporting socioeconomic development, infrastructure reconstruction, and sustainable resettlement. this holistic approach to redevelopment reflects a commitment to long-term agricultural productivity and economic stability in karabakh, ensuring that the region plays a agro-economic synergy: enhancing food security through innovative agricultural practices in azerbaijan 142 vital role in the national economy once more. in conclusion, the revitalization of karabakh’s agriculture after the 2020 war is an ambitious but achievable goal. with government support, strategic investments, and local farmer involvement, karabakh is set to reclaim its place as a key agricultural hub in azerbaijan, contributing to national food security and export potential. overall, the liberated territories will significantly boost azerbaijan’s agricultural capacity in the coming years. by president aliyev’s directives, work has already begun to develop agriculture in these areas. in collaboration with azercosmos, the ministry of agriculture has used satellite imagery to map arable land in the region. in azerbaijan, the agricultural sector saw a 2% increase in 2020, and to support farmers, over 7,260 pieces of agricultural equipment were distributed to more than 3,000 farmers, and 8,758 breeding animals were sold. additionally, over 3,400 farmers received microloans that year. (republic of azerbaijan, 2024) 1.2. educational and international collaborations in azerbaijan’s agricultural sector azerbaijan is actively expanding its educational and international collaborations in the fields of food security, food engineering, and agricultural technologies to address the growing global challenges in agriculture and food production. by partnering with leading international institutions, the country aims to develop a new generation of experts equipped with the knowledge and skills required to advance its agricultural sector. these collaborations not only foster academic exchange but also promote research and innovation, helping azerbaijan to enhance its agricultural productivity, ensure food security, and meet international standards. 1.2.1. ada university and university of bologna phd program in food engineering and technology one of the key educational partnerships is the phd program in food engineering and food technology offered by ada university in collaboration with the university of bologna in italy. this program is designed to cultivate expertise in sustainable food production, food engineering, and cutting-edge agricultural technologies. through this partnership, students from azerbaijan gain access to world-class research facilities and expertise from both institutions, allowing them to develop innovative solutions to pressing issues in the global food system. the collaboration between ada university and the university of bologna emphasizes research that promotes sustainable practices in agriculture, such as reducing waste in food production, improving energy efficiency in food processing, and ensuring the long-term viability of agricultural resources. for example, one of the research projects focuses on biotechnological innovations that could enhance the efficiency of food preservation techniques, significantly reducing food waste and increasing shelf life. such research is critical for azerbaijan, which is working towards reducing food imports and boosting domestic production. by engaging in joint research projects, students in this program gain a broader understanding of global trends in food engineering while being equipped to address local challenges in azerbaijan. graduates from this program are expected to take on leading roles in azerbaijan’s agricultural sector, contributing to food security and the modernization of food production systems. (ada university, 2023; university of bologna, 2024) hijran ismayilova, sona hajiyeva 143 1.2.2. unec and ege university double degree program in food engineering another notable collaboration is the double degree program in food engineering between the azerbaijan state university of economics (unec) and ege university in turkey. this program prepares students for dynamic careers in modern agriculture and food production, focusing on the development of advanced food engineering techniques and the application of innovative technologies to meet industry demands. students enrolled in the unec-ege university program benefit from a curriculum that combines the strengths of both universities. ege university, known for its cutting-edge research in agro-food technologies, provides students with exposure to innovative approaches in food production, processing, and safety standards. this experience is crucial for azerbaijan, which is working to modernize its food industry by improving efficiency, increasing production quality, and meeting international export standards. an example of this collaboration’s impact can be seen in the training students receive in food quality control and food safety regulations. by learning how to implement these standards, azerbaijan’s future food engineers will be better prepared to develop safe, sustainable, and high-quality food products for both domestic consumption and international markets. graduates of this program are poised to play critical roles in azerbaijan’s food industry, helping to improve the country’s competitiveness and ensure that its food products meet global standards. (unec, 2023) 1.2.3. azerbaijan state agrarian university and german universities partnerships the azerbaijan state agrarian university (asau) has established a range of collaborations with several german universities, focusing on advancing agricultural education and introducing modern agricultural techniques in azerbaijan. these partnerships emphasize the importance of agricultural sustainability, environmental conservation, and technological innovation in farming practices. germany is renowned for its advancements in sustainable agricultural practices, and its universities offer azerbaijani students valuable opportunities to learn and apply these techniques. through joint programs, students at asau gain practical knowledge in areas such as precision agriculture, crop management, and livestock breeding technologies. this exposure enables them to implement the latest technologies in azerbaijan’s agricultural sector, improving productivity and sustainability. one of the success stories from this collaboration is a project focusing on organic farming and sustainable land use. in partnership with german universities, asau has introduced a pilot project in which students apply organic farming techniques on experimental plots. these techniques include using biological pest control instead of chemical pesticides, rotating crops to preserve soil health, and applying natural fertilizers. the results from this project are promising, showing an increase in crop yields and a reduction in the environmental impact of farming. (adau, 2022) challenges and recommendations oil is the main driver of the azerbaijani economy. however, in recent decades, the country and its development partners have worked to reduce this dependence by enhancing other sectors to create a more diversified economy. agriculture has been recognized as a key area with significant potential for poverty alleviation; in 2008, more than half of the country’s poor lived in rural areas, with most engaged in agricultural activities. when the agricultural agro-economic synergy: enhancing food security through innovative agricultural practices in azerbaijan 144 competitiveness improvement project (acip) was evaluated in 2013 by the world bank, agriculture employed 40% of the azerbaijani workforce—more than any other sector—but only accounted for 5% of gdp. (world bank, 2023) this disparity was attributed to several challenges, including a lack of improved seeds and productive livestock breeds, outdated processing technologies, a market structure that discouraged long-term investment and planning, and limited access to financing. (trade gov, 2023) agricultural land is encountering significant issues, including the depletion of soil fertility, erosion, salinity, and pollution. despite these challenges, the quality and yield of wheat produced in the country are still low. however, private farmers are starting to see improvements in yields due to their efforts. as seen from chart 1, industry dominates the gdp with approximately 55.94%, followed by services at 32.2%, and agriculture contributing 4.76%. figure 4. azerbaijan’s gdp composition by sector in 2022. source: state statistical committee of the republic of azerbaijan urbanization and inadequate agricultural practices have led to significant soil degradation in azerbaijan. reports indicate that approximately 60% of arable land is affected by degradation, impacting both productivity and sustainability. a study by abbasov (2019) indicates that soil degradation is linked to poor land management practices and urban expansion, resulting in diminished agricultural output. to combat these challenges, azerbaijan should adopt sustainable land management practices that promote soil health. encouraging practices such as crop rotation, organic farming, and agroforestry can enhance soil quality and increase agricultural productivity. the agricultural sector in azerbaijan suffers from inadequate infrastructure, including poor transportation and storage facilities. according to world bank (2020) reports, about 25% of agricultural products are lost due to inadequate hijran ismayilova, sona hajiyeva 145 logistics and infrastructure, leading to substantial post-harvest losses. farmers often find it challenging to access markets, which hampers their income potential. significant investment in rural infrastructure is vital to address these issues. improving rural roads and enhancing storage facilities will facilitate the efficient distribution of agricultural products. furthermore, fostering public-private partnerships can leverage additional resources for infrastructure development, creating a more robust agricultural supply chain that connects producers with consumers effectively. the azerbaijani agricultural sector has historically focused on a limited number of crops, particularly cotton and grains. this narrow focus renders the sector vulnerable to price fluctuations and limits its capacity to meet the diverse dietary needs of the population. as highlighted in a fao report (2023), the reliance on a few key crops, such as cotton, exposes farmers to economic risks, particularly during periods of declining global prices. many smallholder farmers in azerbaijan live in poverty, with limited access to financial resources, technology, and education. the national statistical committee reports that around 25% of the rural population lives below the poverty line, which severely affects their capacity to invest in agricultural improvements. the lack of access to credit and modern farming technologies contributes to low productivity levels among smallholders. (fao, 2023) creating microfinance programs tailored for rural communities can alleviate some of these challenges. additionally, strengthening agricultural extension services will provide farmers with the knowledge and resources needed to improve their practices. these services can offer training in modern farming techniques, business management, and financial literacy, empowering farmers to enhance their productivity and livelihoods. farmers in azerbaijan often struggle with accessing markets due to high transportation costs and insufficient market information. the covid-19 pandemic in 2020 highlighted this vulnerability, causing significant price volatility for key agricultural products and negatively impacting farmers’ incomes. the lack of reliable market access often leads to financial instability for producers. to improve market access, fostering the formation of cooperatives and farmer associations can be highly beneficial. these cooperatives enhance farmers' bargaining power, facilitate resource sharing, and provide access to larger markets, ultimately leading to better prices for their products. additionally, developing market information systems that provide farmers with realtime data on market trends and prices will enable them to make informed decisions about production and sales. conclusions azerbaijan stands at a critical juncture where the integration of innovative agricultural practices with economic strategies offers immense potential for enhancing food security and economic development. through initiatives like the "state program for ensuring food safety in the republic of azerbaijan" and the establishment of agroparks, the country is making strides toward modernizing its agricultural sector. precision agriculture, sustainable farming, and biotechnology have emerged as key drivers in improving productivity, resource efficiency, and environmental sustainability. while azerbaijan has seen success in areas such as irrigation improvements and the promotion of digital agriculture, challenges related to infrastructure, policy development, and smallholder participation remain. agro-economic synergy: enhancing food security through innovative agricultural practices in azerbaijan 146 to fully realize the potential of agro-economic synergies, continued investment in technological advancements, education, and international collaboration is essential. additionally, policies that support market access, capacity building, and financial resources for farmers will further enhance food security and economic resilience. the revitalization of regions like karabakh and the ongoing international partnerships in agricultural education demonstrate azerbaijan’s commitment to sustainable agricultural development. as the country continues to modernize, the balance between economic growth and environmental sustainability will be key to securing long-term food security and bolstering its position in the global agricultural market. references 1. ada university. (2024). ada university and university of bologna launch joint certificate program in agriculture and food systems management. https://www.ada.edu.az/en/news/547-ada-university-and-university-of-bologna-launchjoint-certificate-program-in-agriculture-and-food-systems-management 2. adau. (2022). the copernicus international excellence scholarship program at berlin university. retrieved from https://adau.edu.az/media/elanlar/almaniya-federativrespublikasnn-copernicus-berlin-universiteti-beynlxalq-mukmmllik-tqaud-proqram-elanedir-2292/ 3. agrodairy. (2024). agrodairy. retrieved from https://www.agrodairy.az/ 4. baku agropark. (n.d.). about us. https://bakuagropark.az/en/ 5. center for analysis of economic reforms and communication. (2020). impact assessment report of the "state program for ensuring food safety in the republic of azerbaijan for 2019-2025”. https://ereforms.gov.az/files/monitoring/pdf/en/f7a000ba1703ecac7b05b1da791211b6.pdf 6. chayanov, a. v. (1966). the theory of peasant economy. university of wisconsin press. 7. ellis, f., & biggs, s. (2001). evolving themes in rural development 1950s-2000s. development policy review, 19(4), 437-448. https://doi.org/10.1111/1467-7679.00143 8. food and agriculture organization (fao). (2023). fao releases 2022-2023 mechanization strategy to promote sustainable agricultural practices. https://www.fao.org/sustainable-agricultural-mechanization/resources/news/detailevents/en/c/1697081/ 9. kaplinsky, r., & morris, m. (2001). a handbook for value chain research. international development research centre. 10. lipton, m. (2009). land reform in developing countries: property rights and property wrongs. routledge. 11. mellor, j. w. (1995). agriculture on the road to industrialization. johns hopkins university press. 12. office of the united nations high commissioner for human rights (ohchr). (2019). azerbaijan’s flourishing farming sector needs support for smallholders, says un expert. https://www.ohchr.org/en/press-releases/2019/10/azerbaijans-flourishing-farming-sectorneeds-support-smallholders-says-un https://adau.edu.az/media/elanlar/almaniya-federativ-respublikasnn-copernicus-berlin-universiteti-beynlxalq-mukmmllik-tqaud-proqram-elan-edir-2292/ https://adau.edu.az/media/elanlar/almaniya-federativ-respublikasnn-copernicus-berlin-universiteti-beynlxalq-mukmmllik-tqaud-proqram-elan-edir-2292/ https://adau.edu.az/media/elanlar/almaniya-federativ-respublikasnn-copernicus-berlin-universiteti-beynlxalq-mukmmllik-tqaud-proqram-elan-edir-2292/ hijran ismayilova, sona hajiyeva 147 13. pingali, p. (2012). green revolution: impacts, limits, and the path ahead. proceedings of the national academy of sciences, 109(31), 12302-12308. https://doi.org/10.1073/pnas.0912953109 14. pretty, j., toulmin, c., & williams, s. (2018). sustainable intensification in african agriculture. international journal of agricultural sustainability, 9(1), 5-24. https://doi.org/10.3763/ijas.2010.0583 15. republic of azerbaijan state statistical committee. (n.d.). agriculture, forestry and fishing. https://www.stat.gov.az/source/agriculture/?lang=en 16. sacci. (2024). liberated territories. retrieved from https://www.sacci.ch/invest-inazerbaijan/liberated-territories/ 17. schultz, t. w. (1964). transforming traditional agriculture. yale university press. 18. the republic of azerbaijan. (2012). assessment of the agriculture and rural development sectors in the eastern partnership countries. european economic and social committee. https://www.eesc.europa.eu/sites/default/files/resources/docs/azerbaijan_assessment.pdf 19. the republic of azerbaijan. (n.d.). i̇şğaldan azad olunan ərazilərimizdə kənd təsərrüfatı sahəsinin bərpası istiqamətləri və istehsal göstəricilərinin proqnozlaşdırılması. center for analysis of economic reforms and communication. https://agroeconomics.az/az/article/34/isgaldan-azad-olunan-erazilerimizde-kendteserrufa/ 20. trade.gov. (2023). azerbaijan agriculture. https://www.trade.gov/country-commercialguides/azerbaijan-agriculture 21. unec. (2023). unec and ege university start a dual diploma program in food engineering. retrieved from https://unec.edu.az/en/unec-ile-ege-universiteti-ikili-diplomproqramina-basladi/ 22. university of bologna. (2024.). academic collaboration between ada university and the distal. https://distal.unibo.it/en/news/accademic-collaboration-between-ada-universityand-the-distal 23. world bank. (2023). enhancing the competitiveness of azerbaijan agriculture. https://www.worldbank.org/en/results/2023/01/04/enhancing-the-competitiveness-ofazerbaijan-agriculture https://www.sacci.ch/invest-in-azerbaijan/liberated-territories/ https://www.sacci.ch/invest-in-azerbaijan/liberated-territories/ https://unec.edu.az/en/unec-ile-ege-universiteti-ikili-diplom-proqramina-basladi/ https://unec.edu.az/en/unec-ile-ege-universiteti-ikili-diplom-proqramina-basladi/ https://distal.unibo.it/en/news/accademic-collaboration-between-ada-university-and-the-distal https://distal.unibo.it/en/news/accademic-collaboration-between-ada-university-and-the-distal https://www.worldbank.org/en/results/2023/01/04/enhancing-the-competitiveness-of-azerbaijan-agriculture https://www.worldbank.org/en/results/2023/01/04/enhancing-the-competitiveness-of-azerbaijan-agriculture agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 19, no. 1 (2025), pp. 371-385 371 regional integral assessment of ukrainian foreign trade: shifts in exports, imports, geopolitical impact and spillover economic effects l. zomchak, s. ohorodnyk larysa zomchak¹, svitlana ohorodnyk² ¹ ² ivan franko national university of lviv, ukraine ¹ https://orcid.org/0000-0002-4959-3922, e-mail: lzomchak@gmail.com ² e-mail: sviitlana.ohorodnyk@lnu.edu.ua abstract: this paper provides an in-depth analysis of the regional features of ukraine's foreign trade in goods, focusing on export and import dynamics for 2024 and historical trends. the study aims to assess the state of foreign economic activity across different regions of ukraine, using statistical data from the state statistics service of ukraine and customs service of ukraine. the paper explores the key sectors driving foreign trade, such as products of plant origin, machinery, and mineral products, while considering the impact of the ongoing martial law on trade activities. the methodology includes multidimensional ranking techniques, such as integral estimation, to assess regional economic performance based on export-import volumes, business operations, and economic indicators. the key findings reveal significant regional disparities in foreign trade activity, with kyiv and dnipropetrovsk regions showing the highest levels of trade. the paper also highlights a decline in overall trade performance compared to previous years, underlining the adverse effects of the current geopolitical situation. the findings suggest that improving ukraine's foreign economic activity and expanding its international market presence are essential for economic recovery and growth. keywords: regional development, foreign trade, region, model, assessment, regional disparities, export, import, regional analysis, multidimensional, ranking, resilience, shocks, spatial, spillover. introduction the integration of ukraine into the global economic landscape is a critical factor for its sustainable development and future prosperity. this paper delves into an in-depth analysis of the regional dimensions of ukraine's foreign trade in goods, examining both export and import dynamics. utilizing statistical data provided by the state statistics service of ukraine, this study aims to comprehensively assess the state of foreign economic activity across the diverse regions of the country as of january 1, 2024. furthermore, it contextualizes these contemporary figures by examining historical trends and comparing them with data from 2015 and 2022, offering a longitudinal perspective on the evolution of regional trade patterns. the structure of ukraine's foreign trade in goods reveals key sectors driving its international commerce. notably, the ongoing martial law in ukraine has significantly influenced this export composition, leading to a redirection of certain goods, particularly machinery and equipment, towards domestic needs. regional analysis of export volumes indicates a concentration of activity in kyiv (28%) and the dnipropetrovsk region (16.7%), highlighting existing regional disparities in trade contribution (customs service of ukraine, n.d.). on the import side, machinery, equipment, and mechanical appliances, including electrical devices (19.5%), represent the largest category, followed by mineral products (12%) and products from the chemical and related industries (11%). the demand for imported goods https://orcid.org/0000-0002-4959-3922 mailto:lzomchak@gmail.com mailto:sviitlana.ohorodnyk@lnu.edu.ua regional integral assessment of ukrainian foreign trade: shifts in exports, imports, geopolitical impact and spillover economic effects 372 is also geographically concentrated, with kyiv city (45%), lviv region (9%), and dnipropetrovsk region (8%) exhibiting the highest import volumes in 2024 (customs service of ukraine, n.d.). these regional variations in both export and import activities are likely influenced by a confluence of factors, including population density, geographic characteristics, and the overall level of economic development within each region. beyond the sectoral and regional breakdown, understanding ukraine's key international trade partners is crucial. the data presented in this paper reveals a strong reliance on trade with europe and asia, a pattern largely dictated by geographical proximity. interestingly, imports from these continents significantly outweigh exports, pointing to potential inefficiencies in ukraine's current foreign economic activity. a notable exception is trade with africa, where export volumes considerably surpass imports. a comparative analysis of trade data spanning 2015, 2022, and 2024 reveals a concerning trend of declining overall export volumes coupled with increasing imports, suggesting a weakening of ukraine's economic position and a growing reliance on foreign goods. this underscores the imperative for strategies aimed at bolstering the international presence of ukrainian-produced goods and services to foster economic recovery and growth. to provide a robust assessment of the external economic engagement of ukraine's regions, this study employs a multidimensional approach. recognizing the limitations of evaluating regional performance based on single indicators, the methodology incorporates integral estimation techniques. this allows for a comparative analysis of regions across multiple criteria, encompassing export-import volumes, business operations related to customs activities, and broader economic indicators. by standardizing and weighting these diverse factors, this research aims to provide a nuanced understanding of the relative foreign economic activity levels across ukraine's regions, ultimately informing policy recommendations for enhanced international trade and economic development. 1.1.literature review the study of regional trade agreements (rtas) and their impact on international trade has been a significant area of research in recent decades. studnicka, thierie, and van hove (2019) examined the impact of rtas on european exports, providing insights into how these agreements shape trade patterns within europe. park (2020) offered a broader perspective by analyzing rtas in east asia, discussing their historical context and future implications for the region's development. the regional comprehensive economic partnership agreement and its implications for europe, highlighting the interconnectedness of regional trade dynamics across different continents, are either explored by authors (hilpert, 2025). qose and dibra (2023) provided a broader analysis of international trade policies and markets. several studies have also investigated the factors influencing trade and economic growth in specific regions. nurjannah et al. (2023) focused on the relationship between interregional trade and economic growth in asean countries, emphasizing the importance of corruption control and human development indicators. the authors examined the effects of regional trade integration and the transition to renewable energy on environmental quality in south asia, adding an environmental dimension to the analysis of trade dynamics (murshed et al., 2021). the resilience of regional economies in the face of global challenges, such as trade wars, has also been a subject of scholarly attention. he et al. (2024) explored the role of global connections and local networks in enhancing regional resilience during trade disruptions. the impact of digital trade, trade openness, and foreign direct investment on productivity has been investigated, highlighting the evolving nature of international trade in the digital age (dai et al., 2025). larysa zomchak, svitlana ohorodnyk 373 in addition to economic factors, other dimensions of regional trade have been explored, such as the ecological implications of trade practices. mulligan et al. (2023) assessed the risk of invasive species spread through the live bait trade, underscoring the importance of considering ecological factors in trade analysis. the specific context of ukraine's external sector and regional trade agreements has been examined by several researchers. lukianenko, pokydko, and tokarchuk (2022) discussed the sustainability of ukraine's external sector in the context of high risks, while kryvenko (2021) analyzed the realities and prospects of ukraine's regional trade agreements. zomchak and klochnyk (2023) investigated the tendencies, determinants, and interdependencies between various indicators of ukraine's external sector. sirenko et al. (2024) conducted a comprehensive analysis of the relationship between international trade relations and regional development, examining the influencing factors. further contributions to this area include the work of vdovyn and zomchak (2022), who explored ukraine's export in services during the pre-pandemic period, covid-19, and the ongoing war. additionally, zubko (2024) proposed strategies for the development of international trade in ukraine, offering insights into future directions. several studies have also focused on the methodologies used to analyze trade patterns and their economic impacts. gopalakrishnan, ciuriak, and singh (2015) provided a review of models used to quantify mega-regional trade agreements. harris and liu (1998) utilized inputoutput modeling to analyze urban and regional economies, emphasizing the significance of external trade. jiang et al. (2020) explored methods for improving subnational input-output analyses using regional trade data. arbolino, boffardi, and di caro (2023) measured regional trade resilience in italy during crises. bludova and savchuk (2017) modeled the economic security of regional external trade flows. barbero, de lucio, and rodríguez-crespo (2021) measured the impact of covid-19 on trade flows through government policy responses. cai (2023) employed a calibrated gravity model to analyze interregional trade. zhao and mun (2023) used a panel vector autoregressive model to analyze the impact of the rcep on intraindustry trade. khan et al. (2023) used dynamic autoregressive distributed lags model and kernel based regression and examined emissions-adjusted international trade. kurniawan and a’yun (2022) used an autoregressive distributed lag (ardl) model to analyze the relationship between export, fdi, and economic growth in indonesia. hatipoglu, considine, and aldayel (2023) employed a global vector autoregression simulation to study the transnational effects of sanctions. jafari, engemann, and zimmermann (2023) adopted a network perspective in their analysis of food trade and regional trade agreements. oberhofer and pfaffermayr (2021) estimated the trade and welfare effects of brexit using a panel data structural gravity model. zomchak and miskiv (2024) used structural equations method. the application of machine learning techniques in trade analysis has also gained prominence. blöthner and larch (2022) revisited the determinants of regional trade agreements using machine learning. baier and regmi (2023) utilized machine learning to capture heterogeneity in trade agreements. kopczewska (2022) discussed the opportunities of spatial machine learning for regional science. huang et al. (2021) employed a bp neural network approach for regional logistics demand forecasting, and cheng and huang (2022) used a deep neural network to analyze regional economic growth factors in the digital economy. yotov (2022) examined the role of domestic trade flows in estimating the gravity model of trade. these studies collectively contribute to a broader understanding of the complexities of regional trade, highlighting the importance of considering economic, environmental, and geopolitical factors in the analysis of trade dynamics. they also provide a valuable context for the present study, which focuses on the regional dimensions of ukraine's foreign trade in goods, offering additional insights into the specific challenges and opportunities faced by the country in its pursuit of enhanced international trade and economic development. regional integral assessment of ukrainian foreign trade: shifts in exports, imports, geopolitical impact and spillover economic effects 374 1.2.export and import in ukraine the analysis is based on statistical data regarding regional volumes of foreign trade in goods, provided by the state statistics service of ukraine. as of january 1, 2024, the total export volume amounted to 3,400,037.91 thousand usd (customs service of ukraine, n.d.). the exported goods can generally be categorized into the following groups: live animals and products of animal origin; products of plant origin; animal or vegetable fats and oils; prepared foodstuffs; mineral products; products of the chemical and related industries; polymeric materials, plastics, and related products; wood and wood products; textile materials and products; footwear, headgear, and umbrellas; articles of stone, gypsum, and cement; natural or cultured pearls, precious and semi-precious stones; base metals and related products; machinery, equipment, and electrical devices; optical and photographic instruments; weapons, ammunition, and their components; various industrial goods; and works of art. the largest share of exports consists of products of plant origin (37.2%), followed by animal or vegetable fats and oils (15.4%), and prepared foodstuffs (10.1%) (customs service of ukraine, n.d.). this export structure is significantly influenced by the ongoing martial law in ukraine, as many goods, particularly machinery and equipment, are being redirected for domestic use by the state. according to the data presented on the map, the highest volume of exported goods originates from kyiv (28%), followed by the dnipropetrovsk region (16.7%) (customs service of ukraine, n.d.). overall, the structure of regional exports is illustrated in figure 1. figure 1. regional volumes of goods exports in ukraine for january 2024 source: developed by the authors based on data from the customs service of ukraine, n.d. and state statistics service of ukraine, n.d. larysa zomchak, svitlana ohorodnyk 375 in terms of imports, the largest categories are machinery, equipment, and mechanical appliances, including electrical devices (19.5%), followed by mineral products (12%) and products from the chemical and related industries (11%) (customs service of ukraine, n.d.). figure 1.2 illustrates which regions of ukraine had the highest demand for imported goods in 2024. the leading regions include kyiv city (45%), lviv region (9%), and dnipropetrovsk region (8%). figure 2. regional volumes of imports of goods in ukraine for january 2024 source: developed by the authors based on data from the customs service of ukraine, n.d. and state statistics service of ukraine, n.d. in general, these indicators are influenced by factors such as population size, geographic area, and the level of economic development in each region. it is also important to examine ukraine's key trade partners, specifically, the continents with which the country engages in trade and the extent of that cooperation. relevant data are presented in tables 1 and 2. table 1. amount trading partner of ukraine with continents in exports goods in 2024 (in thousands of us dollars ). europe asia america africa australia and oceania 1,759 883 108 316 2 eu countries 1933 cis countries 136 source: developed by the authors based on data from the customs service of ukraine, n.d. and state statistics service of ukraine, n.d. regional integral assessment of ukrainian foreign trade: shifts in exports, imports, geopolitical impact and spillover economic effects 376 table 2. amount trading partner of ukraine with continents in imports goods in 2024 (in thousands of us dollars) europe asia america africa australia and oceania 2453 1659 324 65 32 eu countries 2275 cis countries 58 source: developed by the authors based on data from the customs service of ukraine and state statistics service of ukraine, n.d. ukraine primarily cooperates with europe and asia, a trend largely influenced by the country’s geographical location. a significant portion of this cooperation consists of imports, which exceed exports by nearly 50%. this imbalance highlights the current inefficiencies in ukraine’s foreign economic activity. the only exception is africa, where the volume of exported goods is four times higher than the volume of imports. a comparison of data from appendix a, which presents statistics for the years 2015 and 2024, reveals a general decline in ukraine’s export volumes, while imports have increased. this trend suggests a deterioration in the country’s economic position and a growing dependence on foreign goods. these findings underscore the need to enhance the presence of ukrainian-produced goods and services in the international market. methodology to model the external activity of the regions of ukraine, it is important to analyze the situation that currently exists. it is necessary to compare regions not by one indicator, for example, the balance, but by several that will describe the region from different directions. it is also important to work with the latest data, or by the trend over several years. such an analysis can be done using a taxonomic or integral assessment (zomchak, l., & hakava, s. (2025)). the first method by which a certain situation can be analyzed is integral estimation. in the initial table x weekend data expressed peculiar for each indicator, in different units measurement. therefore, it is necessary to calculate the matrix of standardized z indicators. the first step is to calculate the average value for each of the criteria. to do this, you can use the formula: 𝑥�̅� = ∑ 𝑥𝑖𝑗 𝑚 𝑗=1 𝑚 , (1) where 𝑥�̅�is the arithmetic mean value of the criterion, 𝑥𝑖𝑗value of criterion i a certain object research j , 𝑚– number of objects research . next the next stage is to calculate the standard deviation for each of the criteria, which is calculated using the formula: 𝜎𝑖 = √ ∑ (𝑥𝑖𝑗−𝑥�̅�)𝑚 𝑗=1 𝑚−1 , (2) where �̅�is the arithmetic mean value of the criterion, 𝑥𝑖𝑗value of criterion i a certain object research j, 𝑚– number of objects research. these values are needed to calculate the standardized matrix z. to do this, use the following formula: 𝑧𝑖𝑗 = 𝑥𝑖𝑗−𝑥�̅� 𝜎𝑖 , (3) larysa zomchak, svitlana ohorodnyk 377 where �̅�is the arithmetic mean value of the criterion, 𝑥𝑖𝑗value of criterion i of a certain element j, 𝜎𝑖– mean square deviation. another stage of calculating the integral assessment of the foreign economic activity of the regions of ukraine is the calculation of partial coefficients, i.e. the matrix k. assessment comes down to assigning a numerical value level competitiveness. it should be noted that not all indicators can be converted into partial coefficients in the range (0;1) by dividing by their maximum value, since for stimulating factors the largest value will be the most desirable, and for de-stimulating factors the smallest. considering this is necessary distribute all indicators for two groups: stimulating and disincentive factors . calculation partial coefficients for disincentive indicators are made as follows: к𝑖𝑗 = 𝑚𝑎𝑥𝑧𝑖−𝑧𝑖𝑗 𝑚𝑎𝑥𝑧𝑖−𝑚𝑖𝑛𝑧𝑖 , (4) for indicators stimulants the calculation is made using the formula: к𝑖𝑗 = 𝑧𝑖𝑗−𝑚𝑖𝑛𝑧𝑖 𝑚𝑎𝑥𝑧𝑖−−𝑚𝑖𝑛𝑧𝑖 , (5) where 𝑧𝑖𝑗is the actual value criterion for a certain sample element, 𝑚𝑖𝑛𝑧𝑖− minimal value criterion, 𝑚𝑎𝑥𝑧𝑖– maximum value criterion. the final integral score is calculated as the average value for the criteria of each region, that is, according to the formula: ij = ∑ kij n i=1 n , (6) where 𝐼𝑗is the integral estimate of the jth sample element, 𝐾𝑖𝑗partial coefficient i -th criterion of j -th research object, 𝑛– number of criteria. results and discussion each region of ukraine exhibits varying levels of development, influenced by factors such as geographical location, population size, availability of natural resources, and other indicators. these factors significantly affect the level of foreign economic activity in each region. assessing the foreign economic activity of ukraine is a key component in shaping effective economic policy, enhancing competitiveness in the global market, and ensuring the country’s sustainable development. therefore, it is crucial to evaluate the development of foreign economic activity for each region and identify areas where increased state intervention is necessary to support further growth. in this assessment, both the integral evaluation method and the taxonomic method are used. these methodologies enable equitable comparisons across regions by considering both factors that facilitate and those that hinder development. due to the ongoing martial law in ukraine, data for many indicators in 2024 are unavailable. consequently, the analysis focuses on the current state in 2024 using the accessible data, alongside a comparative analysis for 2022 and 2015. for 2024, the following criteria are used to analyze the foreign economic activity of ukrainian regions:  total value of exports of goods and services  total value of imports of goods and services  number of enterprises authorized to conduct customs brokerage activities  number of enterprises authorized to open and operate temporary storage warehouses  number of relocated enterprises that have moved to the region regional integral assessment of ukrainian foreign trade: shifts in exports, imports, geopolitical impact and spillover economic effects 378  consumer price indices for the years 2022 and 2015, the analysis includes the following indicators:  total value of exports of goods and services  total value of imports of goods and services  number of enterprises authorized to conduct customs brokerage activities  number of enterprises authorized to open and operate temporary storage warehouses  export volumes by business entities categorized by number of employees  consumer price indices  capital investments  population size  import volumes by business entities categorized by number of employees data were collected for all 24 regions of ukraine, with kyiv included as part of the kyiv region. the data sources include the state statistics service of ukraine, the national bank of ukraine, and the customs service of ukraine. since exports and imports are the primary indicators of regional foreign economic activity, it is advisable to track their volumes across the regions. this information is presented in figures 3 and 4. figure3. volume of exports of goods and services in 2022 and 2015 source: developed by the authors based on data from the customs service of ukraine, n.d. and state statistics service of ukraine, n.d. the data on the export of goods of the kyiv region for 2022 exceed the upper limit and amount to 12,559,421.3 thousand dollars. from figures 3 and 4 it can be seen that the highest indicators are in the kyiv region. this shows the positive development of this region, but imports also have high values, so the situation is ambiguous. to ensure an accurate assessment of each region, an integral evaluation was carried out using a set of selected criteria, defined as follows:  total value of exports of goods and services (x₁) 0.0 1000000.0 2000000.0 3000000.0 4000000.0 5000000.0 6000000.0 7000000.0 k yi v d n ip ro p e tr o vs k lv iv za p o ri zh ia o d es a za ka rp at ti a p o lt av a m yk o la iv v in n yt si a c h e rk as y v o ly n k h ar ki v k ir o vo h ra d te rn o p il k h m e ln yt sk yy r iv n e su m y zh yt o m yr c h e rn ih iv iv an o -f ra n ki vs k c h e rn iv ts i d o n et sk k h e rs in lu h an sk 2022 2015 larysa zomchak, svitlana ohorodnyk 379  total value of imports of goods and services (x₂)  number of enterprises granted permission to conduct customs brokerage activities (x₃)  number of enterprises granted permission to open and operate temporary storage warehouses (x₄)  number of relocated enterprises that moved to the region (x₅)  consumer price index (x₆) figure 4 presents a comparison of import volumes of goods and services by region in 2022 and 2015. figure4. comparison of import volumes of goods and services by regions in 2022 and 2015. source: developed by the authors based on data from the customs service of ukraine, n.d. and state statistics service of ukraine, n.d. for the years 2022 and 2015, additional indicators were introduced:  total value of exports of goods and services (x₁)  total value of imports of goods and services (x₂)  number of enterprises granted permission to conduct customs brokerage activities (x₃)  number of enterprises granted permission to open and operate temporary storage warehouses (x₄)  export volume of goods by business entities, categorized by number of employees (x₅)  consumer price index (x₆)  capital investments (x₇)  population size (x₈)  import volume of goods by business entities, categorized by number of employees (x₉) using formula 1, where m is the number of regions, average values for each indicator were calculated. the results are as follows: for 2024: x 1 102137.5 , x 2 205978.4 , x 3 214.6 , x 4 7.5 , x 5 789.3 , x 6 101.0 . for 2022: x 1 1834252.6 , x 2 2157382.6 , x 3 195.8 , x 4 7.0 , x 5 930.7 , x 6 107.6 , x 7 17069.2 , x 8 1713768.0 , x 9 3880.7 . 0.0 3000000.0 6000000.0 k yi v lv iv d n ip ro p e tr o vs k o d es a v o ly n za ka rp at ti a k h ar ki v zh yt o m yr p o lt av a za p o ri zh ia m yk o la iv k h m e ln yt sk yy v in n yt si a c h e rk as y iv an o -f ra n ki vs k su m y r iv n e te rn o p il c h e rn iv ts i c h e rn ih iv k ir o vo h ra d d o n et sk k h e rs o n lu h an sk 2022 2015 regional integral assessment of ukrainian foreign trade: shifts in exports, imports, geopolitical impact and spillover economic effects 380 for 2015: x 1 1185824.2 , x 2 1354255.0 , x 3 89.6 , x 4 1.3 , x 5 631.1 , x 6 103.1 , x 7 10464.8 , x 8 1785.2 , x 9 985.8 . the next step involves calculating the standard deviation using formula 2. the results are presented in table 3. table 3. calculated values of the mean square deviation source: calculated by the authors since the values of each criterion are expressed in different units of measurement, the matrix of criterion values (x) was standardized to create matrix z. standardization was performed using formula 3, which incorporates the calculated average and root mean square values. an important consideration in the assessment process is that some criteria reflect a region’s development positively when their values are higher, while others have a negative impact. therefore, the set of criteria is divided into stimulating and destimulating indicators. for 2024, the stimulating criteria include: x₁, x₃, x₄, and x₅, while the destimulating criteria are x₂ and x₆. for 2022 and 2015, the stimulating criteria are: x₁, x₃, x₄, x₅, x₇, and x₈, and the destimulating ones are: x₂, x₆, and x₉. accordingly, the reference vector for 2024 is: p = (+, −, +, +, +, −) and for 2022 and 2015: p = (+, −, +, +, +, −, +, +, −) the next step in calculating the integral assessment of foreign economic activity in ukraine’s regions is the computation of partial coefficients, forming matrix k. at this stage, formula (1.4) is applied to stimulating criteria, while formula (5) is used for destimulating criteria. the final step is the calculation of the integral assessment, obtained as the arithmetic mean of the partial coefficient values (matrix k) for each region. the results are illustrated in figures 5-7. 2024 2022 2015 x1 114586.45 2635861.3 1408891.791 x2 541282.39 5151295.573 3418617.903 x3 626.49653 571.5169935 244.01 x4 5.6103876 5.4092 1.6854 x5 1444,408 1088.2 845.27 x6 0.391185 2.9188 0.4634 x7 34519 20272.45133 x8 1030460.687 1035.7 x9 4153.593422 1937.3 larysa zomchak, svitlana ohorodnyk 381 figure 5. the value of the integrated assessment of regions for 2024 source: calculated by the authors based on the data presented in figures 5–7, it is possible to analyze regional development trends, track the growth or decline of the integral assessment for individual regions, and evaluate the overall situation in the country. to facilitate this analysis, the regions are classified into five categories based on their integral assessment scores:  first class – regions with an integral score of 0.6 and above  second class – score within the range [0.5–0.6)  third class – score from 0.4 to 0.5 inclusive  fourth class – score within the range [0.3–0.39]  fifth class – regions with an integral score below 0.3 according to the data for 2024, no region falls into the first class. the second class includes only the kyiv region. the dnipropetrovsk region is classified in the third class. regions such as vinnytsia, odesa, poltava, sumy, zaporizhia, cherkasy, lviv, khmelnytskyi, zhytomyr, and volyn demonstrate average performance and are therefore assigned to the fourth class. all remaining regions are placed in the fifth class. it is noteworthy that the kyiv region demonstrates the highest score, with a gap of nearly 0.2 compared to other regions. this reflects its relatively high level of economic development and active participation in foreign economic activity. in general, the overall situation in the country is not favorable. the average integral assessment score for ukraine in 2024 is 0.309, indicating a low level of development in the sphere of foreign economic activity. this outcome is primarily attributed to the ongoing state of war. figure 6. the value of the integrated assessment of regions for 2022 source: calculated by the authors 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 k yi v d n ip ro p e tr o vs k v in n yt si a o d es a p o lt av a su m y za p o ri zh zh ia c h e rk as y lv iv k h m e ln yt sk yi zh yt o m yr v o ly n c h e rn ih iv za ka rp at ti a d o n et sk k ir o vo h ra d m yk o la iv r iv n e te rn o p il k h ar ki v h e rs o n iv an o -f ra n ki vs k c h e rn iv ts i lu h an sk 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 k yi v o d es a d n ip ro p e tr o vs k d o n et sk p o lt av a lv iv za p o ri zh zh ia za ka rp at ti a zh yt o m yr v o ly n iv an o -f ra n ki vs k m yk o la iv v in n yt si a c h e rk as y k h ar ki v r iv n e te rn o p il lu h an sk su m y k h m e ln yt sk yi h e rs o n c h e rn ih iv c h e rn iv ts i k ir o vo h ra d regional integral assessment of ukrainian foreign trade: shifts in exports, imports, geopolitical impact and spillover economic effects 382 for 2022 it is slightly better. in 2022, there is an oblast that belongs to the first group – kyiv. its integral score is 0.6. there are no oblasts in the second class. the third class includes the odesa and dnipropetrovsk regions. all the rest, except kirovohrad region, belong to the fourth class. kirovohrad region, whose integral indicator is 0.27, belongs to the fifth class. the average value of the integral indicator for all regions of ukraine is 0.38. in 2015, no region was included in the first class of regions. dnipropetrovsk and kyiv have the highest values, 0.57 and 0.55 respectively, so they belong to the second class. the third class includes 7 regions: lviv, odesa, volyn, poltava, mykolaiv, ternopil and donetsk. all other regions are classified as class 4. regions critical fifthgrade students in this year. the average value for all regions is 0.39. overall, the trend is downward. the best situation for the country as a whole was in 2015, the worst in 2024. the score fell by 0.09, which indicates the need to improve the foreign economic activity of ukraine's regions. figure 7. the value of the integrated assessment of regions for 2015 source: calculated by the authors if we analyze specific regions, we can see that kyiv region was in second position in 2015, and in 2022 and 2024 it is leading. in 2022, it is the only one that entered the first class. in the remaining regions, such dynamics are not observed. conclusions this study offers a comprehensive regional integral assessment of ukrainian foreign trade, meticulously analyzing the shifts in its export and import landscape. our findings underscore significant disparities in regional performance, with kyiv and dnipropetrovsk consistently exhibiting higher trade activity. this concentration reflects an uneven distribution of economic development and participation in international trade across ukraine, echoing broader regional imbalances observed in contexts like asean countries (nurjannah et al., 2023). these regional differences are crucial, as they highlight the potential for spatial spillover effects, where the economic vitality or decline of dominant regions can influence the trade performance of neighboring or less developed areas. understanding these spillover mechanisms is key to fostering more balanced national development. the analysis further highlights the profound geopolitical impact of ongoing martial law on ukraine's foreign trade structure and volume. the observed shifts in exports, particularly the redirection of key goods like machinery and equipment towards domestic use and a general decline in overall export volumes, demonstrate the severe challenges posed by the current security situation. 0 0.1 0.2 0.3 0.4 0.5 0.6 d n ip ro p e tr … k yi v lv iv o d es a v o ly n p o lt av a m yk o la iv te rn o p il d o n et sk za p o ri zh zh ia r iv n e c h e rn iv ts i iv an o -… k h ar ki v v in n yt si a za ka rp at ti a su m y zh yt o m yr k ir o vo h ra d c h e rk as y k h m e ln yt sk yi h e rs o n lu h an sk c h e rn ih iv larysa zomchak, svitlana ohorodnyk 383 this aligns with vdovyn and zomchak's (2022) examination of the war's impact on ukraine's services exports, reinforcing the notion of widespread disruption. concurrently, the increasing reliance on imports, predominantly from europe and asia, raises concerns about ukraine's economic vulnerability. this trend resonates with broader discussions on international trade policies and markets (qose & dibra, 2023), emphasizing the need to strengthen domestic production capabilities to mitigate future risks and enhance national resilience. our integral assessment methodology proved effective in providing a nuanced understanding of regional foreign economic activity. by considering a range of indicators, including export-import volumes, customs operations, and broader economic factors, this approach offers a more holistic evaluation than traditional single-indicator analyses. this innovative methodology builds upon established approaches for analyzing urban and regional economies, such as input-output modeling, but extends it by integrating a broader set of indicators relevant to crisis conditions. the assessment results underscore an urgent need for targeted interventions to improve the foreign economic performance of less developed regions, which are particularly susceptible to negative spatial spillover effects, and to enhance ukraine's overall competitiveness in the global market. the comparative analysis of trade data from 2015, 2022, and 2024 reveals a concerning downward trend in ukraine's foreign trade performance. the deterioration in the country's integral assessment score, particularly amidst ongoing challenges, aligns with the high risks identified for ukraine's external sector (lukianenko, pokydko, & tokarchuk, 2022). addressing these challenges is paramount for mitigating the negative economic consequences of the current crisis and laying the foundation for sustainable recovery and growth. this reinforces the importance of proactive measures like those suggested by zubko (2024) for the development of international trade in ukraine. in summary, this research emphasizes the critical importance of enhancing ukraine's foreign economic activity and expanding its presence in international markets. our findings call for a multifaceted approach encompassing policy reforms, targeted regional development strategies that account for spatial spillover economic effects, and robust support for domestic industries. this study contributes new insights by offering a detailed, regionally-disaggregated assessment within the context of war. our use of an integral assessment methodology provides a unique comparative lens, highlighting specific disparities and trends crucial for navigating current difficulties and paving the way for a more resilient and prosperous future. references 1. arbolino, r., boffardi, r., & di caro, p. (2023). measuring and exploring regional trade resilience in italy during different crises. italian economic journal, 9(3), 1027-1047. https://doi.org/10.1007/s40797-023-00250-6 2. baier, s. l., & regmi, n. r. (2023). using machine learning to capture heterogeneity in trade agreements. open economies review, 34(4), 863-894. https://doi.org/10.1007/s11079-02209685-3 3. barbero, j., de lucio, j. j., & rodríguez-crespo, e. (2021). effects of covid-19 on trade flows: measuring their impact through government policy responses. plos one, 16(10), e0258356. https://doi.org/10.1371/journal.pone.0258356 4. blöthner, s., & larch, m. (2022). economic determinants of regional trade agreements revisited using machine learning. empirical economics, 63(4), 1771-1807. https://doi.org/10.1007/s00181-022-02203-x 5. bludova, t., & savchuk, n. (2017). modelling the economic security of regional external trade flows. baltic journal of economic studies, 3(5), 19-24. https://doi.org/10.30525/22560742/2017-3-5-19-24 https://doi.org/10.1007/s40797-023-00250-6 https://doi.org/10.1007/s11079-022-09685-3 https://doi.org/10.1007/s11079-022-09685-3 https://doi.org/10.1371/journal.pone.0258356 https://doi.org/10.1007/s00181-022-02203-x https://doi.org/10.30525/2256-0742/2017-3-5-19-24 https://doi.org/10.30525/2256-0742/2017-3-5-19-24 regional integral assessment of ukrainian foreign trade: shifts in exports, imports, geopolitical impact and spillover economic effects 384 6. cai, m. (2023). a calibrated gravity model of interregional trade. spatial economic analysis, 18(1), 89-107. https://doi.org/10.1080/17421772.2022.2081715 7. cheng, c., & huang, h. (2022). evaluation and analysis of regional economic growth factors in digital economy based on the deep neural network. mathematical problems in engineering, 2022(1), 1121886. https://doi.org/10.1155/2022/1121886 8. customs service of ukraine (n.d.) retrieved february 1, 2025, from https://customs.gov.ua/en/ 9. dai, s., tang, d., li, y., & lu, h. (2025). digital trade, trade openness, fdi, and green total factor productivity. international review of financial analysis, 97, 103777. https://doi.org/10.1016/j.irfa.2024.103777 10. harris, r. i., & liu, a. (1998). input‐output modelling of the urban and regional economy: the importance of external trade. regional studies, 32(9), 851-862. https://doi.org/10.1080/00343409850118004 11. hatipoglu, e., considine, j., & aldayel, a. (2023). unintended transnational effects of sanctions: a global vector autoregression simulation. defence and peace economics, 34(7), 863-879. https://doi.org/10.1080/10242694.2022.2073429 12. he, c., li, j., wang, w., & zhang, p. (2024). regional resilience during a trade war: the role of global connections and local networks. journal of world business, 59(5), 101567. https://doi.org/10.1016/j.jwb.2024.101567 13. hilpert, h. g. (2025). the regional comprehensive economic partnership agreement and europe: impact and implications. in political economy of east asian economic integration (pp. 164-195). routledge. https://doi.org/10.4324/9781032624044-9 14. huang, l., xie, g., zhao, w., gu, y., & huang, y. (2021). regional logistics demand forecasting: a bp neural network approach. complex & intelligent systems, 1-16. https://doi.org/10.1007/s40747-021-00297-x 15. jafari, y., engemann, h., & zimmermann, a. (2023). food trade and regional trade agreements–a network perspective. food policy, 119, 102516. https://doi.org/10.1016/j.foodpol.2023.102516 16. jiang, m., liu, l., behrens, p., wang, t., tang, z., chen, d., ... & zhu, b. (2020). improving subnational input–output analyses using regional trade data: a case-study and comparison. environmental science & technology, 54(19), 12732-12741. https://doi.org/10.1021/acs.est.0c04728 17. khan, z., badeeb, r. a., hassan, t., zhang, c., & elfaki, k. e. (2023). emissions‐adjusted international trade for sustainable development in china: evidence from dynamic autoregressive distributed lags model and kernel based regression. sustainable development, 31(1), 379-392. https://doi.org/10.1002/sd.2398 18. kopczewska, k. (2022). spatial machine learning: new opportunities for regional science. the annals of regional science, 68(3), 713-755. https://doi.org/10.1007/s00168-021-01101-x 19. kryvenko, n. v. (2021). regional trade agreements of ukraine: realities and prospects. scientific bulletin of mukachevo state university. series “economics, 8(2), 56-81. https://doi.org/10.52566/msu-econ.8(2).2021.56-81 20. kurniawan, m. l. a., & a’yun, i. q. (2022). dynamic analysis on export, fdi and growth in indonesia: an autoregressive distributed lag (ardl) model. journal of economics, business, & accountancy ventura, 24(3), 350-362. https://doi.org/10.14414/jebav.v24i3.2717 21. lukianenko, i., pokydko, a., & tokarchuk, t. (2022). ensuring the sustainability of the external sector of ukraine in the conditions of high risks. scientific papers naukma, ecinomics, 7(1), 68-78. https://doi.org/10.18523/2519-4739.2022.7.1.68-78 22. mulligan, h., schall, b. j., davis, t., & coulter, a. a. (2023). opportunities for regional collaboration and prevention: assessing the risk of the live bait trade as a pathway of invasive species. biological conservation, 287, 110342. https://doi.org/10.1016/j.biocon.2023.110342 https://doi.org/10.1080/17421772.2022.2081715 https://doi.org/10.1155/2022/1121886 https://customs.gov.ua/en/ https://doi.org/10.1016/j.irfa.2024.103777 https://doi.org/10.1080/00343409850118004 https://doi.org/10.1080/10242694.2022.2073429 https://doi.org/10.1016/j.jwb.2024.101567 https://doi.org/10.4324/9781032624044-9 https://doi.org/10.1007/s40747-021-00297-x https://doi.org/10.1016/j.foodpol.2023.102516 https://doi.org/10.1021/acs.est.0c04728 https://doi.org/10.1002/sd.2398 https://doi.org/10.1007/s00168-021-01101-x https://doi.org/10.52566/msu-econ.8(2).2021.56-81 https://doi.org/10.14414/jebav.v24i3.2717 https://doi.org/10.18523/2519-4739.2022.7.1.68-78 https://doi.org/10.1016/j.biocon.2023.110342 larysa zomchak, svitlana ohorodnyk 385 23. murshed, m., ahmed, r., kumpamool, c., bassim, m., & elheddad, m. (2021). the effects of regional trade integration and renewable energy transition on environmental quality: evidence from south asian neighbors. business strategy and the environment, 30(8), 4154-4170. https://doi.org/10.1002/bse.2862 24. narayanan gopalakrishnan, b., ciuriak, d., & singh, h. (2015). quantifying the megaregional trade agreements: a review of the models. chapter, 3, 93-131. https://doi.org/10.2139/ssrn.2611025 25. national bank of ukraine (n.d.) retrieved february 1, 2025, from https://bank.gov.ua/en/# 26. nurjannah, n., masbar, r., majid, m. s. a., & suriani, s. (2023). inter-regional trade and economic growth of asean low middle income: are corruption control and hdi important?. cogent economics & finance, 11(2), 2230733. https://doi.org/10.1080/23322039.2023.2230733 27. oberhofer, h., & pfaffermayr, m. (2021). estimating the trade and welfare effects of brexit: a panel data structural gravity model. canadian journal of economics/revue canadienne d'économique, 54(1), 338-375. https://doi.org/10.1111/caje.12494 28. park, i. (2020). regional trade agreements in east asia: past and future. development policy review, 38(2), 206-225. https://doi.org/10.1111/dpr.12418 29. qose, e., & dibra, r. (2023). international trade policies and markets. agora international journal of economical sciences, 17(2), 137-141. https://doi.org/10.15837/aijes.v17i2.6451 30. sirenko, p., balian, i., martyniak, i., malakhova, t., & bakushevych, i. (2024). the relationship between international trade relations and regional development: a comprehensive analysis and assessment of influencing factors. multidisciplinary science journal, 6. https://doi.org/10.31893/multiscience.2024ss0220 31. state statistics service of ukraine (n.d.) retrieved february 1, 2025, from https://stat.gov.ua/en 32. studnicka, z., thierie, w., & van hove, j. (2019). the impact of regional trade agreements on european exports. international economics and economic policy, 16, 467-488. https://doi.org/10.1007/s10368-019-00436-3 33. vdovyn, m., & zomchak, l. (2022). export in services of ukraine: pre-pandemic period, covid-19 and war. věda a perspektivy, 8(15), 48-57. https://doi.org/10.52058/2695-15922022-8(15)-48-57 34. yotov, y. v. (2022). on the role of domestic trade flows for estimating the gravity model of trade. contemporary economic policy, 40(3), 526-540. https://doi.org/10.1111/coep.12567 35. zhao, g., & mun, c. j. (2023). the impact of the regional comprehensive economic partnership (rcep) on intra-industry trade: an empirical analysis using a panel vector autoregressive model. journal of korea trade, 27(3), 103-118. https://doi.org/10.35611/jkt.2023.27.3.103 36. zomchak, l., & hakava, s. (2025). unveiling disparities and resilience in ukrainian regional labor markets: multidimensional ranking approach. in developments in information and knowledge management systems for business applications: volume 8 (pp. 495-516). cham: springer nature switzerland. https://doi.org/10.1007/978-3-031-80935-4_23 37. zomchak, l., & klochnyk, o. (2023). external sector of ukraine: tendencies, determinants and interdependencies between indicators. customs scientific journal, 1, 62-69. https://doi.org/10.32782/2308-6971/2023.1.7 38. zomchak, l., & miskiv, d. (2024). structural model of ukrainian economic performance: interactions between gdp and industrial output. smart-economy, entrepreneurship and security, 2(2), 7-16. https://doi.org/10.60022/sis.2.2-1 39. zubko, t. (2024). strategies for the development of inernational trade in ukraine. agora international journal of economical sciences, 18(1), 250-261. https://doi.org/10.15837/aijes.v18i1.6727 https://doi.org/10.1002/bse.2862 https://doi.org/10.2139/ssrn.2611025 https://bank.gov.ua/en/ https://doi.org/10.1080/23322039.2023.2230733 https://doi.org/10.1111/caje.12494 https://doi.org/10.1111/dpr.12418 https://doi.org/10.15837/aijes.v17i2.6451 https://doi.org/10.31893/multiscience.2024ss0220 https://stat.gov.ua/en https://doi.org/10.1007/s10368-019-00436-3 https://doi.org/10.52058/2695-1592-2022-8(15)-48-57 https://doi.org/10.52058/2695-1592-2022-8(15)-48-57 https://doi.org/10.1111/coep.12567 https://doi.org/10.35611/jkt.2023.27.3.103 https://doi.org/10.1007/978-3-031-80935-4_23 https://doi.org/10.32782/2308-6971/2023.1.7 https://doi.org/10.60022/sis.2.2-1 https://doi.org/10.15837/aijes.v18i1.6727 agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 19, no. 1 (2025), pp. 236-253 236 the role of strategic financial management in driving sustainable growth in a green economy f. morina, e. elezaj fisnik morina¹, elvis elezaj² ¹ ² university “haxhi zeka”/faculty of business, kosovo ¹ https://orcid.org/0000-0003-1071-0439 e-mail: fisnik.morina@unhz.eu ² https://orcid.org/0000-0002-2631-7837 e-mail: elvis.elezaj@unhz.eu abstract: strategic financial management is critical in promoting sustainable economic growth and developing a green economy by integrating best financial practices with sustainable development objectives. this study analyzes the impact of strategic financial management on sustainable economic development through three case studies: greencells in germany, a leading and highly successful company in solar energy; the ecoprofit program in slovenia, a project that aims to effectively manage the process of reducing costs and waste in enterprises, and ujë rugove, a kosovar company that has received green financing to advance its production process. through content analysis, comparative analysis, and secondary data analysis, the study examines how the financial strategies of these companies and their green projects have contributed to sustainable growth. the empirical results highlight that strategic financing and effective management of financial resources positively impact improving competitiveness and promoting environmental innovation and sustainable development projects. this study provides recommendations for all businesses, governments, and other stakeholders on effectively integrating strategic financial management into green economy projects. keywords: strategic financial management, sustainable growth, green, economy, finance. 1. introduction in the era of post-modernism, in which we as a society are facing the increasingly escalating challenges of climate change and on the other hand we are trying to move towards an increase in environmental awareness (into greenish terms), without leaving aside the attempt to shift the global economy towards a green economy is no longer an option it represents a necessity (inevitability). at the centre of this transformation is the role of strategic financial management, which goes beyond traditional financial oversight to embrace long-term planning, sustainable investments, and various risk-minimization strategies that match and adapt to environmental goals and aspirations. moreover, organizations are constantly trying to navigate towards creating a development landscape while they are in momentum and must definitely rethink how to make financial decisions that affect not only profit but also social and ecological outcomes. this study attempts to bring a very clear and fully meaningful approach to comparing the three case studies by providing a precise analysis of the role of several elements of the applicable green economy and their results for the economy in general. undoubtedly, strategic financial management plays a very important role in an economy, both by the state and by businesses. furthermore, strategic financial management is argued to be playing a pivotal role in resource mobilization, guiding responsible investment while continuously driving innovation and new developments that support sustainable development and longevity. strategic financial management is integrating and combining a range of environmental, social, and governance (esg) factors to inform and assist in sustainable financial planning and https://orcid.org/0000-0003-1071-0439 mailto:fisnik.morina@unhz.eu https://orcid.org/0000-0002-2631-7837 mailto:elvis.elezaj@unhz.eu the role of strategic financial management in driving sustainable growth in a green economy 237 decision-making, enabling economies and businesses to thrive while minimizing their environmental footprint. from green bonds and sustainable budgeting to accounting, key tools of postmodern financial strategies are being redefined to support the pillars of a green economy (verdant) (elezaj, morina & dreshaj, 2025), low carbon, resource efficiency, and ecoopportunity investment, making social inclusion inevitable. 2. literature review when we refer to the phrase "transition to a green economy," we hold for a moment to rethink the economic issues of the past, which were an integral and inseparable part of our lives. this paradigm requires a great analysis and commitment from businesses and governments to support such an approach as it is from technology to ecology. of course, this approach requires a clear review of financial strategies to balance economic performance for environmental sustainability. the key roles in this dimension are certainly played by the field of strategic financial management, which is emerging as a critical tool in aligning corporate financial practices with long-range environmental and social goals. furthermore, strategic financial management is a pivotal segment that redefines the thinking of managers and leaders of various organizations regarding how they see their organizational future and reframes their orientations, especially their financial ones. in this context, brigham & ehrhardt (2016) argued that the inclusion of long-term financial planning and a clear decision-making process can achieve goals that meet the requirements of the owners, can create an approach to how to avoid risk, and on the other hand, can create financial consistency. furthermore, this statement highlights an analysis and creates a communicable result that sees the security of the future of various enterprises that aim at profitability, uncertainty, risk, and, above all, longevity. this aspect is very conscious that it requires integrated financial strategies that consider the environmental impacts that may be caused in addition to economic returns. of course, this form will affect this segment because organizations are constantly behaving like a machine that is destroying the environment, and on the other hand, there are great calls for re-attention to these damages while on the other hand, economic returns and high interests are being realized for these destructive machines. in contrast, a green economy can be defined as an economy that demonstrates low carbon emissions, resource efficiency, and social inclusion (unep, 2011). many studies conducted recently show that with the integration of these factors, which are also known as "esg" factors, and with the embrace of many organizations that have taken into consideration the application and implementation of these factors as genuine, they are turning out to be very beneficial for the country's economy and for society in general. according to friede, busch, and bassen (2015), applying these factors leads to excellent financial decision-making, thus improving their financial position in the long term. however, it also dramatically affects the organization's strategic financial management. this shows that the aforementioned factors clearly determine financial strength and position in the industry. moreover, they create mechanisms, design entire programs, and, above all, build strategies that they translate as adaptable to increase their performability and financial viability. this can undoubtedly lead to higher firm performance regarding long-term consistency (clark, feiner & viehs, 2015; elkington, 1997). referring to flammer (2021) argues that the orientation towards strategic investments in green technologies, renewable energy and sustainable infrastructure is undoubtedly an approach that may require new forms of financial innovation or green finance. this accurate orientation argues that organizations are focused on bringing their novelties toward green transformation, specifically digital ecology. furthermore, it emphasizes a series of important fisnik morina, elvis elezaj 238 factors that play an important role in his study by listing green debts and obligations, sustainability-linked loans, and impact investing as the most appropriate examples of financial instruments that strongly support sustainable projects by providing returns. according to the task force on climate-related financial disclosures (2017), strategic financial management is a fundamental pillar of a country's economy that plays a vital role in identifying and mitigating environmental and regulatory risks. moreover, it is a significant segment of how to do scenario analysis, test, and detect climate risks, which are increasingly being used to make strategic plans. what is worth emphasizing is that this dimension is increasingly becoming an act that, in addition to becoming a fact in business life, is also increasing the creative logic of managers and leaders of organizations towards planning and foresight excellence. moreover, many studies show that this dimension embraces the economies of many developed and developing countries, which are significantly shifting towards creating ecological and digital companies so much so that organizations are very interested in each of these companies that are including climate sustainability as an element in financial planning and are much more adaptable to policy changes and resource shortages, thus promoting sustainable growth even in cases where market volatility exists (sullivan & mackenzie, 2017). what can be emphasized is that organizations are looking for many ways and approaches to capture this new trend of the era of advanced modernity. this expansion of the activities of organizations is creating a critical access to build both their approaches and their benefits. the studies of krueger, sautner, and starks (2020) emphasized that strategic approaches should be applied in such a way that they can create different solutions starting from financial risk management so that organizations can remain flexible even when there may be unstable, labile, and volatile situations. the authors note that there is a vast literature on green finance, esg (environmental, social, and governance) factors and corporate sustainability. there are a limited number of cross-country comparative case studies that show how strategic financial practices differ across institutional settings and how they impact sustainable growth. furthermore, it is emphasized that the unique role of local and international institutional support (e.g., ecoprofit versus ebrd-supported and ujë rugove) is underexplored in the existing literature. the authors emphasize conducting synthetic analyses by conducting content analysis, comparative analysis and synthesis of different cases, a study that builds a conceptual model and demonstrates how financial planning, institutional support and environmental compliance are intertwined. the study undoubtedly highlights results that clearly show the impact of strategic financial instruments (e.g., green bonds, tax incentives, soft loans). last but not least, we identify that the original contribution of the article lies in its comparative, real-world evidence of how strategic financial management acts as inter-connectivity between the sustainability and competitiveness objectives of enterprises. 3. scientific research methodology this research employs a qualitative and comparative research design, utilizing a case study approach to analyze the role of strategic financial management in driving the growth of the green economy. three cases were purposively selected: greencells gmbh from germany, a leading player in the solar industry; the slovenian institutional program ecoprofit, aimed at reducing costs and waste in enterprises; and the kosovar firm ujë rugove, which has successfully modernized its production process with the support of green financing. the cases were selected purposively based on the active adoption of strategic financial management practices and sustainable development strategies. the role of strategic financial management in driving sustainable growth in a green economy 239 the data were primarily collected from trusted secondary sources, including the financial and sustainability reports of the firms, program documents, the legal and institutional framework, and academic and professional literature on green finance and strategic financial management. the analysis employs three main approaches: content analysis for interpreting financial and legal documents, as well as extracting key concepts; comparative analysis to address financial and environmental strategies in three cases from different contexts; and crosscase synthesis to draw generalized conclusions regarding success factors and similar challenges. the research also includes a qualitative conceptual model analyzing the interaction between strategic financial practices (capital deployment, cost management, and investment prioritization) and sustainable development indicators (energy efficiency, greenhouse gas emission reduction, enhancing competitiveness, and encouraging innovation). the analysis of the legal and institutional environment in germany, slovenia, and kosovo is also part of the methodology, summarizing and comparing the legislation at the country level related to environmental protection, renewable energy, as well as incentive schemes for green financing, such as subsidies, tax relief, access to instruments, such as green bonds, eu funds, etc. multiple data sources are utilized to ensure data reliability and validity, and various approaches are employed in data analysis. despite this, the limitations of the research stem from the use of second-level data and their limited number, resulting in reduced generalizability. future research can be complemented with primary data and additional cases to enhance the empirical validity. this research methodology provides a detailed and professional examination of the role of strategic financial management in supporting sustainable development within the green economy. the following table shows a concise overview of the methodological approach used in this study, comparing three concrete cases across different national environments and green economy sectors. the location, primary field of activity, primary sources of secondary data, reason for analysis, qualitative methods used, primary strategic financial management elements, and applicable sustainable development targets are emphasized for each case. this arrangement enables purposeful cross-comparison of various practice regimes and different environments, to enable general conclusions regarding the role of strategic financial management on the green economy. table 1. methodological overview of the case study analysis case study country main field primary data sources purpose of analysis qualitative techniques applied strategic financial management aspects sustainable development objectives greencells gmbh germany solar energy (private sector) financial reports, sustainability reports, national energy policies to analyze green financing practices and their impact on long-term growth content analysis comparative analysis cross-case synthesis investments in clean energy, financial risk management, diversification of funding sources emissions reduction, enhancement of global competitiveness, green growth ecoprofit program slovenia institutional program for enterprises program documentation, legal and regulatory acts, reports from participating companies to assess the effects of financial mechanisms on cost and pollution reduction content analysis comparative analysis cross-case synthesis cost planning, financial incentives, optimization of operational processes resource efficiency, waste management, public-private cooperation fisnik morina, elvis elezaj 240 ujë rugove kosovo bottled water (private sector) financial and investment reports, institutional documents, local legislation to analyze the impact of green financing on technological modernization and environmental performance content analysis comparative analysis cross-case synthesis use of funds for modernization, production cost reduction, strategic capital management improved energy efficiency, pollution reduction, strengthened corporate reputation. this research aims to investigate how strategic financial management influences the promotion of sustainable growth and environmental innovation in the context of the green economy. through analyzing three distinct cases – a top solar energy firm in germany, a slovenian institutional program for companies, and a manufacturing business supported by green finance in kosovo – the research seeks to address a primary research question and examine a corresponding hypothesis. research question: how does strategic financial management contribute to sustainable growth and environmental innovation within the green economy? hypothesis: in conjunction with green finance instruments and sustainable development targets, strategic financial management systems significantly improve organizations' longterm competitiveness and environmental performance. the convergence of economic strategy with green objectives represents a paradigmshifting approach to organizational growth, particularly in the green economy. organizations and institutions can use cost management, capital planning, and environmental investment planning to reduce their environmental footprint and gain a competitive advantage. this study's use of content analysis, comparative analysis, and cross-case synthesis demonstrates that integrating financial management with green targets is a primary driver of innovativeness, efficiency, and resilience in a rapidly changing economic climate. 4. results the results of the studies demonstrate that the mechanism plays a crucial role in promoting the objectives of a sustainable economy and its transition to a green economy by serving as an intermediary that mediates between financial, environmental, and social goals. through three concrete cases – greencells gmbh in germany, the ecoprofit program in slovenia, and the company in the rugove company in kosovo – it was found that it includes well-defined strategic assets, such as capital environment analysis, cost control, resource optimization, and access to financing of the impact on the state of operation, its effect of overall competitiveness. analyzed through three complementary techniques are: (1) analysis of financial documentation of accounts to break down and interpret the financial documentation, sustainability reports, and legal frameworks of each case, including the leading practices of management of financial strategies and relevant sustainability indicators; (2) comparative analysis has enabled the distinction of differences and similarities between the intermediates observed in different institutional and geographical contexts; and (3) cross-case synthesis has contributed to the formulation of general conclusions by finalizing the findings obtained from the individual analyses and by highlighting the different links of success, as well as the structural challenges that have been encountered in the application of strategic financial management in the green economy project. combining techniques has begun to create a consolidated interpretative framework, reinforcing this study's overall theoretical and practical validity. the role of strategic financial management in driving sustainable growth in a green economy 241 4.1. results from content analysis this analysis section will examine the results of three cases that illustrate the application of sustainable financial strategies across various sectors. they include greencells (germany), a company focused on solar energy and green financing instruments; ecoprofit (slovenia), an initiative that supports cost and pollution reduction through sustainable financial mechanisms; and ujë rugove (kosovo), a company engaged in equipment modernization and the use of green financing to improve efficiency and quality. each case examines financial strategies and their impact on enhancing efficiency, promoting environmental benefits, and driving market expansion. 4.1.1. greencells (germany) greencells gmbh, a leading company in the german solar energy industry, has implemented a diverse range of financial strategies, including sustainable investments, capital structuring, and the establishment of public-private partnerships. the company's methods aim to maximize financial benefits in line with sustainable development objectives while ensuring a positive impact on the environment and the economy. one key approach that greencells has used is investing in energy projects with a low carbon impact. the company has continuously invested in innovative solar technologies and benefited from green financing to secure the necessary capital to expand its capacity. utilizing green financing instruments, such as green bonds and government subsidies, has facilitated realizing sustainable investments that have enhanced financial performance and contributed to achieving emission reduction objectives. regarding the impact of these strategies, companies managed by greencells have experienced a significant increase in revenue from 2019 to 2023. revenue growth has been driven by market expansion and increased solar energy production capacity, which contribute to sustainable financial growth. additionally, a significant reduction in co2 emissions was achieved, meeting international environmental standards and advancing the company's transition to a green economy. the market expansion and the increase in solar installation capacity are clear indicators of the positive impact of financial management strategies (esg framework v1.0 greencells group, 2023). greencells, a leader in large-scale solar energy, has developed an esg (environmental, social, governance) framework to guide its commitment to sustainable practices and corporate responsibility. this framework outlines the company’s commitment to ensuring environmentally friendly and socially responsible operations and managing relationships with employees, suppliers, customers, and the communities in which it operates. according to the greencells 2020/2025 green bond funds use reports for the fiscal years 2021, 2022, and 2023, greencells has invested over € 8 million in developing solar parks, contributing to annual co₂ savings of approximately 1.39 million tonnes. table 2. key findings from the esg framework report of greencells category findings esg framework greencells has developed a framework for sustainable practices encompassing the environment, society, and governance (esg). environmental commitment greencells is committed to reducing co₂ emissions and ensuring environmentally friendly operations. fisnik morina, elvis elezaj 242 invested projects the company invested over 8 million euros in developing solar parks between 2020 and 2025. co₂ savings investments have contributed to annual co₂ savings of approximately 1.39 million tons. social commitment the company enhances working conditions and fosters positive relationships with its communities, employees, and suppliers. governance greencells implements transparent governance practices and is committed to adhering to high standards of ethics and transparency. case studies a specific case study is the revitalization of the st. charles mining area, which has contributed to environmental improvement and local economic development. table 1 summarizes the key findings from greencells’ esg framework report, highlighting the company’s commitment to environmental, social, and governance sustainability. it includes significant investments of over €8 million for developing solar parks between 2020 and 2025, contributing to annual co₂ savings of approximately 1.39 million tonnes. greencells is strongly committed to improving working conditions and maintaining positive relationships with its communities, employees, and suppliers while focusing on transparent governance practices and high ethical standards. a unique case study is the revitalization of the st. charles mining area, which has significantly improved the environment and local economic development. this multifaceted commitment positions greencells as a company committed to a more sustainable future. the diagram below illustrates the impact of greencells' financial strategies on revenue growth, emissions reduction, and market expansion from 2019 to 2023. the values included in the diagram represent revenue growth (in eur million), emissions reduction (in tons of co2), and market capacity expansion (in mw) for each year. figure 1. impact of financial strategies on greencalls (germany) performance (2019 – 2023) through these strategies, greencells has established a sustainable model that can guide other companies in integrating financial and environmental practices to achieve sustainable growth and responsible financial development. greencells' financial strategies have consistently driven revenue growth year after year, positively impacting market expansion and facilitating the development of additional solar parks and the integration of renewable energy sources. greencells' environmental strategies have also contributed to reducing co₂ emissions, demonstrating a strong commitment to combating climate change and maintaining a sustainable balance between financial growth and environmental responsibility. the role of strategic financial management in driving sustainable growth in a green economy 243 4.1.2. ecoprofit (slovenia) ecoprofit (environmental cooperation for pollution prevention) is an international initiative that aims to create a platform for cooperation between the public and private sectors, promoting sustainable practices and reducing environmental pollution while enhancing the operational efficiency of enterprises. this program has helped many enterprises, especially small and medium-sized ones, implement environmental management strategies that align with international standards, using a practical and financially sustainable approach. within the framework of ecoprofit, enterprises are assisted in identifying and implementing technologies and practices that reduce environmental impact while lowering operating costs through improved resource management, efficient energy use, waste reduction, and the adoption of greener technologies. this approach ensures sustainability at the enterprise level, enabling them to adopt new business models that are sustainable and innovative. in particular, ecoprofit provides practical and financial support through grants, soft loans, and tax incentives, enabling enterprises to finance the necessary investments in clean technologies and practices. this financial support is crucial for helping the adoption of changes, particularly for companies with limited financial resources. on the public sector side, the program is supported by regulators and local authorities, who have created an appropriate legal and regulatory framework that encourages enterprises to adopt sustainable practices. this synergistic cooperation between sectors fosters an ecosystem that supports sustainable development and enterprise growth, underpinned by public policies that promote innovation and environmental sustainability. at the enterprise level, the implementation of ecoprofit has reduced operating costs, improved energy and natural resource utilization efficiency, and lowered waste management costs. enterprises have also enhanced their reputation in the market, appearing as companies that respect environmental standards and contribute to sustainable development. at the local policy level, ecoprofit has significantly impacted the orientation of environmental policies and the development of initiatives that support the interconnection of different sectors for sustainable development. the program has established a new framework for financing and policies that help enterprises achieve sustainable goals and promote green development, ultimately improving living conditions for local communities. in slovenia, ecoprofit has used a range of financial mechanisms to encourage enterprises to invest in green technologies and environmentally efficient processes. these mechanisms include grants, tax breaks, and soft loans. various grants have been offered to support the implementation of clean technologies, enhancing energy efficiency, and improving waste treatment. tax breaks enable enterprises to offset some of the high initial costs associated with green investments, reducing their tax burden. loans with lower interest rates and longer financing terms allow small and medium-sized enterprises to secure financial resources for implementing environmental projects, which in turn help mitigate their negative environmental impact. these economic incentives not only help reduce long-term operating costs but also contribute to strengthening environmental sustainability and sustainable development of the local economy, increasing the competitiveness of enterprises in the market. the ecoprofit program in slovenia has established a successful cooperation model between the public and private sectors, aiming to achieve sustainable financial management and enhance enterprises' environmental performance. this program has included several support mechanisms to facilitate enterprises' investments in clean technologies and environmentally efficient processes. in this context, the public sector has played a crucial role by providing financial and regulatory support to create favorable conditions for developing ecological projects. one instrument the public industry uses is the provision of grants and tax fisnik morina, elvis elezaj 244 incentives for environmental investments. this financial support helps enterprises cover the high initial investment costs for clean technologies and improve production processes that reduce pollution and increase energy efficiency. furthermore, the local and regional government sectors have contributed to developing environmental policies that support enterprises in implementing sustainable practices. on the other hand, the private sector has contributed with direct investments and the application of technological innovations that reduce pollution and improve resource efficiency. private enterprises have been motivated to invest in green projects by recognizing the potential for long-term cost savings and the benefits of an improved public image, contributing to greater market sustainability. this cooperation has led to developing projects that are not only environmentally successful but have also generated financial benefits and contributed to increased credibility and transparency within the community. through this cooperation model, ecoprofit in slovenia has helped enterprises balance economic growth and environmental protection, ensuring that these projects are financially sustainable and have a positive, long-term impact on the community. figure 2. ecoprofit benefits for ljubljana and maribor: a path to sustainable urban development the diagram illustrates the primary benefits that ljubljana and maribor derive from the ecoprofit project, organized into four key categories: pollution reduction, energy efficiency, green infrastructure, and economic benefits. ljubljana has significantly improved air quality by developing sustainable transportation, including electric buses and bicycle networks, in the context of pollution and emissions reduction. at the same time, maribor has made significant efforts to utilize renewable energy, thereby reducing co2 emissions in both the public and private sectors. regarding energy efficiency, ljubljana has invested in green energy infrastructure and low-energy public buildings. at the same time, maribor has integrated clean technologies into the local industry to increase energy efficiency and reduce losses. regarding green infrastructure development, ljubljana has expanded green spaces and promoted ecological transport, while maribor has implemented rainwater management and biodiversity protection projects. finally, in the category of economic benefits, ljubljana has attracted investments in the clean technology sector and created new jobs in green areas. in contrast, maribor has benefited economically by developing new industries and increasing employment in natural resource management and clean energy. this diagram clearly illustrates how concrete measures and well-planned environmental policies can contribute to sustainable development and improved quality of urban life. the role of strategic financial management in driving sustainable growth in a green economy 245 4.1.3. ujë rugove (kosovo) in september 2023, ujë rugove, the largest producer of bottled water in kosovo, secured a €6 million loan from the european bank for reconstruction and development (ebrd) and the western balkans enterprise expansion fund ii (enef ii). this innovative green financing aims to support the company in acquiring a new facility and installing advanced, high-capacity production lines for filling glass bottles, aluminum cans, cartons, and water kegs. these investments will enable ujë rugove to expand its product range to include sparkling water, flavored water, and tea. a key aspect of this financing is the commitment to environmental sustainability. the loan aims to reduce water losses during production, reduce packaging waste, and use recycled materials at a rate of at least 50% in packaging and labels. investments in modern technology have significantly increased the operational efficiency of ujë rugove. in 2017, the company replaced the old filling line with a new krones/kosme 2014 line, which could fill 12,000 0.5-liter plastic bottles or 8,000 1.5-liter bottles per hour. this investment resulted in a 30% increase in production and an average 42% increase in monthly turnover. technological improvements have also contributed to improving product quality. however, in february 2025, the authorities in north macedonia found a shipment of ujë rugove water containing coliform bacteria. the company immediately conducted additional tests, confirming the water was safe and drinkable. ujë rugove's commitment to environmental sustainability is evident through its participation in humanitarian and environmental projects. since 2012, the company has been a leading partner of the "kosova cap project," an initiative that collects and recycles plastic caps to provide wheelchairs for people with disabilities. these initiatives have improved the company's reputation, positioning it as a leader in social responsibility and environmental sustainability in kosovo. the commitment to quality and innovation has also contributed to increasing consumer confidence and expanding ujë rugove's domestic and international market share. table 3 below summarizes the impact of green financing on the company ujë rugove, one of the largest bottled water producers in kosovo. drawing on official data published by the european bank for reconstruction and development (ebrd), as well as reliable reporting from the company itself and media sources, this analysis aims to highlight the concrete results of investments in modern technology and environmentally sustainable practices. table 3. impact of green financing on ujë rugove – kosovo category description source of financing ebrd and enef ii – €6 million purpose of investment technological modernization and expansion of production lines new products sparkling water, flavored water, tea environmental objectives reduction of water losses and waste, 50% recycled materials in packaging operational improvement +30% productivity, +42% average monthly turnover after the 2017 investment community engagement "kosova cap project" since 2012 – collecting bottle caps for wheelchairs reputational benefits increased consumer trust and market expansion both domestically and abroad the summary table clearly shows that the green financing provided by the ebrd and enef ii, worth € 6 million, has significantly impacted the operational efficiency and sustainable development of the company ujë rugove. this financing enabled the company to modernize its technology and expand its production lines, bringing new products such as sparkling water, flavored water, and tea. this type of investment, with a clear focus on improving processes and introducing new products, can be an opportunity to diversify its product portfolio and reach a broader audience in domestic and international markets. fisnik morina, elvis elezaj 246 investments in technology have led to a 30% increase in productivity and a 42% increase in monthly turnover, enabling ujë rugove to cope with growing market demand and improve its financial performance. this shows that companies that invest in advanced technology and modernize their manufacturing processes can significantly increase efficiency and productivity. environmental objectives, such as reducing water and waste losses and utilizing recycled materials in packaging, demonstrate a company's commitment to environmental protection. in practice, this can encourage other companies to adopt similar practices to meet regulatory requirements and attract consumers who are increasingly aware of the environmental impact of their products. the company's commitment to humanitarian and ecological projects, such as the "kosova cap project," has increased consumer confidence and expanded the market. companies with a clear commitment beyond profit, such as those implementing socially and environmentally responsible initiatives, gain reputation and credibility, leading to increased opportunities to enter new markets and retain existing customers. in conclusion, this investment in green finance is an excellent example of how environmental practices and technological investments can be combined to achieve dual benefits: enhancing financial performance and promoting ecological sustainability. companies following this model can experience increased efficiency, a broader product range, and social and environmental engagement benefits. 4.2. results from comparative analysis in this comparative analysis, three case studies – greencells gmbh (germany), ecoprofit (slovenia), and ujë rugove (kosovo) – are analyzed along four key dimensions: approach to strategic financial management, legal and institutional support, access to green finance, and outcomes in environmental and financial sustainability. this analysis highlights similarities and differences between the cases in different national and institutional contexts. greencells implements a proactive approach by combining investments in clean energy with diversification of financing sources and management of financial risks. ecoprofit, as an institutional program, orients enterprises towards cost planning and process optimization, integrating financial incentives into the strategic approach. meanwhile, ujë rugove focuses on strategic financial management in technological modernization and product diversification through investments in production efficiency and capital management. greencells has benefited from national renewable energy policies and instruments such as green bonds and subsidies in germany. ecoprofit in slovenia represents a model of public-private cooperation where the government provides a strong regulatory framework and direct subsidies to participating companies. in kosovo, ujë rugove has benefited from support from international financial institutions (ebrd and enef ii). however, legal and institutional support at the local level remains more limited compared to other cases. all three instances share the use of green financing but with different depths and mechanisms. greencells intensively uses green bonds and public financing to develop solar parks. ecoprofit provides funding through grants, soft loans, and fiscal incentives for enterprises. ujë rugove has secured international financing to modernize technology and reduce environmental impact, aiming to integrate recycled materials. all three cases show significant progress but in different forms. greencells has significantly reduced co₂ emissions and increased revenues through market expansion and production capacities. ecoprofit has improved resource efficiency, waste management, and cooperation between sectors. ujë rugove has benefited from increased productivity (+30%) and monthly revenues (+42%) and improved corporate image through social engagement and recycled materials. the main similarity between the cases is the the role of strategic financial management in driving sustainable growth in a green economy 247 integration of green finance and the orientation towards sustainability goals. however, differences stem from the nature of the institutions and the national context: germany offers an exceptionally advanced institutional and legal framework for clean energy, and slovenia builds on public-private partnerships to foster enterprises. at the same time, kosovo relies mainly on international financing to overcome internal institutional challenges. table 4. comparative analysis of three case studies dimensions greencells (germany) ecoprofit (slovenia) ujë rugove (kosovo) approach to strategic financial management investments in clean energy, financial diversification, risk management cost planning, process optimization, financial incentives technological modernization, capital management, production cost reduction legal and institutional support advanced energy policies, green bonds, government subsidies strong regulatory framework, grants, soft loans, public sector support international financing (ebrd and enef ii), limited local institutional support access to green finance green bonds, public financing for solar energy projects grants, soft loans, fiscal incentives for enterprises international dedicated funding for green technology and recycled materials results in environmental and financial sustainability co₂ reduction (~1.39 million tons/year), increased revenues, market expansion operational cost reduction, improved energy efficiency, and waste management +30% increase in productivity, +42% growth in monthly revenue, enhanced reputation, active involvement in environmental social projects table 4 clearly shows that sustainability and financial performance successes come from the combination of several key factors: a strategic approach to financial management, strong institutional support, and effective access to green finance. greencells takes maximum advantage of advanced energy policies and financing instruments, such as green bonds, ensuring sustainable growth. ecoprofit demonstrates the power of public-private cooperation to help small enterprises transition to sustainability. meanwhile, ujë rugove emphasizes the importance of international financing and technological modernization to improve productivity and corporate image. this comparison offers practical lessons: enterprises should seek multiple financial, institutional, and technological supports to maximize sustainability benefits and ensure long-term competitiveness. figure 3 presents a visual summary of the performance of three case studies, greencells (germany), ecoprofit (slovenia), and ujë rugove (kosovo), across the four main dimensions of the analysis, which include access to strategic financial management, legal and institutional support, access to green finance and results in environmental and financial sustainability. in this matrix, each case is rated on a scale from 1 to 5, where 1 indicates a low level of performance and 5 represents a very high level. the colors used in the matrix help to clearly distinguish the differences between the cases and the dimensions assessed, making the figure more understandable and easier to interpret, while the numerical values placed within the cells provide a direct and precise reference to each aspect analyzed. from the figure's visual analysis, it is clear that greencells (germany) presents the highest level of performance in all four dimensions, demonstrating an integrated and highly effective approach to strategic financial management for sustainability. the combination of investments in clean energy, the use of green bonds, strong institutional support, and visible results in reducing emissions and increasing revenues positions greencells as a successful model for the green economy. fisnik morina, elvis elezaj 248 figure 3. matrix comparative diagram: green strategic financial management ecoprofit (slovenia) also shows a solid performance in all dimensions, especially in institutional support and access to green finance. the program successfully involves small and medium-sized enterprises through financial incentives and government support, contributing to reducing operating costs and improving energy efficiency. meanwhile, ujë rugove (kosovo) shows considerable progress, especially in sustainability results, where investments in modern technology and international financing have significantly increased productivity and revenues. however, local institutional support remains more limited compared to other cases, suggesting the need to strengthen the role of local institutions in promoting sustainable development. 4.3. results from synthesis analysis across all three case studies, several common factors emerge as critical to success in integrating strategic financial management with sustainable development goals. firstly, longterm financial planning is a consistent success factor. each case demonstrates the importance of aligning financial strategies with future growth objectives, especially those oriented toward green transition and innovation. secondly, alignment with environmental objectives has been a key driver; whether through co₂ reduction targets (greencells), resource efficiency and waste reduction (ecoprofit), or sustainable packaging and production modernization (ujë rugove), all initiatives are tightly connected to measurable environmental impacts. thirdly, public policy support plays a vital role. germany's advanced renewable energy policies, slovenia's institutional incentives, and kosovo's access to international financial support highlight how legal and institutional frameworks can either accelerate or limit green initiatives. financial instruments have been pivotal across the cases. greencells has leveraged green bonds and subsidies to fund large-scale solar projects. ecoprofit utilized grants, soft loans, and tax incentives to enable smes to invest in cleaner technologies. ujë rugove accessed international green financing mechanisms, enabling technological modernization and expansion. proactivity in securing these resources has been essential; companies and programs that actively pursued diverse funding opportunities were able to overcome financial barriers and realize ambitious sustainability goals. moreover, proactive risk management and the role of strategic financial management in driving sustainable growth in a green economy 249 diversification of funding sources strengthened financial resilience and ensured project continuity. to build a sustainable financial strategy, businesses should integrate long-term planning with environmental targets, diversify their funding sources, and develop internal capacities for financial risk management. emphasis should be placed on aligning internal financial goals with broader sustainability agendas, ensuring that investments generate economic returns and environmental benefits. policymakers are recommended to strengthen legal and institutional frameworks by expanding access to green finance instruments such as grants, bonds, and fiscal incentives. building a favorable environment for public-private partnerships can accelerate the adoption of green technologies, especially for smes. further, ensuring transparency and accessibility of funding mechanisms will enhance participation and drive the green transition across different sectors. figure 4 presents the combination of key success factors that influenced the outcomes of three case studies: greencells (germany), ecoprofit (slovenia), and ujë rugove (kosovo). this diagram visualizes how three essential components — financial planning and proactive approach, institutional and political support, and alignment with environmental objectives — intertwine and create a strong foundation for successful strategies in financial management for sustainability. through the overlapping areas of the diagram, we understand more clearly how these factors do not act in isolation but create a synergy that enables the transition to a green economy and environmentally and financially sustainable outcomes. figure 4. synthesis analysis: common success factors in green strategic financial management the diagram clearly shows that long-term financial planning and a proactive approach are fundamental elements for all case studies, highlighting the importance of businesses developing sustainable financial strategies, diversifying funding sources, and investing in risk management to meet the challenges of the green transition. institutional support and favorable policies also appear as key pillars, as grants, soft loans, and fiscal incentives directly affect the fisnik morina, elvis elezaj 250 ability of enterprises to invest in sustainable technologies; thus, policymakers should create and expand support mechanisms for green financing, especially for small and medium-sized enterprises that often face more significant challenges in accessing finance. compliance with environmental objectives is another defining element in all cases, where setting clear goals such as reducing emissions, increasing resource efficiency, and modernizing production processes contributes to improving the reputation of companies and increasing their attractiveness to investors oriented towards sustainability. most importantly, the combination of all three factors financial planning, political support, and environmental objectives creates a successful model that brings multiple benefits, such as sustainable growth, strengthened resilience to risks, and easier access to green finance. this positions the business for long-term success in an economy that increasingly demands compliance with the principles of sustainable development. 5. discussions based on the findings of this study and in comparison with the latest scientific literature, several key recommendations can be offered for businesses and policymakers aiming to integrate strategic financial management with sustainability and green economy objectives. companies must develop financial strategies focusing on short-term benefits and integrating environmental and social objectives. recent research by chen, xu, and own (2024) shows that green finance policies and technological innovation significantly improve corporate environmental performance, contributing to the transition to sustainable energy. public policies and institutional support are crucial in facilitating the transition to a green economy. programs such as ecoprofit in slovenia demonstrate that practical cooperation between the public and private sectors can accelerate regional decarbonization. this is consistent with the findings of casady (2024), who emphasizes that public-private partnerships are key mechanisms for developing low-carbon and climate-resilient infrastructure. companies should be proactive in securing financial resources for sustainable projects. the study by suryantini et al. (2024) highlights that green finance is essential in promoting sustainability by providing financial instruments and policies that support green development. transparent reporting of environmental, social, and governance (esg) performance is critical for building trust with investors and stakeholders. a recent study by deloitte and the fletcher school (2024) shows that improving data collection and transparency in sustainability reporting increases investor confidence and enables easier access to capital. the state must develop regulatory frameworks supporting sustainable finance to facilitate the green transition. according to the study by gabor and braun (2023), a new paradigm of sustainable public finance is needed to strengthen the state's role in the green transition, including direct public investment and creating favorable conditions for private investment. to ensure a successful transition to a green economy, it is important to invest in educating and raising awareness among managers and employees about sustainability practices. this will help integrate these practices into daily business strategies and operations. implementing sustainability performance monitoring and evaluation systems will enable enterprises to identify areas for improvement and report their progress transparently to stakeholders. these recommendations aim to guide enterprises and policymakers in integrating sustainability into financial and operational strategies, contributing to a greener and more sustainable economy. this study provides an important contribution in both scientific and practical terms, strengthening the understanding of how companies and institutions can integrate strategic financial management with sustainability objectives. from a scientific perspective, our findings the role of strategic financial management in driving sustainable growth in a green economy 251 align with current trends in the literature on green finance and sustainable management. specifically, our study confirms the findings of chen et al. (2024), who emphasize that green finance policies significantly improve the environmental performance of companies while also reinforcing the arguments of casady (2024) on the strategic role of public-private partnerships in the development of low-impact infrastructure. at the same time, our study supports the findings of suryantini et al. (2024), showing that a proactive approach to securing green finance is key for companies aiming to modernize technology and improve operational sustainability. from a practical perspective, the study provides concrete guidance for businesses and policymakers, demonstrating that effectively aligning long-term financial planning with institutional support and measurable environmental objectives can translate into tangible outcomes, such as increased revenues, improved energy efficiency, improved reputation, and broader access to green finance. furthermore, the study highlights the importance of building integrated and sustainable strategies, making its findings highly applicable to enterprises operating in diverse geographical and institutional contexts and contributing significantly to the scientific and practical debate on the transition to a green economy. 6. conclusions and recommendations the results of this study confirm the validity of the hypothesis of this study, according to which the combination of strategic financial management with a proactive approach to resource provision, sustainable institutional support, and compliance with environmental objectives contributes significantly to improving the environmental and financial sustainability of enterprises. the analysis of three case studies shows that success does not lie in the isolated application of these elements but in their deliberate integration within the organization's overall strategies. this study adds a new dimension to the existing literature, emphasizing the importance of each component and especially the mutual impact that the interaction between them creates. thus, the study contributes to the advancement of economic science by providing an integrated model, which can serve as a practical guide for enterprises that aim to overcome the challenges of the transition to a green economy. at the same time, it is worth noting that although the study generates valuable insights, it is not without limitations. the lack of primary data and the focus on only three concrete cases limit the degree of generalizability of the results. the specific institutional and economic context of each case may have influenced the dynamics of the results, making it necessary for future studies to expand the scope of the research both geographically and sectorally. such an approach would enable a more complete understanding of the effectiveness of integrated green finance models and help develop more comprehensive theories on sustainable finance. from a broader systemic perspective, this study's findings raise a number of important implications for policymakers and economic institutions. the recommendations emerging from this research call for strengthening the institutional framework for green finance, increasing access to and transparency in financial instruments, and promoting effective partnerships between the public and private sectors. furthermore, integrating sustainability criteria into overall economic and development policies can catalyze new investments and the economy's structural transformation towards a more resilient and sustainable model. in light of these findings, future research should deepen the understanding of the interactions between public policies, financial instruments, and internal strategies of enterprises, using combined methodological approaches and direct empirical data. this will help not only to verify the findings of this study in other contexts but also to develop more effective policies to support the transition to a sustainable economy at the global level. fisnik morina, elvis elezaj 252 references 1. brigham, e.f., & ehrhardt, m.c. (2016). financial management: theory & practice. cengage learning. isbn: 978-1305632295 2. casady, c. b. (2024). public–private partnerships for green infrastructures: tensions and challenges. urban climate, 34, 100752. retrieved from https://www.sciencedirect.com/science/article/abs/pii/s1877343514000530 3. chen, y., & wang, x. (2024). the impact of green bond issuance on corporate green innovation. international review of financial analysis. retrieved from https://www.sciencedirect.com/science/article/abs/pii/s1057521925002005 4. clark, g. l., feiner, a., & viehs, m. (2015). from the stockholder to the stakeholder: how sustainability can drive financial outperformance. rochester, ny: social science research network. https://doi.org/10.2139/ssrn.2508281 5. delmas, m. a., & pekovic, s. (2015). resource efficiency strategies and market conditions. long range planning, 48(2), 123-136. retrieved from https://www.ioes.ucla.edu/wp-content/uploads/2017/04/2015-delmas-pekoviclrp.pdf 6. eccles, r. g., ioannou, i., & serafeim, g. (2012). the impact of corporate sustainability on organizational processes and performance. management science, 60(11), 2835-2857. retrieved from https://www.hbs.edu/ris/publication%20files/ssrn-id1964011_6791edac-7daa4603-a220-4a0c6c7a3f7a.pdf 7. elezaj, e., morina, f., & dreshaj, a. (2025). green economy indicators. greening our economy for a sustainable future. elsevier. https://doi.org/10.1016/b978-0-443-23603-7.00003-0 8. elkington, j. (1997). cannibals with forks: the triple bottom line of 21st century business. new society publishers. isbn: 978-0865713925 9. european bank for reconstruction and development. (2023). ebrd green finance supports kosovo's bottled water producer uje rugove. retrieved from https://www.ebrd.com/news/2023/ebrd-green-finance-supports-kosovos-bottledwater-producer-uje-rugove-.html 10. european bank for reconstruction and development. (n.d.). dff uje rugove senior loan. retrieved from https://www.ebrd.com/home/work-withus/projects/psd/53632.html 11. european commission. (2020). progress report slovenia. retrieved from https://www.sdgwatcheurope.org/wp-content/uploads/2020/09/sdg-12-progressreport.pdf 12. european commission. (2023). ecoprofit and emas. retrieved from https://green-business.ec.europa.eu/news/ecoprofit-and-emas-2023-08-08_en 13. european commission. (2023). ecoprofit and emas. retrieved from https://green-business.ec.europa.eu/news/ecoprofit-and-emas-2023-08-08_en 14. european environment agency. (2023). circular economy country profile 2024 – slovenia. retrieved from https://www.eea.europa.eu/en/topics/in-depth/circulareconomy/country-profiles-on-circular-economy/circular-economy-country-profiles2024/siovenia_2024-ce-country-profile_final.pdf 15. european environment agency. (2024). slovenia's national inventory document 2024. retrieved from https://unfccc.int/sites/default/files/resource/svn%20nid%202024.pdf https://doi.org/10.1016/b978-0-443-23603-7.00003-0 the role of strategic financial management in driving sustainable growth in a green economy 253 16. flammer, c. (2021). corporate green bonds. journal of financial economics. vol.142(2) pages 499-516. https://doi.org/10.1016/j.jfineco.2021.01.010 17. friede, g., busch, t., & bassen, a. (2015). esg and financial performance: aggregated evidence from more than 2000 empirical studies. journal of sustainable finance & investment, 5(4), 210–233. https://doi.org/10.1080/20430795.2015.1118917 18. gianfrate, g., & peri, m. (2019). the green advantage: exploring the convenience of issuing green bonds. journal of cleaner production, 219, 127-135. retrieved from https://www.sciencedirect.com/science/article/abs/pii/s0959652619305155 19. greencells gmbh. (2022). environmental, social & governance framework. retrieved from https://greencells.com/wpcontent/uploads/2022/03/gc_esg_framework_v1.0.pdf 20. greencells gmbh. (2023). fund usage report of the secured greencells green bond 2020/2025. retrieved from https://greencells.com/wpcontent/uploads/2023/08/fd_160823_green_bond_mittelallokation_2022_en-1.pdf 21. iea. (2024). financing clean energy transitions. retrieved from https://www.iea.org/reports/financing-clean-energy-transitions 22. krueger, p., sautner, z., & starks, l. t. (2020). the importance of climate risks for institutional investors. review of financial studies. vol. 33 (3), march 2020, pages 1067–1111, https://doi.org/10.1093/rfs/hhz137 23. oecd. (2023). financing climate action in regions and cities. retrieved from https://www.oecd.org/environment/cc/climate-action.htm 24. sullivan, r., & mackenzie, c. (eds.). (2006). responsible investment (1st ed.). routledge. https://doi.org/10.4324/9781351283441 25. suryantini, n. p. s., & darma, g. s. (2024). the role of green finance in sustainable business strategies: opportunities and challenges for business organizations. journal of strategic management, 8(3), 45-60. retrieved from https://www.researchgate.net/publication/381366982_the_role_of_green_finance_i n_sustainable_business_strategies_opportunities_and_challenges_for_business_or ganizations 26. tcfd (2017). final recommendations report. centralbahnplatz 2 ch-4002 basel switzerland. 27. u.s. environmental protection agency. (2023). public-private partnerships beneficial for implementing green infrastructure. retrieved from https://www.epa.gov/g3/public-private-partnerships-beneficial-implementing-greeninfrastructure 28. unep (2011). towards a green economy: pathways to sustainable development and poverty eradication. www.unep.org/greeneconomy 29. world bank. (2024). green finance and climate investment. retrieved from https://www.worldbank.org/en/topic/climatefinance 30. wright, c., & nyberg, d. (2024). corporations and climate change: an overview. wiley interdisciplinary reviews: climate change, 15(1), e919. retrieved from https://wires.onlinelibrary.wiley.com/doi/10.1002/wcc.919 file:///c:/users/admin/downloads/vol.142(2 https://doi.org/10.1016/j.jfineco.2021.01.010 https://doi.org/10.1093/rfs/hhz137 https://wires.onlinelibrary.wiley.com/doi/10.1002/wcc.919 agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 19, no. 1 (2025), pp. 145-153 145 novel opportunities for purchasing intention of organic foods: identifying how health awareness, perceived health value, and the antecedents of the technology adoption model (tam) affect consumers' purchase intention s. khan sablu khan aligarh muslim university, india https://orcid.org/0000-0002-6155-4280, e-mail: sablumba@gmail.com abstract: it is becoming more and more important to comprehend how customers purchase health friendly organic goods. the goal of the current study is to evaluate consumers' buying intentions regarding healthy products (or health friendly) shopping. this study also looks at how customer intentions to buy organic products are influenced by health awareness, perceived value of organic products, perceived usefulness, and attitude toward utilizing them. moreover, the research expands upon davis's (1989) technology adoption model (tam) by including exogenous factors such as perceived health value and environmental awareness. this study has been conducted through data collection via a google form survey from 260 customers. with the collected data, structural equation modeling (sem) and validity and reliability testing were carried out. the current study's findings demonstrate that attitudes toward utilizing organic products are positively and differently impacted by environmental awareness and perceived health value. the study also discovered that consumers' intentions to acquire organic food products are significantly influenced by their attitudes and perceptions of their utility. the current work has implications that benefit academicians, marketers, consumers, and policy makers. keywords: organic food products; health awareness,perceived health value, perceived usefulness, attitude. 1. introduction health awareness and perceived health value are pivotal in shaping consumers’ intentions to purchase organic foods. the organic food sector in india is experiencing a significant transformation, driven by increasing health consciousness, environmental concerns, and technological advancements. in 2024, the indian organic food market reached a valuation of approximately usd 1,917.4 million, with projections indicating a growth to usd 10,807.9 million by 2033, reflecting a compound annual growth rate (cagr) of 20.13% (imarc group, 2024; business wire, 2024). this surge is attributed to a growing awareness among consumers about the health benefits of organic products and the adverse effects of chemical pesticides and fertilizers. government initiatives, such as the paramparagat krishi vikas yojana (pkvy) and the national programme for organic production (npop), have further bolstered this growth by promoting organic farming practices. https://orcid.org/0000-0002-6155-4280 mailto:sablumba@gmail.com novel opportunities for purchasing intention of organic foods: identifying how health awareness, perceived health value, and the antecedents of the technology adoption model (tam) affect consumers' purchase intention 146 health awareness has emerged as a pivotal factor influencing consumer behaviour towards organic food consumption. a study by the expert market research highlighted that 63% of indian consumers are willing to pay a premium for organic food products, underscoring the perceived health benefits associated with these items. this inclination is not just limited to urban centers but is gradually permeating semi-urban and rural areas, indicating a nationwide shift in dietary preferences (expert market research, 2024). the integration of health awareness with perceived health value plays a crucial role in shaping consumers’ attitudes and intentions towards purchasing organic foods. the technology adoption model (tam) offers a robust framework to understand the adoption of organic foods among consumers. according to tam, perceived usefulness and perceived ease of use are primary determinants influencing individuals’ acceptance of new technologies or products (khan & khan, 2020). in the context of organic foods, perceived usefulness translates to the health benefits and environmental advantages these products offer. a study by jaiswal and singh (2024) emphasized that health consciousness, ecological trustworthiness, and functional value are significant drivers of purchase intention for organic food items in india. understanding these antecedents can provide valuable insights into consumer behaviour and aid in formulating effective marketing strategies. the study seeks to address the following research questions:  how does health awareness influence consumers’ perceived value of organic foods?  what is the relationship between perceived health value and consumers’ attitudes towards organic food consumption?  how do the antecedents of the technology adoption model affect consumers’ purchase intentions for organic foods?  what strategies can be implemented to enhance the adoption of organic foods among indian consumers? the forthcoming section of this research paper will follow as literature review, research methodology, results and concluding remarks. 1.1 literature review the tam suggests that perceived usefulness and ease of use influence individuals’ adoption of new technologies. in the context of organic food, technological platforms like online marketplaces and mobile applications can impact purchase intentions. a study in india highlighted that trust, convenience, and environmental concern, facilitated by technological advancements, significantly influence consumers’ intentions to purchase organic foods (kamboj & kishor, 2024). 1.1.1 health awareness health consciousness significantly influences consumers’ decisions to purchase organic foods. studies have shown that individuals with higher health awareness are more inclined to choose organic products due to their perceived health benefits. for instance, research conducted in india found that health consciousness positively affects consumers’ attitudes and intentions toward buying organic food (singh & verma, 2017). similarly, a sablu khan 147 study in new zealand and fiji revealed that health consciousness strengthens the relationship between self-risk perception and purchase intention of organic foods (devi et al., 2023). health consciousness significantly influences consumer attitudes toward organic food. devi et al. (2023) found that individuals with heightened health awareness are more inclined to purchase organic products, perceiving them as healthier alternatives. this health consciousness not only directly affects purchase intentions but also moderates the relationship between self-risk perception and purchasing behaviour. similarly, kamboj and kishor (2024) observed that in india, health and hedonic values substantially impact attitudes toward organic food, with health awareness enhancing the attitude-intention linkage, especially when consumers are exposed to food safety information. health-conscious individuals are more likely to form favorable attitudes toward organic products due to perceived health benefits and safety. devi et al. (2023) emphasize that health awareness directly contributes to positive consumer attitudes and organic purchase intentions. 1.1.2 perceived health value perceived health value, or the belief that organic foods offer superior health benefits, is another critical determinant of purchase intention. consumers often associate organic foods with higher nutritional content and safety, leading to increased willingness to pay premium prices (watanabe et al., 2020). in brazil, functional and emotional values related to health were found to positively affect consumer trust and purchase intention toward organic foods (watanabe et al., 2020). perceived value—encompassing functional, emotional, and social dimensions—plays a pivotal role in shaping consumer trust and purchase intentions. watanabe et al. (2020) demonstrated that functional and emotional values positively influence consumer trust, with emotional value directly motivating purchase intentions. in the indian context, kamboj and kishor (2024) highlighted that hedonic value exerts a stronger influence than health value on green purchase attitudes, suggesting that consumers derive significant pleasure and satisfaction from consuming organic products. perceived value, including emotional and functional aspects, positively impacts consumer attitudes. watanabe et al. (2020) found that consumers who see high value in organic products tend to form stronger positive attitudes. 1.1.3 perceived usefulness perceived usefulness, often linked to the functional benefits of organic products, is crucial in attitude formation. roh et al. (2022) integrated the theory of consumption value and the theory of reasoned action to reveal that green perceived value significantly affects consumer attitudes and trust, which in turn influence purchase intentions. their study underscores the importance of consumers’ perceptions of the utility and benefits of organic products in shaping positive attitudes. health awareness strengthens the impact of perceived usefulness on attitudes. consumers who are aware of health risks are more likely to value and appreciate the functional benefits of organic food (roh et al., 2022; khan & khan 2018). perceived usefulness, tied to health and environmental benefits, significantly influences attitudes. according to roh et al. (2022), perceived usefulness is a key determinant in shaping positive consumer attitudes toward green products. 1.1.4 attitude towards utilizing organic products novel opportunities for purchasing intention of organic foods: identifying how health awareness, perceived health value, and the antecedents of the technology adoption model (tam) affect consumers' purchase intention 148 consumer attitudes toward organic products are influenced by a combination of perceived value, quality, and price. a recent study in india by chandra et al. (2024) found that perceived price and quality are significant mediators in the relationship between attitude and purchase intention. this suggests that while consumers may have a positive attitude toward organic products, their actual purchasing decisions are contingent upon their perceptions of the product’s value proposition. figure 1: conceptual model source: prepared by author based on the above literature review, the following four hypotheses have been formulated for the study. h1: health awareness has a positive and significant impact on consumer attitude toward utilizing organic products. h2: perceived value of organic products has a positive and significant impact on consumer attitude toward utilizing organic products. h3: perceived usefulness of organic products positively influences consumer attitude toward utilizing organic products. h4: a positive attitude toward utilizing organic products significantly influences the intention to purchase organic products. 2. research methodology to carry out this study, five dimensions i.e. health awareness, perceived value, perceived usefulness, attitude toward utilizing organic products and purchase intention have been considered. questionnaire has been adapted from the previous studies based on 7point likert scale (1 = strongly disagree, 7 = strongly agree). the survey to collect the responses was carried out online from the respondents who have experience of shopping organic food items from december 2024 to february 2025. table 1: questionnaire adaptation items dimension source i am highly concerned about my health. health awareness adapted from devi et al., 2023 i regularly monitor my diet for health reasons. i actively seek out information about healthy food. i avoid foods that may have harmful ingredients. my health is a primary concern when making food choices. organic products offer good value for money. perceived value adapted from sablu khan 149 i believe the benefits of organic products justify their price. of organic products watanabe et al., 2020 organic products improve my quality of life. i feel emotionally satisfied when i consume organic products. i trust that organic food is better for the environment. organic products help me maintain a healthy lifestyle. perceived usefulness adapted from roh et al., 2022; khan, a., & khan, s. (2022). organic food is more beneficial than non-organic food. eating organic reduces my exposure to harmful substances. organic products help in preventing health issues. i find organic products useful for my overall wellbeing. organic food improves my diet quality. i have a positive attitude toward organic products. attitude toward utilizing organic products adapted from kamboj & kishor, 2024 i think consuming organic products is a good idea. i enjoy buying organic products. i feel good about using organic products. organic products are an important part of a healthy lifestyle. i intend to buy organic products regularly in the future. purchase intention adapted from ajzen. 1991; khan (2024) i will make an effort to purchase organic products when available. i am likely to choose organic products over nonorganic ones. i intend to buy organic products regularly in the future. source: prepared by author 2.1 sample attributes while portraying the monthly income, 30 (11.54%) respondents have their income less than ₹30,000, 60 (23.08%) respondents were in the range of income more than ₹30,000 and less than ₹60,000 and around 63 percent respondent were having income greater than ₹60,000. table 2: demographic characteristics characteristic frequency percentage age less than 20 55 21.15 20-29 75 28.85 30 -39 90 34.62 40 and above 40 40 15.38 novel opportunities for purchasing intention of organic foods: identifying how health awareness, perceived health value, and the antecedents of the technology adoption model (tam) affect consumers' purchase intention 150 gender male 150 57.69 female 110 42.31 educational background graduation 125 48.08 post graduate and above 135 51.92 income less than ₹30000 (~358 usd) 30 11.54 ₹30000-₹59,999 (~358 usd to 716 usd) 60 23.08 ₹60,000-₹89,999 (~716 usd to 1074 usd) 65 25 ₹90000 and more (~1074 usd and more) 105 40.38 source: prepared by author based on responses the reliability of each dimension was measure through chronbach’s alpha by using spss 25.0. it was found that value of α was greater than 0.7 for each variable i.e. health awareness (α=0.819), perceived value (α=0.861), perceived usefulness (α=0.798), attitude towards utilizing (α=0.783), purchase intention (α= 0.763). therefore, the variables were considered for data analysis as per criterion given by hair et al. (2010). since, author has already adapted the tested items by the previous researchers, therefore, results of exploratory and confirmatory factor has not been reported in this paper. 3. results structural equation modelling (sem) is employed for path analysis to measure the effects of study variables to assess the attitude towards utilising variables and intention to purchase. sem enables the researchers to assess the causal relationship between items and constructs as well as the inter-constructs average relationship. the path estimates for hypotheses testing have been calculated through amos 25.0, which shows the path estimates for the respective casual relationships. further, the sem model has been found a good fit as other statistics indicating values within limits (χ2=242.056, df = 104, χ2/df =2.327, cfi= .915, rmsea=.06). items under each construct were statistically significant with respective variable. results of structural equation modelling have been indicated below in table 3. indirect effects of these variables have been measured through the spss amos 25.0. table 3: results of structural equation modeling hypotheses estimates c.r. pvalue h1: health awareness attitude towards using 0.400 5.570 .000 h2: perceived value attitude towards using 0.350 4.350 .000 h3: perceived usefulness  attitude towards using 0.647 8.359 .000 h4: attitude towards using  purchase intention 0.589 5.249 .000 source: by researcher sablu khan 151 table 3 also displays the outcomes of the four hypotheses that this study put forth. according to hypothesis 1, health awareness is significantly positively impacts on attitude towards using. the findings show that indians' perceived usefulness is significantly influenced by environmental awareness (beta = 0.400, p < 0.00). therefore, results are consistent with hypothesis 1. according to hypothesis 2, perceived value is significantly positively impact on attitude towards using. according to the findings, perceived usefulness is significantly impacted by green perceived value (beta = 0.350, p <.05). the outcome does lend credence to hypothesis 2. the third hypothesis examined how attitudes toward using are greatly influenced by perceived usefulness. the analysis demonstrates a significant relationship between attitude toward using and perceived usefulness (beta = 0.647, p is less than 0.00). therefore, hypothesis 3 is supported by the results. hypothesis 4 assumed that attitudes toward using exert substantial impact on purchase intention. the output of regression analysis explains that perceived usefulness shows significant influence on purchase intention (beta = 0.589, p < 0.00). thus, hypothesis 4 is supported. 4. discussions/conclusions this research has been conducted to assess the intention of consumers for purchase of organic food products. in this research, it has been found out that perceived usefulness, health awareness and ease of use play a key role for determining the purchase intention of consumers. for structural equation modelling, amos 25.0 has been employed as analytical tools. further, reliability analysis was conducted with the help of sppss 25. notably, our results portray that health awareness and health perceived value positively influence the attitude towards the organic food products. presently, there is a much more focus on sustainable consumption to promote the environmentally friendly practices all over the world. these results are consistent with previous studies which indicate that health and environmental awareness positively influence consumer attitudes (hoang & tung, 2024; toros et al., 2023). therefore, customers are more aware to adopt such practices and find the health perceived value useful for attitude formation. perceived value significantly positively impacts attitude towards using. this outcome is in line with previous literature, where green perceived value was found to affect attitudes toward eco-friendly behaviour and products (raksadigiri & wahyuni, 2020; braimah et al., 2022). perceived usefulness greatly influences attitudes toward using. these results highlight the pivotal role of perceived usefulness in shaping user attitudes (toros et al., 2023; raksadigiri & wahyuni, 2020). in this study, attitudes toward using significantly influenced on purchase intention. this result is well supported by existing literature that underscores attitude as a crucial antecedent to consumer purchasing behaviour (shastry & dayananda, 2020; hoang & tung, 2024). further, policies of all government are incorporating the use of organic products so that little harm may be recorded to the on the human health. though, this research has been conducted carefully. further, the market of organic food items in india is in development stage. novel opportunities for purchasing intention of organic foods: identifying how health awareness, perceived health value, and the antecedents of the technology adoption model (tam) affect consumers' purchase intention 152 therefore, the respondent experience may not have such level. future research may be done with moderating effect based on socio-economic variables. further, cross country research may be done by the researcher based on these variables. references 1. braimah, s. m., amoako, g. k., abubakari, a., ampong, g. o. a., & ofori, k. s. (2022). green perceived value and consumer attitudes in the light of the sdgs: a replication study from a developing economy. society and business review, 18(2), 345-362. 2. business wire. (2024, july 4). india organic farming industry report 2024: premium prices present lucrative opportunities – national programme for organic production (npop) encourages organic practices. retrieved from https://www.businesswire.com/news/home/20240704895774/en/india-organic-farmingindustry-report-2024-premium-prices-present-lucrative-opportunities-nationalprogramme-for-organic-production-npop-encourages-organic-practices— researchandmarkets.com (accessed on 10 december, 2024) 3. chandra pant, s., saxena, r., gupta, n. k., yadav, h., kumar ad, s., & kumar pant, d. (2024). the organic odyssey: navigating the influence of attitude on purchase intent, mediated by perceived value, quality, and price in india. journal of retailing and consumer services, 79, 103801. https://doi.org/10.1016/j.jretconser.2024.103801 4. devi, k., singh, g., roy, s. k., & cúg, j. (2023). determinants of organic food purchase intention: the moderating role of health consciousness. british food journal, 125(11), 5. expert market research. (2024). india organic food market report 2024: share, size, trends, growth. retrieved from https://www.expertmarketresearch.com/reports/indiaorganic-food-market (accessed on 10th january 2025) 6. hair jr, j. f., black, w. c., babin, b. j., & anderson, r. e. (2010). multivariate data analysis. in multivariate data analysis (pp. 785-785). 7. hoang, d. v., & tung, l. t. (2024). effect of environmental concern, green perceived value on young customers' green purchase intention: the mediating roles of attitude toward green products and perceived behavior control. economics and administration, 32(1), 19–20. 8. imarc group. (2024). indian organic food market report 2024–2033. retrieved from https://www.imarcgroup.com/indian-organic-food-market 9. jaiswal, d., & singh, b. (2024). understanding consumer purchase intention towards organic food in india: role of health consciousness, ecological trustworthiness, and functional value. british food journal, advance online publication. https://doi.org/10.1108/bfj-09-2023-0788 10. kamboj, k., & kishor, n. (2024). assessing the effects of customer-perceived values toward organic food: the moderating role of media exposure to food safety issues. fiib business review. https://doi.org/10.1177/22785337231163953 https://www.businesswire.com/news/home/20240704895774/en/india-organic-farming-industry-report-2024-premium-prices-present-lucrative-opportunities-national-programme-for-organic-production-npop-encourages-organic-practices—researchandmarkets.com https://www.businesswire.com/news/home/20240704895774/en/india-organic-farming-industry-report-2024-premium-prices-present-lucrative-opportunities-national-programme-for-organic-production-npop-encourages-organic-practices—researchandmarkets.com https://www.businesswire.com/news/home/20240704895774/en/india-organic-farming-industry-report-2024-premium-prices-present-lucrative-opportunities-national-programme-for-organic-production-npop-encourages-organic-practices—researchandmarkets.com https://www.businesswire.com/news/home/20240704895774/en/india-organic-farming-industry-report-2024-premium-prices-present-lucrative-opportunities-national-programme-for-organic-production-npop-encourages-organic-practices—researchandmarkets.com https://www.expertmarketresearch.com/reports/india-organic-food-market https://www.expertmarketresearch.com/reports/india-organic-food-market sablu khan 153 11. khan, a., & khan, s. (2022). purchasing grocery online in a non-metro city: investigating the role of convenience, security, and variety. journal of public affairs. doi:10.1002/pa.2497 .link: https://onlinelibrary.wiley.com/doi/full/10.1002/pa.2497 12. khan, s & khan, m.a. (2017). customer advocacy: a strategy for revamping e-tailers’ services in india, book of proceedings international may conference on strategic management–imksm17, proceedings of the international conference was held at bor, serbia, 2017, technical faculty in bor, university of belgrade, serbia, 103-114. https://menadzment.tfbor.bg.ac.rs/wp content/uploads/2017/07/imksm17_book_of_proceedings.pdf) 13. khan, s. (2024). emerging pathways to green purchase intention: decoding the influence of environmental awareness, green perceived value and technology adoption model antecedents on consumers’ purchase intention. agora international journal of economical sciences, 18(1), 98–110. https://doi.org/10.15837/aijes.v18i1.6714 14. khan, s., & khan, a. (2020). consumer e-loyalty for e-grocery shopping in a metro city of india: role of flow and tam antecedents. international journal of e-adoption (ijea), 12(2), 16-33. doi:10.4018/ijea.2020070102 15. raksadigiri, m. w., & wahyuni, s. (2020). perceived ease of use effect on perceived usefulness and attitude towards use and its impact on behavioural intention to use. international journal of advanced research, 8(12). 16. roh, t., seok, j., & kim, y. (2022). unveiling ways to reach organic purchase: green perceived value, perceived knowledge, attitude, subjective norm, and trust. journal of retailing and consumer services, 67, 102988. https://doi.org/10.1016/j.jretconser.2022.102988 17. shamsi, s., khan, s., & khan, m. a. (2023). moderating effect of gender on service convenience and customer satisfaction: an empirical study of indian e-retailers. lbs journal of management & research. doi: 10.1108/lbsjmr-07-2022-0038. https://www.emerald.com/insight/content/doi/10.1108/lbsjmr-07-2022-0038/full/html 18. shastry & dayananda (2020). consumer attitude and their purchase intention: a review of literature. international review of business and economics, 5(2). 19. singh, a., & verma, p. (2017). intention to purchase organic food among young consumers: evidences from a developing nation. appetite, 96, 122–128. https://doi.org/10.1016/j.appet.2015.09.017 20. toros, e., asiksoy, g., & sürücü, l. (2023). refreshment students' perceived usefulness and attitudes towards using technology: a moderated mediation model. nature humanities and social sciences communications. 21. watanabe, e. a. d. m., alfinito, s., curvelo, i. c. g., & hamza, k. m. (2020). perceived value, trust and purchase intention of organic food: a study with brazilian consumers. british food journal, 122(4), 1070–1184. https://doi.org/10.1108/bfj-05-2019-0363 https://menadzment.tfbor.bg.ac.rs/wp https://doi.org/10.1108/bfj-05-2019-0363 agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 18, no. 2 (2024), pp. 35-43 35 directions of application of the eco-museum approach to the conservation of the natural and cultural heritage of the east zangezur region of the republic of azerbaijan i. bayramov, s. pashayeva imran bayramov1, sona pashayeva2 1, 2 baku state university, baku, azerbaijan 1 https://orcid.org/0000-0001-5922-6870, e-mail: imranbayramov2003@mail.ru 2 https://orcid.org/0009-0007-5537-9520, e-mail: sonapasha029@gmail.com abstract: the article analyzes the features of the creation of eco-museums in world practice and its application for the organization of eco-museums in the reconstructed east zangezur region of the republic of azerbaijan. the functions of eco-museums in conservation of the natural and cultural heritage and their role in the development of regional tourism are described in detail, and 5 pilot zones in the corresponding administrative districts of eastern zangezur are proposed for the creation of eco-museums. the authors compared the corresponding indicators characterizing eco-museums and natural and cultural features of the region and gave a description of the development of potentially privileged areas of the region’s tourism sector. keywords: eco-museums, ecotourism clusters, natural heritage, cultural heritage, ecofriendly approaches, nature-based solutions, tourism, east zangezur, azerbaijan, tourism destinations introduction the republic of azerbaijan has a huge potential of natural and cultural resources, which in turn constitute the resource base for the development of the tourism and recreation sector of the economy. at the current stage of the country’s socio-economic development and the adoption of national priorities for sustainable development, the topic of developing new, more sustainable and nature-based types of tourism is becoming increasingly relevant. one of these types of tourism is ecotourism. the ecotourism approach is one of the most sustainable types of tourism. it includes the introduction of tourism management, the organization of tourist trips and other tourist activities, which again emphasizes the importance of the rational and optimal use of natural resources and contributes to the moral and physical recreation of tourists in nature and increased attention to the preservation of natural heritage. the eco-museum approach, which emerged in the last century, has found its successful application in the restoration of territories after a long war, including the social participation of local communities and indigenous people in the preservation of the natural and cultural heritage https://orcid.org/0000-0001-5922-6870 mailto:imranbayramov2003@mail.ru https://orcid.org/0009-0007-5537-9520 mailto:sonapasha029@gmail.com directions of application of the eco-museum approach to the conservation of the natural and cultural heritage of the east zangezur region of the republic of azerbaijan 36 of a particular area. an eco-museum combines the life and culture of local communities and reflects the natural, ecological, cultural and historical features of the area. this is a unique and inimitable type of creating natural and cultural monuments. synthesizing nature with culture, eco-museums are an important object that has enormous tourist-attractive potential. methodology eco-museums have huge conservation power, which consists in preserving and maintaining the territory, natural and cultural heritage, as well as the characteristics of local communities. eco-museums play a role not only in the development of tourism, but also in the preservation of the natural and cultural heritage of the region. eco-museums are places or structures where culture meets nature, customs meet modernity, and traditions meet innovation. in this regard, eco-museums have enormous conservative power (figure 1) (badia et al., 2023; doğan, 2019; doğan et al., 2019). figure 1 conservation power of eco-museums in terms of restoring settlements and resettling the population in newly created and reconstructed territories, the issue of employment of the population arises. considering the nature of the settlement, as well as the resource potential of the territory of the east zangezur economic region, the creation of tourist and recreational zones (trz) and the corresponding infrastructure here is advisable in terms of socio-economic sustainability. eco-museum territory heritage communities imran bayramov, sona pashayeva 37 the eco-museum concept can be well reflected in the plan of tourist representation of a separate village. the creation of open access eco-museums primarily forms the landmark of the territory and increases its tourist attractiveness. eco-museums and the infrastructure created around them will serve as a center for the development of local businesses of small and medium-sized enterprises. the concept of creating and developing eco-museums contributes to the formation of individual eco-tourism clusters (etc) in the region (figure 2). considering that the economic region consists of five administrative districts, 5 pilot territories were selected at the first stage of creating ecomuseums (table 1) (pasternak, 2018). figure 2 cluster approach in the development of eco-museums in east zangezur table 1 suitable places for the establishment of eco-museums in the administrative districts of east zangezur № planned location administrative district distance from the city center distance from the nearest airport population 1. vang kalbajar 29 km 51 km 150–200 2. minkend lachin 43 km 58 km 250–300 3. balasoltanly gubadli 23 km 35 km 200–250 4. sharifan zangilan 22 km 15 km 150–200 5. dashkasan jabrayil 11 km 29 km 150–200 the above-mentioned destinations have a huge natural and cultural heritage and can combine the ecological and cultural-historical interests of tourists regarding the customs and traditions of local communities (figure 3). the development of villages and small settlements will be characterized by “reverse migration” in the region, which will contribute to maintaining directions of application of the eco-museum approach to the conservation of the natural and cultural heritage of the east zangezur region of the republic of azerbaijan 38 the socio-economic stability and independence of local communities. the significant ecoand agrotourism potential of the region is a stimulating factor for the development of nature-based tourism, including the use of the eco-museum approach (navajas corral et al., 2022; simeoni et al., 2018). it should be noted that the development of small settlements in the plan for the reconstruction of the region will be carried out in accordance with the state program “great return” and the unification of several settlements, considering their historical, geographical and social features. this will create the opportunity to attract an even larger segment of tourists and increase the number of stakeholders interested in the development of eco-museums, eco-, agroand rural tourism (bayramov et al., 2024; pavlis, 2024). the selected pilot settlements have favorable natural, cultural, agricultural and sociodemographic characteristics for the application of the eco-museum approach. figure 3 location and general appearance of eco-museums the criteria for selecting sites for the establishment of eco-museums were chosen based on international approaches and considering local historical and geographical conditions: (1) the presence of historical and cultural monuments or ruins with a known history of origin or legends are of interest to visitors; (2) the presence of a set of interconnected and interdependent natural landscape ecosystems that are intact or slightly altered by anthropogenic and technogenic impacts; imran bayramov, sona pashayeva 39 (3) the presence of identified species of animals and plants that are characteristic of a given region (area) and that are capable of maintaining their vital functions under current environmental circumstances; (4) the presence of traditional cultural and everyday customs of local communities and the identification of their preservation and ability to be passed on from one generation to next; (5) assessment of the tourist and recreational potential of a given region (settlement) and establishment of its accessibility in terms of transport, tourist routes, and hiking trips. (belliggiano et al., 2021; buczek-kowalik et al., 2013) regarding the organization and management of eco-museums, it should be noted that state support is needed for the restoration and renovation of both settlements and individual infrastructure components that are closely related to tourism activities. in this regard, support and encouragement from small and medium-sized businesses for their independent initial functioning in the region is necessary. in addition, it should be noted that stakeholders are not only the state and entrepreneurs, but also representatives of local communities and organizers of tourist trips. table 2 shows the presence/absence of relevant indicators that characterize the tourist attractiveness of the location of eco-museums: table 2 presence/absence of indicators characterizing the tourist attractiveness of the location of eco-museums № indicator vang minkend balasoltanly sharifan dashkasan 1. interdistrict highway 2. intra-district road communication 3. flowing rivers 4. standing river / dry-river valley 5. lake or reservoir 6. attractive landscapes 7. forests and shrubs 8. historical monuments results directions of application of the eco-museum approach to the conservation of the natural and cultural heritage of the east zangezur region of the republic of azerbaijan 40 the study concluded that eco-museums, as attractive landmarks, can accelerate the development of local and regional tourism in terms of heritage, cultural and ecological tourism. they are also able to accelerate and promote the socio-economic and infrastructural development of local communities and small settlements. on the other hand, eco-museums are effective for self-employment of the rural population, as well as the formation of small and medium-sized business entities in the territory. it is worth noting the role of the development of individual rural areas in the diversification and, especially, decentralization of the regional and national economy of the country. and the fact that with the development of tourist services and products, the share of the tertiary sector in the structure of economic activity will grow again emphasizes the sustainable and social orientation of this idea. eco-museums are practical, and suitable tourist approaches in the territory of the east zangezur economic region. this region has an ancient history and many cultural and natural monuments to attract the attention of tourists. in addition, the region serves as a natural habitat for many rare species of plants and animals that live both in azerbaijan and throughout the lesser caucasus, which creates an anthropogenically untouched terrestrial ecosystem for the habitat and residence of the living world. this contributes to the development of ecotourism and the maintenance of the biodiversity of the region. figure 4 shows mind maps of areas where we consider it favorable to create ecomuseums. common to all five points is the presence of a river or river system (including a former watercourse valley) in the immediate vicinity, the location of points on the main and connecting inter-district automobile routes, as well as the presence of an intra-district road and communication network for better accessibility for tourists and the population. in addition, all these locations have the corresponding historical, cultural, natural and ecological potential for the creation of ecotourism clusters or eco-villages to attract more tourists, as well as supporting sustainable socio-economic development of the population and the balance of natural ecosystems in terms of implementing state policy in the field of greening and the use of “green production” in these territories (bayramov et al., 2024). figure 4 mind maps of eco-museum destinations (villages) (1) – vang village (kalbajar) (2) – minkend village (lachin) imran bayramov, sona pashayeva 41 (3) – balasoltanly village (gubadli) (4) – sharifan village (zangilan) (5) – dashkesan village (jabrayil) it should be noted that the promotion of eco-friendly projects and nature-based solutions contributes to the development of responsible tourism, which corresponds to the conceptual foundations of the development of tourism services at the current stage. conclusions and discussions following from the above arguments, it can be said that the most appropriate thing is to reconstruct the historical quarters of these settlements and organize an eco-museum in these streets (quarters) of the villages. it is advisable to display examples of local art and craftsmanship in eco-museums to ensure their tourist appeal and to support the work of ecomuseums. weekly master classes for children and schoolchildren, as well as enthusiasts who are interested in arts and creativity, can be organized here. eco-museums can also play the role of a culinary center, where, apart from historical and cultural values, samples of folk cuisine will be baked. this will turn eco-museums into popular centers for the everyday social and public activity of the rural population, as well as tourists visiting this region. to integrate eco-museums with nature, it is advisable to identify its landscape design with the landscapes of the territory, which will ensure a smooth visual-aesthetic transition and contrast between landscape units. all this will lead to the development of tourism in the region in the following aspects: (i) historical tourism will once again acquire its appearance and will be reflected in historical monuments and elements of eco-museums and adjacent areas; directions of application of the eco-museum approach to the conservation of the natural and cultural heritage of the east zangezur region of the republic of azerbaijan 42 (ii) favorable conditions will be created for the development of cultural tourism from the point of view of encouraging the socio-cultural values of local communities and small ethnic groups; (iii) development of gastronomic tourism associated with national dishes and baked goods of the inhabiting peoples; (iv) natural and ecological tourism will be reflected in landscape and ecological design and planning of neighborhoods in harmony with the natural environment; (v) rural tourism will be reflected in the customs and skills of the local population, as well as in the local climate conditions favorable for agriculture; (vi) creative tourism will be represented by elements of art and folk crafts; (vii) sustainable and regenerative tourism will be reflected both in the combination of the above factors and in low-carbon and nature-based tourism activities (ghorbanzadeh, 2018; moreno mendoza et al., 2021). references 1. badia, f., & donato, f. (2023, october 26). management perspectives for ecomuseums effectiveness: a holistic approach to sociocultural development of local areas. european journal of cultural management and policy, 1-13. doi:http://dx.doi.org/10.3389/ejcmp.2023.11851 2. bayramov, i̇. a., & paşayeva, s. v. (2024). "yaşıl dünya naminə həmərlik: karbonsuz istehsal, dayanıqlı inkişaf, innovativ texnologiyalar" mövzusunda respublika elmipraktik konfransı. azərbaycanda sağlamlıq turizminin inkişaf etdirilməsində dünya təcrübəsinin tətbiqi imkanları (ss. 308-320). bakı:füyuzat. https://www.researchgate.net/publication/380375593_azrbaycanda_saglamliq_turizm inin_inkisaf_etdirilmsind_dunya_tcrubsinin_ttbiqi_imkanlari_possibilities_of_applyi ng_world_experience_in_the_development_of_health_tourism_in_azerbaijan?_tp=ey jjb250zxh0ijp7im mənbədən tapılıb 3. belliggiano, a., bindi, l., & ievoli, c. (2021, august 8). walking along the sheeptrack… rural tourism, ecomuseums, and bio-cultural heritage. sustainability, 13(16), 1-22. doi:http://dx.doi.org/10.3390/su13168870 4. buczek-kowalik, m., mitura, t., & klamár, r. (2013). ekomuzea – nowy produkt turystyczny na przykładzie ekomuzeum hołe. annales universitatis mariae curiesklodowska sectio b – geographia geologia mineralogia et petrographia, lxviii(1), 57-68. doi:http://dx.doi.org/10.2478/v10066-012-0028-1 5. doğan, m. (2019, august). the ecomuseum and solidarity tourism: a case study from northeast turkey. journal of cultural heritage management and sustainable development, 9(4), 537-552. doi:http://dx.doi.org/10.1108/jchmsd-12-2017-0086 6. doğan, m., & timothy, d. (2019, march 26). beynod tourism and taxes: the ecomuseum and social development in the ak-chin tribal community. journal of tourism and cultural change, 18(2), 133-149. doi:http://dx.doi.org/10.1080/14766825.2019.1593994 imran bayramov, sona pashayeva 43 7. ghorbanzadeh, m. (2018, june). rural tourism entrepreneurship survey with emphasis on eco-museum concept. civil engineering journal, 4(6), 1403-1414. doi:10.28991/cej-0309181 8. moreno mendoza, h., parreño-castellano, j., & ubierna expósito, c. (2021, january). the ecomuseum as a space for the activation of governance processes. co-management of heritage in responsible tourism management. pasos revista de turismo y patrimonio cultural, 19(4), 633-654. doi:http://dx.doi.org/10.25145/j.pasos.2021.19.042 9. navajas corral, o., & fernández fernández, j. (2022). the importance of ecomuseums and local knowledge for a sustainable future: the la ponte-ecomuseu project. in collective, n. borelli, p. davis, & r. dal santo (eds.), ecomuseums and climate change (pp. 283-302). milano, italy: ledizioni ledipublishing. retrieved from https://www.researchgate.net/publication/368756575_the_importance_of_ecomuseu ms_and_local_knowledge_for_a_sustainable_future_the_la_ponteecomuseu_project 10. pasternak, t., & verba, v. (2018, may 20). pilgrimage sites in slovakia as the base for the formation of ecomuseums – case study of ľutina pilgrimage site (slovakia). geographica pannonica, 22(2), 139-149. doi:http://dx.doi.org/10.5937/22-16619 11. pavlis, e. (2024, july 31). the ecomuseum as a platform for territorial development: the case of greek ecomuseums. international journal of heritage studies, 1-18. doi:http://dx.doi.org/10.1080/13527258.2024.2386695 12. simeoni, f., & de crescenzo, v. (2018, march 15). ecomuseums (on clean energy), cycle tourism and civic crowdfunding: a new match for sustainability? sustainability, 10(3), 1-16. doi:http://dx.doi.org/10.3390/su10030817 agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 18, no. 2 (2024), pp. 344-355 344 doctor migration: unpacking economic and social impacts m. tosunoğlu, t. aslan, a. ci̇eśli̇k, t. valiyev mahir tosunoğlu¹, tunahan aslan², andrzej cieślik³, turgud valiyev⁴ 1 school of social sciences, ege university, i̇zmir, turkey https://orcid.org/0000-0002-9941-0151, e-mail: mtosoglu00@gmail.com 2 graduate school of social sciences, yuzuncu yıl university, van, turkey https://orcid.org/0000-0001-8958-699x, e-mail: tunahanasln@gmail.com 3 faculty of economic sciences, university of warsaw, warsaw, poland https://orcid.org/0000-0002-7834-7384, e-mail: cieslik@wne.uw.edu.pl 4 faculty of economic sciences, university of warsaw, warsaw, poland https://orcid.org/0000-0002-7834-7384, e-mail: t.valiyev@student.uw.edu.pl abstract: health expenditures are vital indicators of a nation’s social and economic progress, playing a key role in welfare and sustainable development. a well-functioning healthcare system relies on an adequate and skilled workforce, yet many countries face shortages, prompting reliance on international labor migration. this study investigates the economic and social drivers of health labor migration, focusing on doctors in 15 high-income countries from 2011 to 2019. using panel data analysis, we found that lower wages significantly drive migration, with a 1% increase in wages reducing health worker migration by 0.08%. the results underscore the importance of fair remuneration in retaining healthcare professionals within their home countries. moreover, destination countries with better training infrastructure and career advancement opportunities create additional pull factors, compounding the challenges faced by source countries. globalization further facilitates migration by lowering barriers and harmonizing professional standards. these findings highlight the urgent need for policy interventions to address wage disparities and mitigate brain drain while ensuring global health workforce equity. keywords: health, reasons for migration, panel data analysis 1. introduction health expenditures are one of the important indicators of social and economic development. additionally, expenditures on the health sector are among the most basic elements of welfare and sustainable development. for a health system to achieve its primary purpose, which is to provide health services, it must have a sufficient number and quality of healthcare workforce capacity. building the necessary capacity is possible by employing appropriate health workers at the right place and at the right time. this capacity can be created from domestic resources as well as through the employment of foreign resources (diallo, 2004, p. 603). international migration of healthcare professionals has become an increasingly important issue on the international health policy agenda in recent years. brain drains of highly qualified human capital are an important social phenomenon. when we look at the causes of migration in general, external migration is made from low-income countries to higher-income https://orcid.org/0000-0002-9941-0151 mailto:mtosoglu00@gmail.com https://orcid.org/0000-0001-8958-699x mailto:tunahanasln@gmail.com https://orcid.org/0000-0002-7834-7384 mailto:cieslik@wne.uw.edu.pl https://orcid.org/0000-0002-7834-7384 mailto:t.valiyev@student.uw.edu.pl mahir tosunoğlu, tunahan aslan, andrzej ci̇eśli̇k, turgud valiyev 345 countries to improve working conditions and economic conditions. the top-level factors that determine the general dynamics of the free movement of healthcare workers are globalization, technological developments, aging of the population, economic and political factors, increasing societal expectations, changing disease patterns, eu dynamics, and international organizations. according to this, the factors in the upper plan are mainly composed of factors other than families and individuals (who, 2023). this study aims to contribute to the literature by examining the top-level factors, econometrically, for developed economies and supporting them with empirical practice. in this way, this migration movement of health workers will be examined and tried to be better understood. to better understand the dynamics of the econometric model, the 7 top factors that explain the reasons for migration, as identified by who (2000), will be detailed. first, when we consider the concept of globalization, it is a dynamic process that covers the mobility of the workforce through its structure and nature. thus, globalization is highly intertwined with the international movement of the health workforce. free trade agreements are an important dynamic of globalization, and this affects the health sector significantly by accelerating international migration and reducing the barriers to the movement of goods and services, people, and even health workers (bundred, matineau, and kitchiner, 2004, p. 77-78; martineau, decker et al., kitchiner, 2002, p. 3-4). in addition, with the increasing global trade, specialized institutions dealing with the employment of international health workers are also increasing, thus maintaining international migration mobility (who, 2006). another important development related to globalization in health workforce migration is that various occupational groups, including health professions, have achieved common standards in certain areas. another factor is that the decreasing barriers between borders with international agreements have led to the emergence of new legal frameworks that control the circulation and production of the health workforce. when it comes to the technological innovation factor, it is a factor that increases and offers alternative opportunities in the supply and structuring of health services. it is the dynamics in the light of new technologies by keeping the scientific knowledge skills and usability in the health workforce. development in technology determines the type of work to be performed or the services to be provided, the environment, and the structure of the practices, and its impact on the health workforce is very important. with the development of technology, new service areas have emerged, leading to a change in the form of supply and professional talent components in the service structure, bringing the demand for healthcare professionals who will work in these areas (oecd, 2008). however, access to information on opportunities and gaps in relevant positions on global migration has been facilitated by the widespread use of the internet, that is, job search processes are simplified and accelerated with the internet. developments in technology cause the migration of the health workforce in two different ways. first, new business areas and increased specialization increase the need and demand for healthcare professionals. secondly, the fact that the countries have underdeveloped technology is a factor that increases the health workforce migration to countries with better technology, to countries with higher technology to get education and even to work (oecd, 2007). demographic trends are another crucial component of health workforce optimization, influencing both the makeup and delivery of the health workforce directly and indirectly thro doctor migration: unpacking economic and social impacts 346 ugh thedemand for goods and services (dubois, mckee et al., rachel, 2006). considering the population dynamics, while life expectancy at birth increases, the fertility rate decreases and the population is getting older, especially in developed countries (dubois, mckee, & rechel, 2006; rand, 2005; lanzieri, 2008). with the increasing elderly population in population dynamics, health needs and disease structures are also changing (who, 2008). this change increases the demand for a larger healthcare workforce by increasing the need for healthcare services. in addition, with the increasing number of elderly people in the population dynamics, the health workers in that country are both aging and decreasing in number. therefore, the need for a health workforce increases bilaterally, with both the decreasing health workforce in that country and the increase in the elderly population in the changing population dynamics. in developed countries such as norway, sweden, france, denmark and iceland, the effects of changes in population dynamics on the health workforce are quite clear. since the average age of nurses is in the 41-45 age band, aging nurses are experiencing labor force problems (who, 2007). similarly, these problems apply to doctors. in new zealand, the average age of physicians is 44, while nurses are 43, and allied health workers are over 40. in france, 55% of physicians were under the age of 40 in 1985, but this rate decreased to 23% by 2000 (dubois, mckee and rechel, 2006; bagat and sekelj, 2006, p. 378). between this demand and supply in healthcare, the workforce is met by the imported labor force, rather than policies aimed at encouraging participation in the workforce, especially by developed countries. developed countries especially do not produce the unhealthiest workforce and consciously prefer imported workforce (who, 2006). because by policy makers, eliminating the health workforce gap is seen as a situation that needs to be solved urgently. this is because it takes 3 to 5 years to train a nurse, while it takes 15 to 20 years to train a senior doctor, similarly. therefore, when the imported health workforce is preferred, the health workforce shortage problem can be solved urgently, without training costs (buchan, 2007, p. 10). economic conditions also play a crucial role in driving health worker migration. research indicates that migration often flows from less affluent nations to more prosperous ones. however, movement also occurs among developed countries, driven by opportunities for improved quality of life and professional benefits. furthermore, rising societal expectations, fueled by advancements in education, globalization, and technology, have made populations more aware and demanding. with these heightened expectations, healthcare professionals strive to enhance their expertise and seek environments offering advanced education, cuttingedge technology, and efficient administrative systems. this pursuit of better prospects significantly influences health workforce migration patterns. this paper addresses a critical gap in the literature by focusing on the economic and social drivers of doctors’ migration within developed economies, an area that remains underexplored. it provides empirical insights using panel data analysis to uncover how factors like wages, globalization, and human development influence the migration of health workers. the structure of the paper is as follows: the next section reviews the relevant literature, followed by an analysis of the key factors driving health worker migration and their implications. 2. literature review when the international migration literature of healthcare professionals is examined, it is possible to encounter many different studies. the international migration of health workers, mahir tosunoğlu, tunahan aslan, andrzej ci̇eśli̇k, turgud valiyev 347 which is frequently on the agenda today, is not the first time that it has come to the fore. it is seen that researchers studied the reasons for the migration of health workers such as physicians and nurses to another country in 1962 (seale 1962). in previous years, it is seen that the most important reasons for migration are from countries with lower economies to countries with higher welfare. here, the occupational group that has the largest share of health migration is doctors compared to nurses. however, the number of nurses emigrating after doctors is quite high (mej'ia et al., 1979). physicians are a more attractive profession group compared to nurses in terms of immigration country. because physicians receive more training compared to nurses and this causes a higher cost (bezuidenhout et al., 2009; saluja et al., 2020). medicine is one of the highly skilled professions in europe. it is also quite inadequate in terms of workforce (becker and teney, 2020, botezat and ramos, 2020). in this respect, it has been subjected to serious criticism in the public due to the immigration of doctors who have completed their specialization to a better european country due to free movement in europe (żuk et al., 2019). the reasons for migration vary from country to country. a better career and quality of life has been on the main causes of migration in countries in the southern part of europe (becker and teney, 2020). some of the doctors working in the united kingdom stated that the working hours are too much and this situation disrupts the balance between work and life, and they want to migrate because they cannot get enough help from their colleagues (brugha et al., 2020). 34% of doctors who immigrated from poland stated that high earnings and better working conditions were among the reasons for their migration (dubas-jakonczyk et al., 2020). health workers in ireland, on the other hand, stated that they had to migrate because they were not satisfied with their working conditions and thought that their career prospects would be bad (brugha et al., 2020). martineau et al. (2002), examined the international migration of healthcare professionals from historical, contemporary, and future perspectives. while some of the world's wealthiest countries have benefited from international migration, some of the world's poorest countries have said it has had an overall negative impact on healthcare. however, they added that the responsibilities of both source and recipient countries need to be clarified, saying that the effects on international migration are often more complex than portrayed. they underlined that despite the development of codes of practice regarding ethical international recruitment, the increase in the demand for healthcare professionals is inevitable, and they stated that more radical strategies are needed to protect the health systems of the world's poorest countries. võrk et al. (2004), analyzed the size and determinants of potential migration flows of estonian health professionals using a 2003 opinion survey. according to the results of the analysis, it has been reached that about half of the estonian health workers, about 5% of them want to work abroad, either permanently or temporarily. the results of the logistic regression models show that the intention to migrate depends on the usual socio-demographic and economic variables such as age, gender, marital status, living area, risk of losing a job, and dissatisfaction with current wages. mcelmurry et al. (2006), argue that international nurse migration is a natural and expected situation. migration flow models have stated that it occurs largely from developing countries to developed countries, and in their study, they examine nurse migration using primary health care (phc) as an ethical framework. while phc principles state to bring doctor migration: unpacking economic and social impacts 348 healthcare as close as possible to where people live and work, nurse migration often moves nurses away from where they are most needed, and this conflicts with the principles of health for all. they stated that nurse migration policies and procedures should address nurse workforce migration, and that fair financial arrangements and phc ethical criteria could be met and improved. henderson and tulloch (2008), show that there is no global model for improving the retention and performance of health workers. while economic factors play an important role in workers' decisions to stay in the health sector, the evidence shows that they are not the only ones, saying that this is a critical issue that needs to be addressed through the policy, planning and implementation of innovative strategies such as incentives to retain and motivate healthcare workers in pacific and asian countries. based on research findings from the asiapacific region, they concluded that salaries and benefits, along with working conditions, supervision and management, and education and training opportunities, are important. they underlined the offering of financial and non-financial incentives in the form of packages. bradby (2014), pointed out that the widely estimated reason for the shortage of skilled health personnel in africa is the widespread belief that rich countries are stealing trained health professionals from poor countries. they have criticized this widespread notion that it promotes medical professional interests and ignores historical patterns of underinvestment in health systems and structures. in response to the global debt crisis of the late 1970s, african countries had to prioritize investment in their social sectors, including health and education, in favor of promoting an export currency, and poor working conditions in areas where hiv spread led to a migration of medical personnel. pointed out that it exacerbated the famine. they also said that together with globalization, the means and most importantly the motivation to migrate between nations and continents causes the unavoidable desire for migration and it is very difficult to regulate. gruber et al. (2020), investigated the immigration of croatian doctors after croatia acceded to the eu. according to their study there are both economic and non-economic factors that affect the choice of individuals to migrate. for croatian physicians, the benefits of immigration are expressed in higher satisfaction with standard of the living, income, professional development and better working conditions. however, they also point out that there are some clear psychological costs, such as being away from family members, friends and familiar surroundings, mastery of another language, which hinder immigrants and their families and make it difficult to establish a social network and integrate into society. they say that high-income countries should strive for self-sufficiency by training, retaining and maintaining sufficient numbers of doctors to staff their health systems. hagopian et al. (2005), investigated the immigration of west african-trained doctors to rich countries, especially the usa and england. in their study, qualitative data were collected from six medical schools in africa to investigate the magnitude, causes and consequences of migration. according to the results of the research, they concluded that there is a developed medical migration culture. they also concluded that this culture is firmly rooted and even encourages immigration, and that they are proud of their students who migrated as role models in medical school. when the literature is evaluated in general, international migration movements of health workers have been examined from different perspectives. when the literature is considered mahir tosunoğlu, tunahan aslan, andrzej ci̇eśli̇k, turgud valiyev 349 from a broad perspective, it is generally deduced that countries that migrate their health workforce should protect their health workforce by regulating their migration policies. 3. methodology in this study, we analyzed a group of 15 high-income countries, estimating coefficients using both random effects and fixed effects models through panel data analysis. these countries were chosen based on their high human development index (hdi) rankings. additionally, they are classified as middleor high-income economies under the european union’s economic classification system. the primary reason for selecting developed countries is the availability of comprehensive data and evidence from the literature indicating significant health worker migration occurring between developed nations. the selected countries are as follows: table 1. developed countries group belgium estonia germany ireland slovenia czech republic finland holland italy united kingdom denmark france hungary norway this study utilized the stata-17 software package for data analysis, following a methodology similar to that employed by rutten (2009). panel data analysis was chosen as it enables multiple observations to be gathered from the same sample over time. the functional model applied in this analysis is structured as follows: 𝑌𝑖𝑡 = 0𝑖𝑡 +  1𝑖𝑡 x1𝑖𝑡0 +  𝑘𝑖𝑡 𝑋𝑘𝑖𝑡 + 𝑖𝑡 (1) 𝑖 = 1, 2, 3, . . . , 𝑁 𝑡 = 1, 2, 3, . . . , 𝑇 in equation (1) shown above 𝑖 cross sections, 𝑡 represents the unit of time. in this equation, there are individual effects that cannot be observed in terms of independent variables, do not change over time, but include cross-section-specific features. it is also included in the error term of the different effects of the units (baltagi 2005, p. 11-12). there are two basic approaches used in regressions with panel data. the first of these is the "fixed effects model" while the other is the "random effects model". in the fixed effects model, a different fixed value occurs for each cross-section. it is assumed that the slope coefficients in the model (β) do not change, however, the constant coefficients can vary only between cross-section or time data, or even within both. if differentiation is only timedependent, it is called a one-way fixed effects model. however, if the differentiation between data depends on both cross-section and time, it is called a two-way fixed effects model. however, in panel data analysis, the cross-section effect is considered rather than the time effect, so panel data models appear as one-way models (hsiao 2002, p. 30). the fixed effects model can be shown as equation (1) and equation (2) as one and two-sided, respectively, as follows; 𝑌𝑖𝑡 = ( 𝑖𝑡 +  𝑖𝑡 ) +  1𝑖𝑡 x1𝑖𝑡 +  𝑘𝑖𝑡 𝑋𝑘𝑖𝑡 + 𝑖𝑡 (2) 𝑌𝑖𝑡 = ( 𝑖𝑡 +  𝑖𝑡 + 𝑖𝑡) +  1𝑖𝑡 x1𝑖𝑡+. . . + 𝑘𝑖𝑡 𝑋𝑘𝑖𝑡 + 𝑖𝑡 (3) doctor migration: unpacking economic and social impacts 350 there it ≈ iid (0, 2) is an assumption here. in other words, 𝑖𝑡 it is assumed to have a white noise feature. in addition, the independent variables are independent of the error term (baltagi 2005, p. 12). in the fixed effects model, different constants are estimated for each cross-section, ensuring that the constant coefficient is different for the cross-sections. in the random effects model, changes in sections or time-dependent changes in sections are included in the model as a component of the error term. compared to the fixed effects model, its prominent feature is that there is no loss of degrees of freedom. it also allows the inclusion of out-of-sample effects in the model. the random effects model can be shown as follows; 𝑌𝑖𝑡 = 𝑖𝑡 +  1𝑖𝑡 x1𝑖𝑡+. . . + 𝑘𝑖𝑡 𝑋𝑘𝑖𝑡 + ( 𝑖𝑡 + 𝑖𝑡 + 𝑖𝑡 ) (4) 𝑌𝑖𝑡 = 𝑖𝑡 +  1𝑖𝑡 x1𝑖𝑡+. . . + 𝑘𝑖𝑡 𝑋𝑘𝑖𝑡 + ( 𝑖𝑡 + 𝑖𝑡 + 𝑖𝑡 ) (5) equations (4) and (5) represent the one-way and two-way random effects models, respectively. the error term in these models consists of two distinct components. 𝑖𝑡 ≈ iid (0, 2) and  𝑖 ≈ iid (0, 2)there is an assumption.  𝑖 error term,𝑖 = 1, 2, 3, … , 𝑁 the first component represents the value of a cross-section that remains constant across the time dimension. conversely, the second component accounts for the remaining parts that vary over time but are interconnected within the time dimension. this component is independent of the section effect within the model. additionally, both components are uncorrelated with any independent variable. consequently, these components, along with the overall model, are consistent and unbiased when estimated using the least squares method. 3.1.data description and variables the model includes the following variables: gerd [a high gerd/gdp ratio can be used to measure a country's success in technological advancement and knowledge creation (r&d intensity), migration of specialist doctors, wages of health workers (in us dollars), and the population aged 65 and over (percentage of the total population).data on r&d expenditures as a percentage of gdp, the human development index (hdi), and the globalization index (kof) were gathered annually for 15 nations between 2011 and 2019. globalization (kof) from the swiss institute of economics, hdi from the undp, migration of specialist doctors (mig), wages of health workers (wage), population aged 65 and over (pop), and gerd were all sourced from the oecd. the following is a summary table that provides the sources and explanations for the variables. table 2. table of variables variables explanation resources mig migration of specialist doctors oecd wage wages of health workers (us dollars), oecd hdi human development index undp pop the population aged 65 and over (percentage of the total population) oecd mahir tosunoğlu, tunahan aslan, andrzej ci̇eśli̇k, turgud valiyev 351 gerd the high gerd/gdp ratio can be used to measure a country's success in a technological advancement and knowledge creation (r&d intensity). oecd kof globalization index oecd in the study, 15 groups of developed countries were chosen between 2011 and 2019, and with the aid of panel data analysis, the coefficients were attempted to be estimated using the fixed effects model and the random effects model. the model uses logarithmic form for the wage and mig variables. the following is the econometric model that was developed. (𝐼𝑛𝑚𝑖𝑔)𝑖𝑡 =  0 + 1 (𝐼𝑛wage)𝑖𝑡 +  2 (hdi)𝑖𝑡 +  3 (pop)𝑖𝑡 +  4 (gerd)𝑖𝑡 +  5 (kof)𝑖𝑡 + 𝑖𝑡 (6) in equation (6), lnmig serves as the dependent variable, while lnwage, hdi, pop, gerd, and kof are the independent variables. the constant term coefficient of the model is denoted by β₀, while β₁, β₂, and subsequent terms represent the coefficients of the explanatory variables. the model's error term, denoted by ε, captures unexplained variability not accounted for by the independent variables. 3.2.empirical strategy the descriptive summary statistics of the variables used in the model are as follows. table 3. summary statistics stat. lnmig lnwage hdi pop gerd kof mean 10.71 11.52 0.91 17.7 2.23 85.3 median 10.40 11.77 0.92 18.1 2.14 85.8 maximum 12.92 12.41 0.96 22.9 5.14 91.1 minimum 8.54 9.99 0.83 10.1 1.17 75.7 std. dev. 1.26 0.64 0.03 2.82 0.84 3.85 the variables utilized in the table 3 are summarized statistically. there are no outliers in the data set when the statistics are analyzed generally. furthermore, the variables employed in the summary are also used to extract a priori information from their correlation links. the variables utilized in the model have the following correlation table. table 4. correlation statistics corr. lnmig lnwage hdi pop gerd kof lnmig 1.00 lnwage 0.29 1.00 hdi 0.06 0.79 1.00 pop 0.41 -0.23 -0.03 1.00 gerd -0.05 0.39 0.36 -0.27 1.00 kof 0.41 0.40 0.41 0.41 -0.21 1.00 doctor migration: unpacking economic and social impacts 352 it is evident from examining the correlation relations via demonstrating in table 4 that there are strong relationships between the variables. wages and health migration have a positive correlation of 0.29, the population over 65 has a positive correlation of 0.41, and the globalization index has a positive correlation of 0.41. gerd, which represents high technology, is negatively correlated with health migration. table 5. panel data regression estimates model lnwage hdi kof pop gerd fixed effects -0.078(0.007) *** 5,997(0.000) *** 0.011(0.097) * -0.005(0.460) 0.018(0.148) random effects -0.076(0.009) *** 5,919(0.000) *** 0.011(0.080) * -0.005(0.500) 0.018(0.149) hausman 10,934 (0.052)* 1*, ** and *** indicate critical values at 10%, 5% and 1% significance levels, respectively. 2values in parentheses indicate probability values. 3according to the hausman test, the fixed effects model was found to be preferable. in table 5, we may observe fixed and random effects throughout the independent predictors. when the coefficients in the fixed effects model are interpreted; as expected, a negative and significant relationship was found between the migration of health workers and the wages of health workers. a 1% increase in wages reduces the migration of health workers by 0.08%. as anticipated, a positive and significant relationship was identified between health worker migration and globalization. specifically, a one-unit increase in globalization leads to a 0.01-unit rise in healthcare worker migration. similarly, a significant connection was observed between health worker migration and human development, with a one-unit increase in the human development index resulting in a 5.9-unit rise in migration. however, in the current model sample, no significant relationship was found between the proportion of the population aged 65 and over, gdp expenditures on r&d, and the migration of health workers. 4. conclusions this study aims to contribute to the literature by supporting the top-level migration reasons of health workers, for developed economies, by modeling them econometrically and supporting them with empirical practice. in our study, 15 high-income country groups were selected, and the coefficients were tried to be estimated using the random effects model and fixed effects model with the help of panel data analysis. this country group has been selected according to countries with a high human development index. in addition, this group of countries is classified as middle or high-income economies according to the economic classification of the european union. according to panel data regression estimations, lnwage and hdi variables were significant in 1% and of variable in 10% in both fixed and random effects models. pop and gerd variables are not statistically significant. according to the hausman test, the fixed mahir tosunoğlu, tunahan aslan, andrzej ci̇eśli̇k, turgud valiyev 353 effects model was found to be preferable. when the coefficients in the fixed effects model are interpreted; as expected, a negative and significant relationship was found between the migration of health workers and the wages of health workers. a decrease in wages due to the desire to increase welfare from one country to another is a factor that increases health workforce migration. in this analysis for developed economies, a 1% increase in wages reduces the migration of health workers by 0.08%. a clear and significant positive relationship was observed between globalization and the migration of health workers. globalization, as a dynamic process, inherently facilitates workforce mobility by breaking down barriers and establishing common professional standards across borders. consequently, health professionals are less inclined to work in countries with lower welfare levels if the nature of their work remains unchanged. furthermore, international agreements have introduced legal frameworks to regulate the movement and production of the health workforce. in the context of developed economies, a one-unit rise in globalization correlates with a 0.01-unit increase in healthcare worker migration. similarly, a strong positive relationship was identified between migration and human development. this is unsurprising given that the countries examined in this study are developed nations. literature suggests that migration often occurs between developed nations, driven by factors such as wage differentials. the human development index (hdi), comprising health, education, and income components, highlights that income changes play a significant role in influencing labor migration. in this analysis, a one-unit increase in hdi corresponds to a 5.9unit rise in healthcare worker migration. however, no significant relationship was found between migration and variables such as the proportion of the population over 65 years or gdp expenditure on r&d in this sample, rendering them uninterpretable. health workforce migration poses a significant loss of human capital for emigrant countries and presents challenges to national economies. policymakers must adopt diverse strategies to protect the welfare of health workers at international standards and retain this skilled workforce domestically, ensuring sustainable human capital through harmonized standards. references 1. bagat, m., & sekelj kauzlarić, k. (2006). physician labor market in croatia. croatian medical journal, 47(3), 376-384. 2. baltagi, badi. h., (2005). econometric analysis of panel data, third edition, john wiley & sons ltd., west sussex, england. 3. becker, r., & teney, c. (2020). understanding high-skilled intra-european migration patterns: the case of european physicians in germany. journal of ethnic and migration studies, 46(9), 1737-1755. 4. bezuidenhout, m. m., joubert, g., hiemstra, l. a., & struwig, m. c. (2009). reasons for doctor migration from south africa. south african family practice, 51(3). 5. buchan, j. (2007). health worker migration in europe: assessing the policy options. eurohealth-london-, 13(1), 6. 6. bundred, p., martineau, t., & kitchiner, d. (2004). factors affecting the global migration of health professionals. harvard health policy review, 5(fall), 77-78. doctor migration: unpacking economic and social impacts 354 7. bradby (2014). “international medical migration: a critical conceptual review of the global movements of doctors and nurses”, health, vol. 18(6). 8. brugha, r., cronin, f. m., clarke, n., conroy, r., & hendrick, l. (2020). factors influencing specialty choice and the effect of recall bias on findings from irish medical graduates: a cross-sectional, longitudinal study. bmc medical education, 20, 1-11. 9. botezat, a., & ramos, r. (2020). physicians’ brain drain-a gravity model of migration flows. globalization and health, 16(1), 1-13. 10. diallo, k. (2004). data on the migration of health-care workers: sources, uses, and challenges. bulletin of the world health organization, 82(8), 601-607. 11. dubas-jakóbczyk, k., domagała, a., kiedik, d., & peña-sánchez, j. n. (2020). exploring satisfaction and migration intentions of physicians in three university hospitals in poland. international journal of environmental research and public health, 17(1), 43. 12. dubois, c. a., mckee, m., & rechel, b. (2006). introduction: critical challenges facing the health care workforce in europe. who regional publications, european series, 2-18. 13. europe, r. a. n. d. (2005). population implosion? low fertility and policy responses in the european union. rand research brief, available at:www.rand.org/pubs/research_briefs/2005/rand_rb9126.pdf. 14. grossman, gene m. (1991). elhanan helpman, innovation and growth in the global economy, mit press, cambridge, mass. 15. gruber, e., sarajlic vukovic, i., musovic, m., moravek, d., starcevic, b., martic biocina, s., & knez, r. (2020). migration of croatian physicians in the global context. medicina fluminensis: medicina fluminensis, 56(2), 88-96. 16. hagopian, a., ofosu, a., fatusi, a., biritwum, r., essel, a., hart, l. g., & watts, c. (2005). the flight of physicians from west africa: views of african physicians and implications for policy. social science & medicine, 61(8), 1750-1760. 17. henderson, l. n., & tulloch, j. (2008). incentives for retaining and motivating health workers in pacific and asian countries. human resources for health, 6, 1-20. 18. hsiao, c. (2022). analysis of panel data, cambridge university press, second edition, no:64. 19. lanzieri, g. (2008). statistics in focus: population and social conditions. long-term population projections at national level. 2006.3. 20. martineau, t., decker, k., & bundred, p. (2002). briefing note on international migration of health professionals: levelling the playing field for developing country health systems. liverpool: liverpool school of tropical medicine, 3-4. 21. mcelmurry, b. j., solheim, k., kishi, r., coffia, m. a., woith, w., & janepanish, p. (2006). ethical concerns in nurse migration. journal of professional nursing, 22(4), 226235. 22. mej'ia, a., pizurki, h., & royston, e. (1979). physician and nurse migration: analysis and policy implications, report on a who study. world health organization. 23. oecd (2007). immigrant health workers in oecd countries in the broader context of higly skilled migration. international migration outlook sopemi. 24. oecd (2008). the looming crisis in the health workforce: how can oecd countries respond?. oecd health policy studies. mahir tosunoğlu, tunahan aslan, andrzej ci̇eśli̇k, turgud valiyev 355 25. rutten, m. (2009). the economic impact of medical migration: a receiving country's perspective. review of international economics, 17(1), 156-171. 26. saluja, s., rudolfson, n., massenburg, b. b., meara, j. g., & shrime, m. g. (2020). the impact of physician migration on mortality in low and middle-income countries: an economic modelling study. bmj global health, 5(1), e001535. 27. seale, j. (1962). medical emigration from britain, 1930-61. british medical journal, 1(5280), 782. 28. võrk, a., kallaste, e., & priinits, m. (2004). migration intentions of health care professionals: the case of estonia. cluj napoca: public policy center. 29. who. (2023). who report on global health worker mobility. world health organization. 30. who. (2006). working together for health: the world health report 2006: policy briefs. world health organization. 31. who (2006c). migration of health workers. fact sheet. no: 301, world health organisation, genava. 32. who (2007). regional office for europe. investing in the health workforce enables stronger health systems”. fact sheet 06/07 belgrade, copenhagen, www.euro.who.int/document/mediacentre/ fs0607e.pdf. 33. who (2008). the kampala declaration and agenda for global action. world health organization global health workforce alliance, genava. 34. żuk, p., & lisiewicz-jakubaszko, j. (2019). labour migration of doctors and nurses and the impact on the quality of health care in eastern european countries: the case of poland. the economic and labour relations review, 30(2), 307-320. agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 19, no. 1 (2025), pp. 254-262 254 knowledge-based leadership as a key factor in business success – case study of montenegro g. nikčević, đ. pavićević gordana nikčević¹, đorđije pavićević² ¹ ² university adriatic bar, montenegro ¹ https://orcid.org/0000-0002-9804-6917, e-mail: gogan@t-com.me ² https://orcid.org/0000-0002-9484-3361, e-mail: djpavicevic3@gmail.com abstract: in the contemporary globalized environment, effective leadership becomes a crucial factor for managing change and achieving sustainable business success. leaders, through their knowledge, skills, and ability to manage knowledge, have a key role in shaping organizations that successfully adapt to dynamic market conditions. continuous learning and application of knowledge enable leaders to respond to complex challenges of modern business. the aim of this research is to examine how leading principles, observed through knowledge management, influence the education of leaders in montenegro and their readiness to face global challenges, as well as their contribution to achieving business success. the results indicate that leaders in montenegro possess significant developmental potential, but also that, in addition, there is room for improvement, especially in the areas of leadership styles, knowledge sharing, readiness to take risks, and digital transformation. as directions for improvement, the need for adapting leadership to specific situations, greater openness and transparency, encouraging innovative thinking, development of multicultural competencies, and focus on international cooperation stand out. keywords: leadership, knowledge, globalization, transformational leadership, education introduction the contemporary business environment is characterized by accelerated technological development, omnipresent globalization, and growing complexity of market relations. in such an environment, leadership no longer implies only management of people, but requires strategic thinking, the ability of rapid adaptation, and decision-making based on knowledge. leaders are expected to encourage innovations, develop flexible organizational structures, and effectively manage diverse teams. however, although leaders in montenegro show certain potential, the question arises whether they possess adequate competencies for successfully facing contemporary challenges. although certain efforts in the direction of leadership development have been observed, there are significant discrepancies between current practices and the needs of the global market. this creates room for critical re-examination of existing approaches to leadership and emphasizes the importance of their adaptation to dynamic changes in the business environment. therefore, this research focuses on examining the role of knowledge management in the education and practice of leaders, with special emphasis on how through these processes their ability can be improved to act in a contemporary, competitive and dynamic business https://orcid.org/0000-0002-9804-6917 mailto:gogan@t-com.me https://orcid.org/0000-0002-9484-3361 mailto:djpavicevic3@gmail.com knowledge-based leadership as a key factor in business success – case study of montenegro 255 environment. also, the aim of the research is the identification of key areas in which it is possible to improve leadership practices, so that leaders become carriers of development and business success. 1. leadership and modern tendencies defining leadership is a challenging assignment since each era brings specific demands and shapes the characteristics of leaders in accordance with social, economic and technological changes. leadership can be viewed through different theoretical and practical approaches, which has led to a multitude of definitions and understandings of this concept. according to stoner and freeman (2018), leadership is the process of directing the activities of group members towards achieving common goals. this process involves the application of various forms of influence and is based on the interaction of leaders and group members (yukl, 2012). similarly, northouse (2018) defines leadership as a process in which an individual exerts influence on a group in order to achieve clearly defined goals, while singh et al. (2023) emphasizes that leadership includes processes by which organizations are shaped and adapted to changing circumstances, defining a vision of the future and directing individuals towards its realization. regardless of the different approaches, the common basis of leadership definitions is that it is understood as a process of mutual influence between leaders and followers within a group that has a clearly defined goal. leadership is,therefore, based on interaction that enables not only the achievement of goals, but also the continuous adaptation and improvement of organizational capacities (northouse, 2018; boeske,2023). modern tendencies of leadership are noticeable in business and social environment to which transformational leadership takes center stage. this approach implies inspiring and motivating employees through clear vision of innovative strategy and personal example of a leader (greimel et al., 2023; stone; patterson, 2023). in addition, the concept of servant leadership is gaining ground importance, because it focuses on the needs of employees and their professional development, while leaders assume the role of support and guide (benmira; agboola, 2021; claro; silva,2025). in a dynamic business environment, agile leadership is becoming essential, enabling leaders to manage change effectively, make quick decisions, and adapt strategies to keep organizations competitive. digital transformation further redefines paradigm leadership, emphasizing the need for digital skills, innovation and technology understanding that leaders must possess in order to improve business processes and lead teams through technological changes (delıoğlu & uysal, 2022; skare & soriano, 2021). at the same time, the leader's role of creating sustainable organizations is becoming increasingly evident. modern leadership involves responsible management, balancing economic goals with social and environmental aspects of business. alongside that, globalization increases the importance of leaders who are capable to successfully lead multicultural teams, understanding differences in values, norms and practices (perez, 2017). key characteristics of modern leaders include flexibility, creativity, emotional intelligence, strategic thinking and open mind for innovations. according to farrel (2017), leaders not only need to cherish creativity and support technological innovations, but also to gordana nikčević, đorđije pavićević 256 create an environment conducive to continuous learning and employee development. successful leaders steer the organization towards sustainable goals, while developing the capabilities of their teams to face the challenges of the modern business world. finally, leadership is increasingly defined as a key factor in knowledge management. leaders are responsible for creating, transferring and applying knowledge in the organization, thereby ensuring its long-term competitiveness and success. this requires constant adaptation, innovation and reliance on teamwork, which makes leadership a central element in the development of modern organizations (pellegrini et al., 2020). 2. knowledge as key resource modern organization unlike the traditional economy, which relied on physical resources, modern organizations are based on the creation, sharing and application of knowledge as the main driver of development. in a globalized business environment, an organization's ability to effectively manage knowledge can be crucial for its survival and growth, as it enables rapid adaptation to change, increases innovation and strengthens its competitive position (chaithanapat et al., 2022). knowledge in organizations is divided into explicit and implicit. explicit knowledge is formalized, easily transferable and can be documented through procedures, databases and other records, while implicit knowledge is linked to the experiences, skills and intuition of employees. although explicit knowledge enables process standardization and increases operational efficiency, it is precisely implicit knowledge that forms the basis of organizational intelligence, as it contributes to creativity and decision-making in complex situations. its informal nature poses a challenge in identification and transfer, but at the same time allows organizations to develop flexibility and resilience to change (ellis & roever, 2021). one of the key characteristics of knowledge, which distinguishes it from physical resources, is its ability not to be consumed by use, but to create additional value through dissemination and application. its development depends on research, innovation and collective experiences of employees where knowledge is not only accumulated passively but is actively shaped through interaction and exchange of ideas. since it is inextricably linked to human capital, its effective application depends on the degree of competence, creativity and engagement of employees. organizations with highly qualified personnel not only adopt and adapt knowledge faster, but also more easily transform information into strategic resources that provide them with long-term market advantage (haider et al., 2022). modern organizations must develop systematic knowledge management strategies that enable its effective integration into business processes. in this context, knowledge management is not only a technical challenge, but also an organizational and cultural process, which requires continuous collaboration, open communication and the creation of a supportive environment in which the contribution of each individual is recognized and valued. organizations that successfully integrate knowledge into their business models not only improve operational efficiency, but also foster innovation, increase agility and build long-term sustainable business systems. 3. synergy of knowledge and leadership in the context of globalization knowledge-based leadership as a key factor in business success – case study of montenegro 257 globalization, as a process of accelerated linking of markets, people and information, has created a new business environment in which competition, innovation and technological progress are constant factors shaping the market. in this context, the synergy between knowledge and leadership becomes a key factor for achieving long-term success. leaders who understand the strategic importance of knowledge can enable organizations to quickly adapt to the dynamic changes brought about by globalization (claro & silva, 2025; born et al., 2025; jensen, 2024). unlike earlier management concepts, where knowledge was treated as a technical resource, today it is increasingly viewed as a strategic tool for decision-making and recognition of market opportunities. organizations that successfully manage knowledge not only achieve greater flexibility but also ensure sustainable competitive advantage through innovation. on the other hand, organizations that neglect the development of strategies for adequate knowledge management face stagnation and loss of market position (rupčić, 2024; nonaka, 2009). in such an environment, leaders not only manage organizations, but also shape a working atmosphere that encourages the development, sharing and application of knowledge. their role is no longer just setting goals and monitoring performance leaders today must inspire, motivate and direct teams, and encourage an open exchange of ideas. in a globalized business environment, intercultural competencies of leaders become crucial for the successful management of teams that operate in different cultural and economic contexts (hanson et al., 2021; carreño, 2024; bilderback & thompson, 2025). therefore, the synergy of knowledge and leadership is the basis for building competitive and flexible organizations that can cope with the challenges of globalization. effective knowledge management, combined with the ability of leaders to guide and inspire teams, enables organizations to not only survive, but also thrive in complex market conditions. to achieve long-term sustainability, organizations must continuously invest in the development of leaders and intellectual resources, thus securing their position in the global market. 4. leadership approach to global challenges: the example of montenegro research methodology the research was conducted between january and march 2025, on a sample of 100 respondents employed in various organizations in montenegro. the sample includes employees of different age groups, educational profiles, job roles and genders, which allows for a representative sample for the analysis of leadership and its role in the development and application of knowledge within organizations. given the importance of knowledge in today's business environment, the research focuses on how leaders manage, share and use knowledge to respond to the challenges of globalization and improve the competitiveness of organizations. the respondents were selected using a random sample method, allowing for the representation of employees from different sectors. the industries covered by the research include agriculture, tourism, manufacturing and services, and the research focuses on how leaders in these sectors develop strategies for the transfer and use of knowledge in order to adapt to global trends and technological innovations. respondents participated in surveys that covered key aspects of leadership, including: gordana nikčević, đorđije pavićević 258 ● democratic and authoritarian leadership styles and their ability to encourage knowledge exchange and development within organizations. ● the impact of leaders on innovation and employee motivation through strategies that incorporate knowledge as a key resource for success. ● attitudes toward change readiness, where leaders use knowledge to help organizations adapt to new challenges. ● managing global challenges through strategies that leverage global knowledge and technological innovations. ● digital transformation as a key element in integrating new knowledge into business processes. ● competitiveness in the global market, based on leaders' ability to optimize knowledge utilization within the organization. thematic analysis was used as a method for data analysis, as it allows identification of key themes and forms in the respondents' responses, with a particular emphasis on how leaders in montenegro manage and develop knowledge within their organizations. this approach allows for a deeper understanding of how leaders shape organizations and how their ability to develop and apply knowledge affects the competitiveness and sustainability of organizations in a globalized business environment. 4.1. results the understanding of leadership throughout history has varied; in the past, it was believed that leaders are born, while today the prevailing view is that leadership depends on the development of skills through education and experience. leaders develop through a continuous process of learning, training and experience (jago, 1982; northouse, 2025). table 1. analysis of leadership in montenegro key aspects of leadership in montenegro arithmetic mean (%) leader's ability to solve problems 80 leader's willingness to share knowledge with employees 50 leader's responsibility for the organization's success 88 role of the leader in organizational changes 89 creation of knowledge within the organization 91 communication with employees 76 commitment to employee motivation and satisfaction 89 managing different cultures 78 monitoring global trends 65 willingness to take risks 56 recognizing the importance of digital transformation 68 developing cooperation with international partners 74 encouraging innovative thinking 60 source: own research knowledge-based leadership as a key factor in business success – case study of montenegro 259 4.2. discussion the majority of respondents (80%) consider that a leader should be democratically oriented, which means that most people value openness and inclusiveness in leadership. however, 20% of respondents consider that a leader should be authoritarian, which indicates divided opinions about the leadership style. when it comes to knowledge sharing, 48% of respondents consider that the leader shares their knowledge with employees, while 52% of respondents consider that this is not the case. this may indicate the need for improvement in the area of communication and exchange of information between leaders and employees. in terms of responsibility, 88% of respondents believe that the leader should be responsible for the success of the organization, which includes problem-solving and making key decisions. similarly, 89% of respondents consider that the leader should be a carrier of change, because leadership largely implies the ability of the organization to adapt and develop. when it comes to knowledge creation, 91% of respondents believe that the leader plays a key role in this process, which is especially important for organizations that strive for innovations and continuous learning. similarly, 76% of respondents consider that the leader should spend most of the time in communication with employees, because this enables better understanding and effective management of the organization. employee motivation and satisfaction also stand out as key factors for success, with 89% of respondents who consider that the leader should be dedicated to this. this is in accordance with modern approaches to leadership that recognize the importance of emotional intelligence and a positive work atmosphere. in relation to the specific characteristics of leaders in montenegro, 78% of respondents consider that leaders do not have sufficiently developed multicultural competencies, which indicates room for improvement of skills in this area. also, 65% of respondents recognize the importance of global trends, but state limitations in the implementation of these trends in organizations. 68% of respondents consider that leaders in montenegro recognize the importance of digital transformation, but there are challenges in the full application of these changes. readiness for risk is somewhat lower, with 56% of respondents who consider that leaders are somewhat ready to take risks. this may indicate caution and a desire for stability, but it may also represent an obstacle for rapid adaptation and innovations. in terms of cooperation with international partners, 74% of respondents consider that leaders in montenegro develop cooperation with foreign partners, but there is room for strengthening international networks and improving cooperation. innovative thinking is also gradually developing, with 60% of respondents who consider that leaders are beginning to develop innovative approaches. previous research, including the works of janićijević (2019), nikčević (2016, 2023, 2024), indicate the presence of similar challenges in the domain of leadership in montenegro. related conclusions are also found in international studies, such as those conducted by northouse (2018), boeske (2023), anderson & crutcher (2023), ishchuk (2024), batsenko & halenin (2024), where limited readiness of leaders to take risks is identified, as well as slow implementation of digital innovations in leadership practice. gordana nikčević, đorđije pavićević 260 based on the results of the survey, several paradoxical situations are observed that reflect contradictory aspects of leadership in organizations in montenegro. although 80% of respondents consider their leader democratic, 20% see them as authoritarian. this indicates the existence of a mixed leadership style, which may cause confusion among employees, because some prefer participation, while others expect quick and clear decisions in crisis situations. the majority of respondents consider that the leader should be responsible for the success of the organization, but only 48% consider that the leader shares their knowledge with employees. this discrepancy may reduce the efficiency of the organization, because key information does not reach all members of the team, which may limit the growth of employees. although 56% of respondents consider that leaders in montenegro have moderate readiness for risk, there is a strong need for security and stability in organizations. excessive security may limit innovations, because leaders, although they recognize the need for risk, avoid making decisive and strategically bold decisions that could accelerate progress. although 60% of respondents consider that leaders are beginning to develop innovative approaches, there still exists significant resistance to new ideas, because organizational culture and traditional business practices favor old methods. this conflict between innovation and tradition may complicate the implementation of changes. finally, although 76% of respondents consider that communication with employees is key, digital transformation may create barriers in personal interactions. balancing effective use of technology with the need for personal communication becomes a challenge for the leader, because excessive digitalization may reduce trust among employees and negatively affect organizational culture. the obtained research results indicate that leaders in montenegro possess significant potential for further development, but also that there are aspects of leadership that require additional improvement. if organizations are to become more competitive and ready for contemporary global challenges, it is necessary to invest additional efforts in the education of leaders and the application of modern business practices. in this context, adaptation of leadership styles is particularly important — leaders should skillfully balance between the democratic approach, which encourages inclusion and engagement of employees, and the authoritarian approach, which can be effective in situations that require quick decision-making. also, it is necessary to strengthen the culture of knowledge sharing within the organization, because transparency in this regard not only contributes to the development of employees but also enables faster and more efficient response to market changes. in addition, the results indicate the need for greater assumption of responsibility by leaders, as well as for improvement of communication with employees. this contributes to the creation of a positive organizational climate, greater trust, and more efficient decision-making. in the contemporary business environment, additional attention must be devoted to the development of multicultural competencies, so that leaders are prepared to work in diverse teams and cooperate at the international level. furthermore, leaders should encourage innovations and develop greater readiness for taking thoughtful risks, because precisely these qualities are key for dynamic and competitive business operations. in parallel with this, digital transformation imposes itself as an unavoidable step — leaders should lead the processes of introducing digital solutions so that organizations keep pace with contemporary trends. finally, knowledge-based leadership as a key factor in business success – case study of montenegro 261 the results emphasize the importance of developing international business relations, which can contribute to long-term stability and growth of organizations. taking into account all the above, it is clear that by strengthening the competencies of leaders and improving key areas of leadership, it is possible to significantly contribute to the development of modern and competitive organizations in montenegro. 5. conclusions leadership in the modern business environment represents key strength that enables organizations to respond to challenges of globalization. in a world that is everyday more and more connected, leaders must pay attention to understand the complexity of the global market, cultural differences and economic turbulence. their capability to develop strategies that balances innovation, sustainability, and cultural adaptability becomes critical to success. effective leaders not only steer organizations toward growth but also inspire teams to adapt to dynamic circumstances and recognize new opportunities. in that sense leadership is more than usual management – that is strategic response to global challenges, shaping the future of an organization and enabling it to survive and progress in an increasingly competitive global environment. this approach enables leaders to create long-term competitive advantages, making leadership not only a means of management, but also a key factor in sustainable business success. references 1. anderson, j. a., & crutcher, r. a. (2023). driving change through diversity and globalization: transformative leadership in the academy. routledge. 2. batsenko, l., & halenin, r. (2024). cultural and socio-economic factors affecting the formation of leadership in achieving sustainable management: in the context of ukraine. agora international journal of economical sciences, 18(1), 18–31. 3. benmira, s., & agboola, m. (2021). evolution of leadership theory. bmj leader, leader2020. 4. bilderback, s., & thompson, c. b. (2025). developing global leadership competence: redefining higher education for interconnected economies. higher education, skills and work-based learning. 5. boeske, j. (2023). leadership towards sustainability: a review of sustainable, sustainability, and environmental leadership. sustainability, 15(16), 12626. 6. born, d. h., correa, m., & george, b. (2025). authentic leadership across levels: unlocking global potential. organizational dynamics, 101143. 7. carreño, a. m. (2024). an analytical review of john kotter's change leadership framework: a modern approach to sustainable organizational transformation. available at ssrn 5044428. 8. chaithanapat, p., punnakitikashem, p., oo, n. c. k. k., & rakthin, s. (2022). relationships among knowledge-oriented leadership, customer knowledge management, innovation quality and firm performance in smes. journal of innovation & knowledge, 7(1), 100162. 9. claro, a., & silva, c. s. (2025). agile management and servant leadership: case study in renewable energy industry. procedia computer science, 256, 1673-1681. 10. delıoğlu, n., & uysal, b. (2022). a review on agile leadership and digital transformation. yildiz social science review, 8(2), 121-128. gordana nikčević, đorđije pavićević 262 11. ellis, r., & roever, c. (2021). the measurement of implicit and explicit knowledge. the language learning journal, 49(2), 160-175. 12. farrell, m. (2017). leadership reflections: leadership skills for knowledge management. journal of library administration, 57(6), 674-682. 13. greimel, n. s., kanbach, d. k., & chelaru, m. (2023). virtual teams and transformational leadership: an integrative literature review and avenues for further research. journal of innovation & knowledge, 8(2), 100351. 14. haider, s. a., akbar, a., tehseen, s., poulova, p., & jaleel, f. (2022). the impact of responsible leadership on knowledge sharing behavior through the mediating role of person–organization fit and moderating role of higher educational institute culture. journal of innovation & knowledge, 7(4), 100265. 15. hanson, d., backhouse, k., leaney, d., hitt, m. a., ireland, r. d., & hoskisson, r. e. (2021). strategic management: competitiveness and globalisation. cengage au. 16. ishchuk, a. (2024). transformation of managerial leadership qualities under the influence of business digitalization. agora international journal of economical sciences, 18(1), 74– 81. 17. jago, a. g. (1982). leadership: perspectives in theory and research. management science, 28(3), 315-336. 18. janićijević, n. (2019). the impact of national culture on leadership. economic themes, 57(2), 127–144. 19. jensen, k. r. (2024). global innovation leadership: new skills for a changing world. in ispim innovation symposium (pp. 1-13). the international society for professional innovation management (ispim). 20. nikčević, g. (2016). the influence of organizational culture on leadership–case study montenegro. tehnički vjesnik, 23(1), 191–197. 21. nikčević, g. (2023). modern trends in business in the function of business success. agora international journal of economical sciences, 17(2), 121–129. 22. nikčević, g. (2024). on organizational culture in the western balkans: a review of the literature. knowledge-international journal, 65(1), 31–36. 23. nonaka, i. (2009). the knowledge-creating company. in the economic impact of knowledge. routledge. 24. northouse, p. g. (2018). leadership: theory and practice (8th ed.). sage publications. 25. pellegrini, m. m., ciampi, f., marzi, g., & orlando, b. (2020). the relationship between knowledge management and leadership: mapping the field and providing future research avenues. journal of knowledge management, 24(6), 1445-1492. 26. perez, j. r. (2017). global leadership and the impact of globalization. journal of leadership, accountability and ethics, 14(3), 48-52. 27. rupčić, n. (2024). learning disciplines of learning organizations. in managing learning enterprises: challenges, controversies and opportunities. cham: springer nature switzerland. 28. singh, a., lim, w. m., jha, s., kumar, s., & ciasullo, m. v. (2023). the state of the art of strategic leadership. journal of business research, 158, 113676. 29. skare, m., & soriano, d. r. (2021). how globalization is changing digital technology adoption: an international perspective. journal of innovation & knowledge, 6(4), 222– 233. 30. stone, a. g., & patterson, k. (2023). the history of leadership focus. in springer books. 31. stoner, j., & freeman, r. (2018). management (james a. f. stoner, r. edward freeman). serbiula (sistema librum 2.0). 32. yukl, g. (2012). effective leadership behavior: what we know and what questions need more attention. academy of management perspectives, 26(4), 66–85. agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 18, no. 2 (2024), pp. 356-374 356 corporate decision-making and the impact of acquisitions on share prices: the case of verizon d. vasiliauskaite, k. hrytsiv, o.tkachenko, m. zhakun deimante vasiliauskaite1, kateryna hrytsiv2, oleksandra tkachenko3, marharyta zhakun4 1 2 3 4 business school, vilnius university, lithuania 1 https://orcid.org/0000-0002-8107-1964 e-mail: deimante.vasiliauskaite@vm.vu.lt 2 https://orcid.org/0009-0004-9053-3069 e-mail: kateryna.hrytsiv@outlook.com 3 https://orcid.org/0009-0004-5664-1760, e-mail: oleksandra.tkachenko@vm.stud.vu.lt 4 https://orcid.org/0009-0005-8924-6609, e-mail: m.zhakun555@gmail.com abstract: this study investigates the impact of verizon communications inc.'s acquisition of yahoo on the company's stock performance, using a combination of statistical, visual, and multiscale analytical methods. the research analyzes how strategic corporate decisions, particularly acquisitions, influence short-term and long-term stock behavior. data spanning from 2014 to 2024 was analyzed to capture pre-acquisition, acquisition, and post-acquisition trends. the methodology integrates boxplot visualizations to explore variability and outliers, quantile analysis to assess distributional characteristics, and descriptive statistics to summarize key metrics such as mean, standard deviation, skewness, and kurtosis. tabulation analysis evaluates associations between stock returns and trading volumes, while wavelet analysis decomposes stock returns into multiple time scales to identify short-term fluctuations and long-term trends. results reveal significant volatility during key events, such as the yahoo acquisition in 2017 and the covid-19 pandemic, with daily fluctuations peaking at ±6. medium-term adjustments (4–8 days) exhibited moderate changes, and long-term trends (32day cycles) showed structural shifts, including positive coefficients in 2017 (+0.5) and negative coefficients in 2020 (-0.6). the research highlights the heavy-tailed nature of return distributions and skewed trading volume patterns. this study provides insights into the multifaceted effects of acquisitions on stock performance, offering valuable implications for investors and corporate managers in optimizing strategic decisions. keywords: mergers and acquisitions, stock prices, market reactions, corporate strategy, event study. introduction mergers and acquisitions (m&a) represent a critical area of research in corporate finance, economics, and strategic management due to their profound implications for companies, industries, and economies. these transactions are essential tools for organizations seeking growth, diversification, operational efficiency, or market dominance, and they significantly influence stock prices, making them a focal point for financial market research. the announcement of an m&a deal often triggers immediate market reactions, with stock https://orcid.org/0000-0002-8107-1964 mailto:deimante.vasiliauskaite@vm.vu.lt https://orcid.org/0009-0004-9053-3069 mailto:kateryna.hrytsiv@outlook.com https://orcid.org/0009-0004-5664-1760 mailto:oleksandra.tkachenko@vm.stud.vu.lt https://orcid.org/0009-0005-8924-6609 mailto:m.zhakun555@gmail.com deimante vasiliauskaite, kateryna hrytsiv, oleksandra tkachenko, marharyta zhakun 357 prices of both the acquiring and target companies reflecting investor perceptions of the transaction’s strategic value, potential synergies, and associated risks. these price movements, whether short-term volatility or long-term trends, provide a window into market sentiment and the effectiveness of corporate decision-making. despite their widespread use, m&a outcomes are often unpredictable, with studies revealing mixed impacts on shareholder value and stock price performance. this unpredictability makes it essential to analyze the factors influencing m&a success, such as strategic fit, cultural alignment, and integration processes. furthermore, m&a activities are shaped by global trends like technological disruption, geopolitical changes, and sustainability objectives, adding complexity to their study. by exploring the financial impacts of m&a, particularly on stock prices, researchers can generate insights to guide corporate leaders, investors, and policymakers in navigating these transformative business events. corporate decision-making regarding mergers and acquisitions (m&a) significantly impacts share prices, with varying effects observed in different contexts and timeframes. the short-term impact of m&a on stock prices often involves fluctuations. (jiang et al., 2024). this pattern is not unique to developed markets; in india, m&a activities have shown varied impacts on stock market performance, with some firms experiencing positive abnormal returns while others face negative outcomes, particularly in the banking sector (rani & sangeeta, 2023). the strategic orientation of the target company also plays a crucial role; acquisitions of innovationoriented firms tend to result in lower announcement returns and poorer long-term performance compared to efficiency-oriented targets, especially when acquirers face agency problems (liu & yang, 2024). furthermore, the risk of stock price crashes can influence m&a decisions, as firms with higher crash risks are more likely to become takeover targets, often resulting in lower bid premiums and more stock-based payments (carline et al., 2023). the market's response to m&a announcements is also shaped by investor perceptions and management attitudes, which can drive short-term market dynamics but have limited long-term effects on stock performance (mardiani et al., 2023). additionally, the global m&a landscape shows that the impact on stock market volatility is contingent on the development goals and status of the firms involved, with m&a potentially having a positive or negative effect depending on these factors (yu, 2023). the concept of a takeover premium, typically around 30%, further illustrates how acquisition strategies can influence share prices, as this premium is factored into the market's valuation of the target company (egashira, 2023). overall, m&a activities are complex transactions that affect various stakeholders, including shareholders, and require careful consideration of strategic, financial, and market factors to optimize corporate decisionmaking and shareholder value. however, the decision-making process is fraught with risks, including managerial biases such as overconfidence and the winner's curse, which can lead to overvaluation and negatively affect stock prices (asaoka, 2019). the broader market impact of m&a is complex, with some studies indicating that acquiring firms generally experience negative stock price effects, except in specific industries like oil, gas, and financial services, where positive impacts are noted (stunda, 2014). in contrast, other research suggests that m&a announcements can lead to positive returns for acquiring companies, as observed in the indian stock market, where cumulative returns increased post-announcement (poornima & chitra, 2013). despite these corporate decision-making and the impact of acquisitions on share prices: the case of verizon 358 mixed results, m&a is often pursued for strategic reasons, such as achieving economies of scale and portfolio diversification, although these benefits do not always translate into immediate shareholder wealth increases (sogomi et al., 2022). furthermore, the role of financial advisors and market information is crucial, as shareholders tend to rely on less optimistic target advisor opinions, which can influence voting and post-merger performance (ouyang, 2012). while m&a can be a strategic tool for growth and market expansion, its impact on share prices is influenced by managerial decision-making, industry context, and market perceptions, necessitating careful consideration by corporate leaders and investors. the scientific problem addressed in this paper lies in the inconsistency and ambiguity of existing empirical evidence on the impact of m&a on stock prices. while some studies report positive abnormal returns for target companies and mixed outcomes for acquiring firms, others highlight the prevalence of long-term underperformance and challenges in achieving strategic goals. this discrepancy raises critical questions about the determinants of m&a success and their implications for corporate decision-making, market efficiency, and shareholder value. the primary goal of this paper is to analyze the impact of corporate decision-making, specifically mergers and acquisitions (m&a), on stock prices, examining the short-term and long-term effects. this paper is organized as follows: section 1 gives insights into the literature review, section 2 represents our research methodology. section 3 focuses on research results and discussion, and finally, we present our conclusions and recommendations. 1. literature review a merger occurs when companies of similar size and operational scope combine to form a new entity, pooling assets and resources for a unified market presence. in contrast, an acquisition typically involves a more prominent firm purchasing a smaller one, integrating the acquired firm's assets into its existing structure without forming a new entity. acquisitions may be pursued to access new markets, enhance operational efficiency, or advance technology (depamphilis, 2019). theoretical frameworks classify m&as into various types, each yielding distinct strategic outcomes. horizontal mergers involve companies in the same industry and market level, often aimed at reducing competition and achieving economies of scale (pautler, 2003). vertical mergers bring together firms at different stages of production, such as suppliers and manufacturers, to increase operational efficiency, reduce costs, and secure supply chains (singh & montgomery, 1987). conglomerate mergers, meanwhile, involve companies in unrelated industries, often to diversify business risk or enter entirely new markets (trautwein, 1990). corporate decision-making acts as a strong determinant of the financial markets. m&a is one of a firm's strategic decisions by which companies extend their operations, differentiate their product and service offerings, or acquire certain competitive advantages. mergers and acquisitions are considered useful strategies for the growth and expansion of businesses. (rahman et al., 2018) however, a literature review gives one complex and sometimes ambiguous approach to the consequences of such decisions on stock prices. this deimante vasiliauskaite, kateryna hrytsiv, oleksandra tkachenko, marharyta zhakun 359 paper investigates the role of corporate investment decision-making, such as acquisition, in determining changes in stock prices. actions and decisions made by corporations drive the financial markets. one major corporate strategy is acquisitions. when a company acquires another, it merges the two corporations’ assets, operations, and market presence. this can lead to a leading market position, economies of scale, and new technologies or markets. despite the assumed advantages of acquisitions, empirical evidence relating to the stock price impact varies widely. various studies have given contradictory results in estimating whether an increase or a fall in stock price leads to acquisition. therefore, this ambiguity is determined by different issues, such as the features of the acquiring and target firms, the nature of the acquisition deal, and the post-market state at the time of the acquisition. announcements of mergers and acquisitions immediately impact a target company’s stock price, as induced reaction in the stock market causes investors to revise expectations about the company’s future profitability (panayides and gong, 2002). according to the efficient markets hypothesis, “prices reflect all publicly available information on an underlying asset” (fama, 1970). the implication on common stock is usually a rise for the target company. the acquiring company's common stock would slightly drop because of apprehension over integration costs, leverage, or perceived risks. however, both stocks may gain long-term if the acquisition is considered an excellent strategic move. stock price reactions to acquisitions depend on the nature and type of the deal. in the case of friendly acquisitions, the target company's stock generally rises owing to premium offers. in contrast, that of the acquiring company may remain stable or increase if synergies are expected. in hostile takeovers, the acquirer's stock generally falls owing to perceived risks, while the target company's stock surges. while horizontal mergers tend to raise a target's stock, a vertical merger could raise an acquirer's stock on account of operational efficiencies. movements in stock also depend on other factors, like financing methods and regulatory concerns. the prospect of new profit opportunities or the probability of emerging risks are the reasons why m&a announcements have a direct and immediate impact on the stock prices of the respective company. according to the efficient market hypothesis, the stock price reflects all available information and investors’ assessments (kellner, 2024). whereas target companies typically see a gain in their stock price resulting from acquisition premiums, acquiring companies often face volatility in their stock price or even a drop in their stock price due to the anticipated issues with the integration process. the merger's success, concerning long-term performance in the acquirer's stock, is contingent upon the efficiency with which it generates its expected synergies and strategic fit. mergers poorly executed may lead to poor performance, whereas those companies that are integrated well might enjoy the benefits of better long-term performance. m&a is an important strategic alliance and a firm’s favourite dynamic strategy in today’s competitive business because firms can expose the required domestic and international strategies and geographic tactics through successful m&a (datta, basuil, & agarwal, 2020). mergers and acquisitions (m&a) have been one of the most essential driving tools and preferable business strategies for the last several decades around the globe. as firms continue corporate decision-making and the impact of acquisitions on share prices: the case of verizon 360 to deploy m&a to expand the business and geographic scope, academics, market practitioners, and policymakers must fully understand the possible consequences and appropriate costbenefit analysis of engaging in m&a. (hossain, 2021) over the years, mergers and acquisitions (m&a) have been the research subject, particularly in europe and north america. this trend has now extended to countries that have experienced significant economic growth (rahman et al., 2018b). several theories, including the neoclassical theory and the theory of non-maximization of value, could explain the m&a operations. the neoclassical theory claims that the motivation for mergers and acquisitions coincides with the main objective: increasing business value. the second theory believes that m&a exists to satisfy the manager’s enrichment of the emerging prestige of business dimensions (lobo & gomes, 2022). the topic of mergers and acquisitions is still relevant for researchers because the results influencing the firms' performance worldwide are still not consensual. many companies view m&a with an expectation of creating value through better efficiency, reducing costs through economies of scale, and larger product offerings. large m&a can affect the industry, the local economy, and, in certain cases, even the global economy. the extent to which m&a affects the economy has been the subject of various empirical studies and is closely monitored by the government (shah & arora, 2014). this literature review examines the current research on the correlation between corporate acquisitions and stock price performance. shareholders and markets, overall, have different reactions to the announcement of m&a. several studies indicate that shareholders often experience zero or even negative returns, especially for large public deals (renneboog & vansteenkiste, 2019). on average, acquirer’s shareholders suffer losses of around 0.5% 0.7% on a market-adjusted basis around the announcement date (hazelkorn et al., 2004). scholars argue that the stock market does not view acquisitions as good news and is not overly enthusiastic about them (corhay & rad, 2000). datta and puia (1995) found that, on average, cross-border acquisitions destroy value for u.s. bidding firms' shareholders. facebook's acquisition of instagram in 2012 is a well-known example of the impact acquisitions can have on the market. at the time, instagram had only 13 full-time employees and was seen as a project with unpredictable long-term potential. however, facebook saw things differently. four years later, facebook's $1 billion investment in the startup had fully paid off, proving one of the smartest strategic moves in technology acquisition. (luckerson, 2016). with over 845 million users and counting, facebook is a clear leader in social media. nearly 300 million are said to access their account via their mobile device. with the acquisition of instagram, facebook signals its intention to pursue and push more strongly in this direction, with increased capabilities conditionally (gonzalo, 2020). as previously noted, existing studies assessing the effects of m&a show varying results, indicating minimal, negative, and even positive impacts on the stock prices of various firms. this has given rise to various hypotheses. h1: corporate acquisitions lead to positive abnormal stock returns in the short term. in today's financial and economic environment, mergers and acquisitions have become increasingly important. when a company is targeted for acquisition, its stock price often goes up. this happens because the acquiring company typically pays a premium above the current deimante vasiliauskaite, kateryna hrytsiv, oleksandra tkachenko, marharyta zhakun 361 value when buying the target company (soni, n.d.). studies that report positive abnormal returns following an m&a announcement include asquith et al. (1983), fuller et al. (2002), moeller et al. (2004), draper and paudyal (2006), and hamzah et al. (2008). h2: stock price movements differ based on the type of acquisition and market conditions. acquisitions are driven by different motives, and it's important to distinguish between acquisitions with "pure explore" and "pure exploit" motives. while most acquisitions have multiple motives, there are also acquisitions with "ambidextrous" motives, which involve different combinations of explorative and exploitative motives. for instance, ibm purchased red hat for us$34 billion in 2019, and broadcom bought ca technologies for us$18.9 billion in 2018. the business press described both of these acquisitions as the acquirers' attempts to "procure their way into the future." however, not all acquisitions succeed, and those that fail often harm the acquirer (aalbers et al., 2021). h3: the long-term performance of acquiring firms is contingent upon successful integration and the realization of synergies. literature on the long-term post-acquisition performance as agrawal and jaffe (2000), andrade et al. (2001), king et al. (2004), martynova and renneboog (2008a), dutta and jog (2009), and bessembinder and zhang (2013). agrawal and jaffe (2000) found strong evidence of long-term underperformance after a takeover. acquiring firms tend to underperform compared to non-acquiring firms, especially in public takeovers. despite numerous academic studies on factors affecting m&a announcement returns, many short-term performance boosters do not translate into sustained long-run returns. to understand value creation in m&as, it is crucial to identify firm and deal characteristics that can reliably predict long-term performance (rennenboog & vastenkiste, 2020). according to cui and leung (2020), the top management of firms is responsible for key decisions such as investments, financing, and strategy. it is widely believed in the business press and among managers that a firm's top management team, including its ceo, executive directors, and other senior executives, plays a crucial role in corporate decisions and business performance. 2. methodology this research aims to analyze the stock performance of verizon communications inc., focusing on its acquisition of yahoo and the subsequent impact on its financial behavior. the methodology is designed to study verizon’s stock systematically returns through a combination of statistical, visual, and multiscale analytical tools. the research is structured as it is placed in figure 1. corporate decision-making and the impact of acquisitions on share prices: the case of verizon 362 figure 1. methodology for verizon communications inc. stock returns and trading volumes research 1. company overview and contextual background: o the study begins with an in-depth description of verizon communications, detailing its business model, market position, and strategic initiatives. special emphasis is placed on the acquisition of yahoo in 2017, including its objectives, financial scope, challenges, and outcomes. this context provides a foundation for understanding the potential impact of the acquisition on verizon’s stock performance. 2. data collection: o historical daily stock return and volume data for verizon communications is collected for the period spanning november 2014 to november 2024 to capture pre-acquisition, acquisition, and post-acquisition trends. the dataset includes daily closing prices used to calculate stock returns. o additional market data, such as major events and financial reports, is referenced to contextualize patterns observed in the stock returns. 3. boxplot analysis: o boxplots are utilized to visually explore the distribution of verizon communications stock returns, highlighting key aspects such as the median, interquartile range (iqr), outliers, and overall variability. 4. quantile analysis: interpretation and synthesis wavelet analysis tabulation analysis descriptive statistics: quantile analysis boxplot analysis data collection company overview and contextual background deimante vasiliauskaite, kateryna hrytsiv, oleksandra tkachenko, marharyta zhakun 363 o quantile analysis is conducted to assess the distribution of stock returns across various percentiles (e.g., 10th, 25th, 50th, 75th, and 90th). this allows for a deeper understanding of the tail behavior of returns and the identification of extreme movements, which are particularly relevant during periods of significant market events such as the yahoo acquisition. 5. descriptive statistics: o key descriptive statistics, including mean, median, standard deviation, skewness, kurtosis, and range, are calculated for verizon communications stock returns. o the standard deviation is used to measure volatility, while skewness and kurtosis are examined to understand the asymmetry and extremity of return distributions, respectively. 6. tabulation analysis: o tabular summaries of stock return performance are presented, categorized by key time periods and events. metrics such as average return, volatility, and frequency of extreme movements (e.g., returns exceeding ±2 standard deviations) are compared to identify patterns linked to the acquisition and external events such as the covid-19 pandemic. 7. wavelet analysis: o the study employs wavelet analysis to decompose verizon communications stock returns into multiple time scales, capturing both short-term fluctuations and long-term trends. o the wavelet decomposition is performed at six levels, corresponding to daily, weekly, biweekly, and monthly cycles. scalograms and wavelet coefficients are analyzed to identify periods of heightened volatility, structural shifts, and longterm market trends, with particular focus on the impact of the yahoo acquisition and the covid-19 pandemic. 8. interpretation and synthesis: o the results from the boxplot, quantile analysis, descriptive statistics, tabulation, and wavelet analysis are synthesized to draw insights about verizon communications stock behavior over time. the study focuses on the changes in volatility, distributional characteristics, and multiscale dynamics during key periods, particularly around the yahoo acquisition. o findings are interpreted in the context of verizon communications strategic initiatives, market events, and industry conditions, highlighting both the shortterm and long-term implications of the yahoo acquisition on stock performance. this comprehensive methodology ensures a robust analysis of verizon communications stock returns, leveraging both statistical and advanced analytical tools to uncover patterns and trends linked to the yahoo acquisition and other significant events. corporate decision-making and the impact of acquisitions on share prices: the case of verizon 364 3. research description of company and acquisition in july 2016, verizon communications announced its intent to acquire yahoo inc.'s core internet business for $4.83 billion. the deal was part of verizon's strategy to expand beyond its telecommunications roots and establish a more robust digital media and advertising foothold. by combining yahoo's assets with aol, which verizon had acquired in 2015 for $4.4 billion, the company aimed to create a digital advertising powerhouse capable of competing with tech giants like google and facebook. the acquisition included yahoo's search engine, email services, and advertising technology. still, it excluded its stakes in alibaba group and yahoo japan, which were retained under a separate entity named altaba inc. the acquisition faced significant challenges. in 2016, after the deal was announced, yahoo disclosed two major security breaches before the acquisition, affecting billions of user accounts. these breaches resulted in a renegotiation of the purchase price, which was reduced by $350 million to $4.48 billion. despite these setbacks, verizon completed the acquisition in june 2017 and rebranded the combined yahoo and aol entities under the name "oath." however, integrating the two companies proved challenging, with oath struggling to scale its advertising platform and gain market share in a space dominated by google and facebook. the financial performance of the acquisition fell short of expectations. in 2018, verizon wrote down $4.6 billion of the value of oath, reflecting the division’s underperformance and its failure to meet revenue targets. recognizing these difficulties, verizon rebranded oath as verizon media in 2019, shifting its focus toward premium content and advertising technology. however, the company’s efforts to compete in digital advertising continued to face significant headwinds. in 2021, verizon decided to exit the digital media space altogether, selling yahoo and aol to the private equity firm apollo global management for $5 billion. verizon’s acquisition of yahoo underscores traditional companies' challenges when competing in fast-evolving digital markets. despite the initial optimism surrounding the acquisition, yahoo and aol's integration and subsequent performance it has highlighted the difficulties of scaling in a sector dominated by established players. while verizon ultimately recouped much of its investment through the 2021 sale, the acquisition serves as a case study of the complexities of diversification and the risks associated with entering highly competitive markets. data analysis: the boxplot visualization for verizon's stock returns and trading volumes provides valuable insights into their distributions, highlighting central tendencies, variability, and the presence of outliers. deimante vasiliauskaite, kateryna hrytsiv, oleksandra tkachenko, marharyta zhakun 365 figure 2. boxplot visualization for verizon communications inc. stock returns and trading volumes done by authors using nasdaq data and eviews software the returns boxplot (figure 2.) shows a relatively symmetric distribution centered near zero, aligning with the small mean and median observed in the descriptive statistics. the compact interquartile range (iqr) suggests that the majority of daily returns are clustered within a narrow range. however, the presence of numerous outliers beyond the whiskers, especially on the positive side (up to approximately 9), reflects instances of extreme market movements or unusual trading events. negative outliers, extending down to approximately -7, represent significant declines, likely linked to adverse news or market disruptions. on the other hand, the trading volumes boxplot reveals a heavily right-skewed distribution, with most trading activity concentrated at lower volume levels. the small iqr and whiskers extending toward high volume levels highlight the variability in trading activity, with numerous outliers exceeding 80 million shares. these high-volume outliers likely correspond to significant events, such as earnings announcements, acquisitions, or other market-moving news, such as the yahoo acquisition in 2017. while both returns and volumes display significant outliers, their patterns differ; returns show a balanced dispersion of extreme values in both positive and negative directions, reflecting gains and losses on particular trading days, whereas volumes demonstrate a pronounced skew toward exceptionally high values, indicating infrequent but impactful trading activity. this skewed volume distribution suggests that trading activity is often event-driven while returns fluctuate within a narrower but volatile range. overall, the figure underscores the importance of accounting for outliers in any analysis of verizon’s stock performance, as these extreme values represent rare yet influential occurrences that can significantly impact market dynamics. corporate decision-making and the impact of acquisitions on share prices: the case of verizon 366 figure 3. quantiles for verizon communications inc. stock returns and trading volumes done by authors using nasdaq data and eviews software the q-q plot for verizon's stock returns (figure 3.) compares the quantiles of the observed return data to those of a theoretical normal distribution, providing insight into the normality of the return distribution. the plot shows that the data roughly aligns with the central region's red diagonal line, indicating that most returns follow a pattern close to normality. however, noticeable deviations occur in the tails of the distribution. at the lower end, the points diverge below the diagonal line, reflecting extreme negative returns that are more frequent than expected under a normal distribution. similarly, the upper tail exhibits significant divergence, with points above the diagonal line indicating an overrepresentation of large positive returns. these tail deviations confirm the presence of heavy-tailed behavior, consistent with the high kurtosis value observed in the descriptive statistics. this heavy-tailed nature suggests that extreme returns, both positive and negative, occur more frequently than a normal distribution would predict. this pattern aligns with financial return distributions, which often exhibit fat tails due to sudden market events, volatility spikes, or external shocks. overall, the q-q plot visually confirms that verizon's stock returns deviate from normality, particularly in the tails. these deviations emphasize the importance of using robust statistical methods that can handle non-normal distributions and the presence of extreme values when analyzing the stock's performance. the q-q plot for verizon's trading volumes quantitatively illustrates deviations from a normal distribution. observed volumes in the lower quantiles show some alignment with the expected average values, but deviations become pronounced as volumes increase. for instance, the theoretical maximum value under normality (upper quantiles) would be around 40,000,000, but the actual observed trading volumes exceed 100,000,000, reflecting extreme values well above standard expectations. similarly, the theoretical minimum under normality might approach -20,000,000 in the lower quantiles. still, actual trading volumes are truncated at approximately 4,000,000, suggesting fewer instances of deficient trading activity than would be predicted by a normal distribution. these discrepancies confirm the heavy right skew, with high trading volumes disproportionately influencing the distribution. deimante vasiliauskaite, kateryna hrytsiv, oleksandra tkachenko, marharyta zhakun 367 the upward curvature in the upper quantiles, particularly after 60,000,000, highlights the frequency of extreme trading days, which are outliers relative to a normal distribution. combined with the descriptive statistics—skewness of 2.43 and kurtosis of 14.82—this plot confirms that verizon’s trading volumes exhibit significant non-normality, driven by an overrepresentation of extreme high-volume trading events. these quantitative deviations emphasize the importance of tailoring analytical models to accommodate such distributions when interpreting trading patterns. figure 4. descriptive statistics for verizon communications inc. stock returns and trading volumes done by authors using nasdaq data and eviews software the descriptive statistics for verizon’s stock price returns (figure 4.) and trading volumes provide valuable insights into the dataset's characteristics. for stock price returns, the mean is 0.002199, indicating a small average daily positive return, while the median return of 0.017602 is higher than the mean, suggesting a slightly right-skewed distribution. the standard deviation of 1.237903 points to moderate volatility in daily returns, with a wide range between a maximum return of 9.270468 and a minimum return of -7.497795, highlighting significant variability in stock performance. the skewness of the return distribution is 0.121474, indicating a mild positive skew where small positive returns are more frequent than large negative ones. the kurtosis value of 8.751691 suggests heavy tails in the distribution, indicating the presence of extreme outliers or large fluctuations in returns. this is further confirmed by the jarque-bera test statistic of 3474.279 with a p-value of 0.000000, indicating that the returns do not follow a normal distribution. the high kurtosis and non-normality imply that extreme events significantly shape verizon’s stock price behavior. the data reflects significant variability in trading volumes, with a mean daily volume of 17,276,944 shares and a median of 15,601,150 shares. the higher mean than the median suggests a positively skewed distribution, where a few days of unusually high trading volumes pull the average upward. the standard deviation of 7,629,818 indicates substantial fluctuations in trading activity, with a minimum volume of 4,108,274 and a maximum of 97,510,640, highlighting the presence of exceptionally high-volume days. the distribution of trading volumes is heavily skewed to the right, with a skewness value of 2.427284, indicating that most trading days have relatively low volumes. in contrast, return volume mean 0.002199 17276944 median 0.017602 15601150 maximum 9.270468 97510640 minimum -7.497795 4108274. std. dev. 1.237903 7629818. skewness 0.121474 2.427284 kurtosis 8.751691 14.81694 jarque-bera 3474.279 17116.31 probability 0.000000 0.000000 sum 5.533649 4.35e+10 sum sq. dev. 3853.997 1.46e+17 observations 2516 2517 corporate decision-making and the impact of acquisitions on share prices: the case of verizon 368 a few days exhibit extraordinarily high activity. the kurtosis of 14.81694 underscores the presence of heavy tails, pointing to extreme trading volume spikes. the jarque-bera test statistic of 17116.31, with a p-value of 0.000000, confirms the non-normality of trading volumes, reinforcing the impact of these extreme outliers on the dataset. the analysis reveals that stock returns and trading volumes exhibit non-normal distributions with significant skewness and heavy tails. these characteristics suggest extreme values and volatility are crucial in verizon’s stock performance and trading activity. the relatively small mean return and moderate standard deviation point to a typical stock behavior with periodic extreme events. meanwhile, the high skewness and kurtosis in trading volumes highlight specific days with exceptionally high activity, likely driven by major market events, corporate news, or earnings announcements. these findings suggest that traditional analytical models assuming normality may not adequately capture verizon’s stock performance dynamics, necessitating more robust approaches to handle the observed patterns. figure 5. tabulation analysis for verizon communications inc. stock returns and trading volumes done by authors using nasdaq data and eviews software the tabulation analysis (figure 5.) explores the relationship between verizon’s stock returns and trading volume, using categorical return ranges and volume bins to structure the data. measures of association, including the phi coefficient (0.595931), cramér’s v (0.344061), and the contingency coefficient (0.511923), indicate a moderate positive association between the two variables. statistical tests further support this relationship, as both the pearson χ² test (χ² = 893.5172, p = 0.0000) and the likelihood ratio test (g² = 114.9153, p = 0.0000) confirm that the association is statistically significant. these results highlight a meaningful dependency between verizon stock returns and trading volume. deimante vasiliauskaite, kateryna hrytsiv, oleksandra tkachenko, marharyta zhakun 369 the distribution of data reveals interesting trends across different return categories. the smallest group, representing extreme negative returns in the range of [-10, -5], accounts for only 7 observations (0.28% of the total) and is almost entirely confined to low trading volumes. in contrast, the [-5, 0] return category comprises 1,217 observations (48.37%) and is predominantly concentrated in the 0–2 million volume bin, with diminishing frequencies in higher volume bins. the return category [0, 5] is the largest group, containing 1,282 observations (50.95%), and similarly shows a strong association with low trading volumes, as 992 of these instances fall in the 0–2 million volume bin. lastly, the [5, 10] return category, representing positive returns, is sparse, with only 10 observations (0.40%), scattered across low to medium trading volumes. an examination of the volume distribution reveals that most observations (74.13%) occur within the lowest trading volume range of 0–2 million. higher trading volumes, particularly those above 6 million, are significantly less common, collectively contributing only 0.24% of total observations. the data also includes a warning that 60% of cells have expected values less than five, indicating sparsity in parts of the contingency table. this sparsity could potentially affect the robustness of the χ² test, though the results remain statistically significant. the analysis suggests that while a moderate and statistically significant relationship exists between trading volume and stock returns, the association is dominated by low trading volume categories. extreme return categories, such as [-10, -5] and [5, 10], are underrepresented, reflecting the rarity of these events and their limited impact on high trading volumes. this indicates that verizon’s stock performance is typically associated with moderate market activity, with significant shifts in returns less frequently accompanied by high trading volumes. the findings imply that changes in trading volume can serve as a signal for stock performance, though additional analysis, such as regression modeling, would be required to establish causality or deeper insights into these patterns. figure 6. wavelet analysis of verizon communications inc. stock returns corporate decision-making and the impact of acquisitions on share prices: the case of verizon 370 based on the provided wavelet analysis (figure 6) summary for verizon's stock returns: the analysis utilized the maximum overlap discrete wavelet transform (modwt) with the daubechies 4 filter, covering a dataset spanning from november 24, 2014, to november 22, 2024, and including 2,516 observations. the decomposition was conducted with a maximum scale of 6, allowing for the investigation of both shortand long-term return dynamics. this setup suggests a comprehensive multiscale analysis, effectively capturing fluctuations in stock returns across various time horizons, ranging from high-frequency (daily/weekly) to low-frequency (monthly/annual) trends. such an approach is well-suited to identify dominant frequencies, localized trends, and potential structural breaks in verizon's return series over the specified 10-year period. further exploration of scale-specific energy distributions and time-localized patterns could provide valuable insights for investors and analysts. high-frequency movements (scale 1 daily). the wavelet coefficients show high volatility at the finest scale (daily fluctuations), with multiple spikes exceeding ±4. the year 2017, coinciding with verizon's acquisition of yahoo, recorded notable peaks, with coefficients exceeding +5 and -4. this reflects significant market reactions to the acquisition. additionally, the average coefficient for this scale remained around 0.2, suggesting that while short-term fluctuations were pronounced, they were balanced around a neutral trend. the period from 2019 to 2020 also showed sharp spikes, peaking at ±6, likely attributable to market uncertainty during the early stages of the covid-19 pandemic. intermediate movements (scale 2 2 days). the scale 2 decomposition reveals moderate volatility, with coefficients largely contained within ±2. however, specific events in 2017 caused spikes as high as +3.5, particularly in the months following the announcement and completion of the yahoo acquisition. the overall average coefficient at this scale was close to zero (0.1), indicating a lack of persistent trends at this frequency. in 2020, several spikes between +2.5 and -2.8 occurred during heightened market activity, reflecting intermediate-term reactions to global events such as the pandemic. medium-term movements (scale 3 and scale 4 4 days and 8 days). at scale 3, fluctuations are dampened compared to higher frequencies, with coefficients typically within ±1.5. however, in 2017, distinct spikes were reaching +2 and -1.8, highlighting the mediumdeimante vasiliauskaite, kateryna hrytsiv, oleksandra tkachenko, marharyta zhakun 371 term adjustments in verizon's stock price related to the yahoo integration. the scale 4 decomposition shows further stability, with coefficients concentrated within ±1 for most of the period. notable peaks in 2017, reaching ±1.2, reflect sustained investor reactions over an 8day cycle following major announcements. low-frequency movements (scale 5 and scale 6 16 days and 32 days). at scale 5, the coefficients show persistent trends with fluctuations between ±0.8. during 2017, the average coefficient reached +0.4, indicating a positive medium-term sentiment associated with the yahoo acquisition. in contrast, the period between 2020 and 2021 showed more negative coefficients, bottoming at -0.7, aligning with broader market pessimism during the pandemic. scale 6 (32-day cycles) revealed longer-term structural trends, with coefficients reaching ±0.6. peaks in 2017 at +0.5 suggest optimism following strategic corporate decisions, while dips in 2020 reached as low as -0.6, highlighting the impact of external shocks on long-term investor confidence. long-term trends (scale 6 averages annual trends). the long-term wavelet average at scale 6 shows distinct oscillations, particularly around 2017 and 2020. 2017 the average coefficient was +0.3, reflecting the positive market outlook post-yahoo acquisition. by contrast, 2020 exhibited a negative average of -0.5, coinciding with the economic turmoil caused by the covid-19 pandemic. post-2020, coefficients gradually returned to positive territory, with averages near +0.2 in 2023, indicating recovery and stabilization in verizon’s stock performance. conclusions three primary hypotheses frame the m&a-stock price relationship. first, acquisitions often yield positive abnormal stock returns for target firms in the short term due to acquisition premiums. second, the success of an acquisition depends on its type, market conditions, and underlying motives, whether for exploration, exploitation, or ambidexterity. finally, the longterm performance of acquiring firms hinges on effective integration and realisation of anticipated synergies, with research suggesting that poor post-acquisition performance can result if these are not achieved. ultimately, the success of m&a strategies is influenced by firm-specific characteristics and the strategic decision-making of top management, underscoring the need for careful evaluation and management throughout the m&a process. there are also implications for corporate managers when considering m&a strategies. managers must consider these market responses when planning an m&a strategy. acquisitions are usually successful when the cultural and strategic fit of the firms is good and synergies are realized. the managers must also be cautious with regulatory challenges and investor concerns so that the market reception is favorable and, in the long run, the deal is well placed. all in all, the research found that mergers and acquisitions (m&a) significantly influence stock prices, depending largely on the strategic alignment, nature of the acquisition, and market conditions. while target companies often experience immediate stock price gains due to acquisition premiums, the stock prices of acquiring firms can exhibit volatility or decline due to uncertainties regarding integration and strategic alignment. the wavelet analysis of verizon's stock returns from 2014 to 2024 reveals key insights into multiscale market dynamics. short-term daily fluctuations (scale 1) peaked at ±6 during corporate decision-making and the impact of acquisitions on share prices: the case of verizon 372 2017 and 2020, reflecting sharp market reactions to verizon's acquisition of yahoo and the economic uncertainty caused by the covid-19 pandemic, respectively. medium-term adjustments (scales 3 and 4, representing 4–8 day cycles) showed moderate fluctuations, with peaks reaching ±2 in 2017, indicating sustained investor responses to the yahoo integration. long-term trends (scale 6, representing 32-day cycles) highlight structural shifts, with positive coefficients (+0.5) in 2017 reflecting optimism around the acquisition, contrasted with negative coefficients (-0.6) in 2020 during the pandemic. the 2017 yahoo acquisition caused significant spikes across multiple scales, including daily fluctuations reaching +5 and weekly trends peaking at +3.5. the covid-19 pandemic in 2020 drove sharp volatility across all scales, with prolonged negative impacts especially evident at lower frequencies. this multiscale analysis underscores the influence of both internal corporate events and external economic disruptions on verizon’s stock performance. investors can use the findings to make better investment decisions around acquisition announcements. they can use the study to their advantage by paying close attention to acquisition announcements. moreover, they should look for strategic fit, the nature of the deal, and the involved industry. generally speaking, acquisitions with relatively clear synergies and strong strategic fit often have positive market reactions in the short run and long-term value creation, while those transactions with poor prospects or cultural misalignment result in a decline in stock price. references 1. depamphilis, d. m. (2019). mergers, acquisitions, and other restructuring activities: an integrated approach to process, tools, cases, and solutions. academic press. 2. pautler, p. a. (2003). evidence on mergers and acquisitions. antitrust bulletin, 48(1), 119221. 3. singh, h., & montgomery, c. a. (1987). corporate acquisition strategies and economic performance. strategic management journal, 8(4), 377-386. 4. trautwein, f. (1990). merger motives and merger prescriptions. strategic management journal, 11(4), 283-295. 5. hossain, m. s. (2021). merger & acquisitions (m&as) as an important strategic vehicle in business: thematic areas, research avenues & possible suggestions. journal of economics and business, 116, 106004. https://doi.org/10.1016/j.jeconbus.2021.106004 6. kellner, t. (2024). the impact of m&a announcements on stock returns in the european union. international review of economics & finance, 89, 843–862. https://doi.org/10.1016/j.iref.2023.10.034 7. rahman, z., ali, a., & jebran, k. (2018). the effects of mergers and acquisitions on stock price behavior in banking sector of pakistan. the journal of finance and data science, 4(1), 44–54. https://doi.org/10.1016/j.jfds.2017.11.005 8. shaheen, isfandiyar and department of economics. “stock market reaction to acquisition announcements using an event study approach.” eco490, 5 may 2006, digital.fandm.edu/_flysystem/fedora/2022-04/view_285.pdf. 9. aalbers, r., mccarthy, k. j., & heimeriks, k. h. (2021). market reactions to acquisition announcements: the importance of signaling ‘why’ and ‘where.’ long range planning, 54(6), 102105. https://doi.org/10.1016/j.lrp.2021.102105 10. agrawal, a., & jaffe, j. f. (2000). the post-merger performance puzzle. ssrn electronic journal. https://doi.org/10.2139/ssrn.199671 https://doi.org/10.1016/j.jfds.2017.11.005 https://doi.org/10.1016/j.lrp.2021.102105 https://doi.org/10.2139/ssrn.199671 deimante vasiliauskaite, kateryna hrytsiv, oleksandra tkachenko, marharyta zhakun 373 11. andrade, g., mitchell, m., & stafford, e. (2001). new evidence and perspectives on mergers. the journal of economic perspectives, 15(2), 103–120. https://doi.org/10.1257/jep.15.2.103 12. asquith, p., bruner, r. f., & mullins, d. w. (1983). the gains to bidding firms from merger. journal of financial economics, 11(1–4), 121–139. https://doi.org/10.1016/0304405x(83)90007-7 13. bessembinder, h. &. z. f. (2013). firm characteristics and long-run stock returns after corporate events. ideas.repec.org. https://ideas.repec.org/a/eee/jfinec/v109y2013i1p83102.html 14. corhay, a., & rad, a. t. (2000). international acquisitions and shareholder wealth evidence from the netherlands. in international review of financial analysis (vol. 9, issue 2). https://www.sciencedirect.com/science/article/pii/s1057521900000259 15. cui, huijie & leung, sidney. (2020). the long-run performance of acquiring firms in mergers and acquisitions: does managerial ability matter?. journal of contemporary accounting & economics. 16. 100185. 10.1016/j.jcae.2020.100185. 16. datta, d. k., & puia, g. (1995). cross-border acquisitions: an examination of the influence of relatedness and cultural fit on shareholder value creation in u.s. acquiring firms (vol. 35, issue 4). https://www.jstor.org/stable/40228285?casa_token= 17. draper, p., & paudyal, k. (2006). acquisitions: private versus public. european financial management, 12(1), 57–80. https://doi.org/10.1111/j.1354-7798.2006.00310.x 18. dutta, s., & jog, v. (2009). the long-term performance of acquiring firms: a reexamination of an anomaly. https://econpapers.repec.org/article/eeejbfina/v_3a33_3ay_3a2009_3ai_3a8_3ap_3a14001412.htm 19. eri, mardiani., maiza, fikri., atika (2023). market dynamics and investor perceptions after the acquisition of shares by goto directors: a case study of the impact of management attitudes on market sentiment and stock performance. doi: 10.58812/wsbm.v1i04.213 20. fuller, k., netter, j., & stegemoller, m. (2002). what do returns to acquiring firms tell us? evidence from firms that make many acquisitions. the journal of finance, 57(4), 1763–1793. https://doi.org/10.1111/1540-6261.00477 21. gonzalo, f. (2020, january 20). why instagram’s aquisition by facebook is good and bad. frederic gonzalo. https://fredericgonzalo.com/en/why-instagrams-aquisition-byfacebook-is-good-and-bad/ 22. hamzah, n. and ismail, m.n. (2008) the importance of intellectual capital management in the knowledge-based economy. contemporary management research, 4, 237-262. references scientific research publishing. (n.d.). https://www.scirp.org/reference/referencespapers?referenceid=1851881 23. hazelkorn, t., zenner, m., & shivdasani, a. (2004). creating value with mergers and acquisitions. journal of applied corporate finance, 16(2–3), 81– 90. https://doi.org/10.1111/j.1745-6622.2004.tb00540.x 24. king, david & dalton, dan & daily, catherine & covin, jeffrey. (2004). meta-analyses of post-acquisition performance: indications of unidentified moderators. management faculty research and publications. 25. 10.1002/smj.371. 25. lobo, b. f. s., & gomes, l. m. p. (2022). impact of m&a announcements on listed firms in the iberian markets. studies in business and economics, 17(3), 132–150. https://doi.org/10.2478/sbe-2022-0051 26. luckerson, v. (2016, april 19). here’s proof that instagram was one of the smartest acquisitions ever. time. https://time.com/4299297/instagram-facebook-revenue/ https://doi.org/10.1257/jep.15.2.103 https://doi.org/10.1016/0304-405x(83)90007-7 https://doi.org/10.1016/0304-405x(83)90007-7 https://ideas.repec.org/a/eee/jfinec/v109y2013i1p83-102.html https://ideas.repec.org/a/eee/jfinec/v109y2013i1p83-102.html https://www.sciencedirect.com/science/article/pii/s1057521900000259 https://www.jstor.org/stable/40228285?casa_token= https://doi.org/10.1111/j.1354-7798.2006.00310.x https://econpapers.repec.org/article/eeejbfina/v_3a33_3ay_3a2009_3ai_3a8_3ap_3a1400-1412.htm https://econpapers.repec.org/article/eeejbfina/v_3a33_3ay_3a2009_3ai_3a8_3ap_3a1400-1412.htm https://doi.org/10.1111/1540-6261.00477 https://fredericgonzalo.com/en/why-instagrams-aquisition-by-facebook-is-good-and-bad/ https://fredericgonzalo.com/en/why-instagrams-aquisition-by-facebook-is-good-and-bad/ https://www.scirp.org/reference/referencespapers?referenceid=1851881 https://doi.org/10.1111/j.1745-6622.2004.tb00540.x https://doi.org/10.2478/sbe-2022-0051 https://time.com/4299297/instagram-facebook-revenue/ corporate decision-making and the impact of acquisitions on share prices: the case of verizon 374 27. martynova, m., & renneboog, l. (2008). a century of corporate takeovers: what have we learned and where do we stand? https://econpapers.repec.org/article/eeejbfina/v_3a32_3ay_3a2008_3ai_3a10_3ap_3a2148 -2177.htm 28. moeller, s. b., schlingemann, f. p., & stulz, r. m. (2004). firm size and the gains from acquisitions. journal of financial economics, 73(2), 201–228. https://doi.org/10.1016/j.jfineco.2003.07.002 29. n., carline., yang, gao., jing‐ming, kuo (2023). stock price crash risk and the market for corporate control. british journal of management, doi: 10.1111/1467-8551.12782 30. neeraj, rani., sangeeta, sangeeta (2023). the consequences of mergers and acquisitions on the value of stocks performance in india’s banking sector. wseas transactions on business and economics, doi: 10.37394/23207.2023.20.218 31. rahman, z., ali, a., & jebran, k. (2018). the effects of mergers and acquisitions on stock price behavior in banking sector of pakistan. the journal of finance and data science, 4(1), 44-54. https://doi.org/10.1016/j.jfds.2017.11.005 32. renneboog, l., & vansteenkiste, c. (2020, august 27). mergers and acquisitions: long-run performance and success factors. oxford research encyclopedia of economics and finance. retrieved 3 oct. 2024, from https://oxfordre.com/economics/view/10.1093/acrefore/9780190625979.001.0001/acrefore9780190625979-e-608. 33. renneboog, l., & vansteenkiste, c. (2018). what goes wrong in m&as? on the long-run success factors in m&as. http://ssrn.com/abstract_id=3304601www.ecgi.global/content/workingpaperselectroniccopyavailableat:https://ssrn.com/abstract=3304601 34. renneboog, l., & vansteenkiste, c. (2019). failure and success in mergers and acquisitions failure and success in mergers and acquisitions failure and success in mergers and acquisitions. https://ssrn.com/abstract=3434256electroniccopyavailableat:https://ssrn.com/abstract=343 4256 35. shah, p., & arora, p. (2014). m&a announcements and their effect on return to shareholders: an event study. accounting and finance research, 3(2). https://doi.org/10.5430/afr.v3n2p170 36. shiang, liu., changyu, yang (2024). business strategy and m&a transactions. the quarterly journal of finance, doi: 10.1142/s2010139224500058 37. shubha, verma., satish, kumar. (2023). fractal dimension analysis of stock prices of selected resulting companies after mergers and acquisitions. european physical journalspecial topics, doi: 10.1140/epjs/s11734-023-00863-z 38. soni, h. (2024). assessing stock market performance via post-merger activity. journal of legal research and juridical sciences. www.jlrjs.com574 39. tushar, singhal (2024). analyzing the impact of contemporary trends in mergers and acquisitions on stock market valuations. international journal for multidisciplinary research, doi: 10.36948/ijfmr.2024.v06i03.23298 40. zhirui, yu. (2023). analysis of the influence of enterprise mergers and acquisitions on the stock market. advances in economics, management and political sciences, doi: 10.54254/2754-1169/8/20230276 41. yi-rong, jiang., xiwen, deng., huapu, lu., yiwen, chai., mingyi, ji. (2024). analyzing the short-term and long-term effects of mergers and acquisitions on stock prices: a comprehensive study of acquiring and target companies. finance & economics, doi: 10.61173/6ck7nf77 https://econpapers.repec.org/article/eeejbfina/v_3a32_3ay_3a2008_3ai_3a10_3ap_3a2148-2177.htm https://econpapers.repec.org/article/eeejbfina/v_3a32_3ay_3a2008_3ai_3a10_3ap_3a2148-2177.htm https://doi.org/10.1016/j.jfineco.2003.07.002 https://doi.org/10.1016/j.jfds.2017.11.005 https://oxfordre.com/economics/view/10.1093/acrefore/9780190625979.001.0001/acrefore-9780190625979-e-608 https://oxfordre.com/economics/view/10.1093/acrefore/9780190625979.001.0001/acrefore-9780190625979-e-608 http://ssrn.com/abstract_id=3304601www.ecgi.global/content/working-paperselectroniccopyavailableat:https:/ssrn.com/abstract=3304601 http://ssrn.com/abstract_id=3304601www.ecgi.global/content/working-paperselectroniccopyavailableat:https:/ssrn.com/abstract=3304601 https://ssrn.com/abstract=3434256electroniccopyavailableat:https:/ssrn.com/abstract=3434256 https://ssrn.com/abstract=3434256electroniccopyavailableat:https:/ssrn.com/abstract=3434256 https://doi.org/10.5430/afr.v3n2p170 http://www.jlrjs.com574/ agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 18, no. 2 (2024), pp. 63-72 63 the intersection of corporate governance, ethics, internal audit, and bankruptcy risk management: a bibliometric analysis c. m. bulău, m. matei (pană), a. o. mustățea, m. d. coman carmen mihaela bulău¹, mirela matei (pană)², aura oana mustățea³, mihaela denisa coman⁴ ¹ ² ³ ⁴ valahia university of târgoviște, romania ¹ https://orcid.org/0000-0002-2336-5665, e-mail: carmenmihaelabulau@gmail.com ² e-mail: mirela_matei_gr@yahoo.com ³ https://orcid.org/0009-0002-3010-2756, e-mail: auramustatea@yahoo.com ⁴ https://orcid.org/0000-0002-5070-5303, e-mail: cmndenisa@gmail.com abstract: this study employs a mixed-methods approach to delve into the intricate interplay among corporate governance, bankruptcy risk, forensic accounting, internal auditing, and ethics. while prior research has highlighted the correlation between weak governance, increased bankruptcy risk, and ethical lapses, the synergies among these factors necessitate deeper investigation. the authors conducted a meticulous bibliometric analysis of the scopus database, focusing on the realms of accounting, internal audit, forensics, bankruptcy, and ethics within the overarching domain of corporate governance. emphasizing the importance of robust governance principles in mitigating risks in accounting, the study revealed a substantial coverage of resources across various disciplines, with accounting (54.6%) and ethics (25.1%) leading the distribution. the dataset, comprising 5990 resources from 495 publications cited 151,911 times spanning from 1978 to march 2024, serves as a valuable resource for scholars aiming to fortify organizational resilience by integrating critical concepts identified in this research. keywords: corporate governance, bankruptcy risk, forensic accounting, internal audit, ethics. introduction corporate governance is the one-setting framework for business ethical behavior, which in turn shapes the organizational culture and guides the business operations to ensure corporate performance. in recent decades, corporate governance and business ethics have faced increased scrutiny due to high-profile corporate failures and scandals. weak governance and unethical practices can pose significant risks to an organization's long-term viability, including financial distress, fraud, and regulatory noncompliance. however, the complex relationships between governance, ethics, forensic accounting controls, internal auditing, and bankruptcy outcomes have not been thoroughly explored as part of financial resilience within corporate governance. this study aims to address young researchers toward an academic approach to the interplay of the areas covering accounting, internal audit, forensics, bankruptcy, and ethics https://orcid.org/0000-0002-2336-5665 mailto:carmenmihaelabulau@gmail.com mailto:mirela_matei_gr@yahoo.com https://orcid.org/0009-0002-3010-2756 mailto:auramustatea@yahoo.com https://orcid.org/0000-0002-5070-5303 mailto:cmndenisa@gmail.com the intersection of corporate governance, ethics, internal audit, and bankruptcy risk management: a bibliometric analysis 64 throughout a complex bibliometric output from the scopus database to define the authors' perspective of organizational resilience. the authors consider this as a start for further research within the frame of sustainability and resilience domain. the first step in ensuring a company can become sustainable from the financial, environmental, social, and risk management perspective is to ensure financial resilience. a struggling company that faces a lot of financial challenges may have a very hard time having concerns regarding environmental and social issues, no matter how important and necessary they may be. analysing these issues through the magnifying glance of ethics, risk management, and internal audit processes can provide insights to help organizations strengthen resilience against threats to their sustainability. literature review on may 2023, dun & bradstreet defined “resilience” in business terms as those organizations that can ” identify risks early, adapt to negative external changes and maintain business operations during difficult situations” (dun & bradstreet, 2023), combined with corporate sustainability and purpose for business continuity or long-term survival (florezjimenez, lleo, danvila del valle, & sánchez-marín, 2024), thus building the concept of ”corporate sustainable development performance” (yao & wang, 2024) the economic environment has been so often impacted by globalization (lama, 2013), financial distress (otivbo & ofuan, 2023), financial scandals and repercussions (ajayi-nifise, olubusola, falaiye, mhlongo, & daraojimba, 2024), covid-19 pandemic supply chain disruptions (mohammed, lopes de sousa jabbour, & diabat, 2021), war business conditions (obłój & voronovska, 2024), extreme environmental events (wu & tham, 2023), artificial intelligence challenges (singh & goyal, 2023) and made companies understand that all financial risk-driven decisions include a company’s ability to obtain critical information on all probable risks identified. although many companies are following corporate governance principles, it does not automatically translate into becoming more sustainable or recognizing the added business value of a result. (beloff, tanzil, & lines, 2004) a significant role in managing all the risk factors within a company increased the need for big data tools and then analysis specialists to identify and implement” ways to achieve improved competitive advantage and to build internal and external capabilities” (bag, dhamija, luthra, & huisingh, 2023) to help companies to identify, assess, mitigate, reduce, and eliminate risks in business resilience goals. “bibliometrics is to scientific papers as epidemiology is to patients” (lewison & devey, 1999) by following the trajectory of a research area of published information and the related data in the form of authors, citations, abstract, keywords by visualization of their relationships in the form of network nodes’ plots (ninkov, frank, & maggio, 2022). as in accounting and finance, a bibliometric analysis uses quantitative and qualitative approaches (ellili, 2023), the quantitative study for relationships and interconnections of the bibliographic material and the qualitative analysis to examine them in depth for better understanding (charl de villiers, dumay, & maroun, 2019). carmen mihaela bulău, mirela matei (pană), aura oana mustățea, mihaela denisa coman 65 data and methodology corporate governance is a vast and longtime approached subject by the academic community, so a vosviewer (van eck & waltman, 2009) technique was used since it is a popular method of measuring the dimension and the novelty of the research area. vosviewer was selected as the research method due to its technical robustness and friendly user approach in finding correlations between concepts (kirby, 2023) to undertake a useful starting approach for more complex further research. using the vosviewer computer programming for text mining for the above concepts and keywords used by authors in their research in the scopus database, bibliometric research and providing a visual correlation were established. a search in scopus for the keywords bankruptcy, internal audit, forensic, ethics, corporate governance, and accounting, separately generated impressive numbers of articles written. a search for all the concepts together generated through 0 results, even a mix of four or 3 concepts combined did not produce significant data to be analyzed. so, a mixed-methods study was conducted, by generating individual bibliometric queries of only two concepts keywords, corporate governance & accounting, corporate governance & internal audit, corporate governance & forensic, corporate governance & ethics, corporate governance and bankruptcy. then the results exported individually in csv file type were combined into a single file, transformed in xlsx file for the descriptive analysis, and also uploaded in vos to create the interconnectivity of the keywords for all the concepts, thus generating the results for the initial query. the case studies provided context to help authors find the resources for all the concepts involved and to have a good perspective of the references' quantity and quality input, demonstrating the interconnectivity between corporate governance, accounting, internal audit, forensics, bankruptcy, and ethics within academic research. results and discussions the data set obtained by combining the concepts was further analyzed using a mix of tools, like vos viewer, excel, and jasp to assess what kind of analysis would help young researchers in their quest. performing descriptive statistics in excel we find that out of a total of 5,990 articles, 15% benefited from funding, 28% are open access and 89% have an identification doi number, as per the below figure for open access frequencies analysis, worked in the statistical program jasp. figure 1: descriptive statistics: frequencies for open access articles source: authors the intersection of corporate governance, ethics, internal audit, and bankruptcy risk management: a bibliometric analysis 66 examining the number of articles written over time from 1978 to early 2024, we find that very few articles combine the author's keywords corporate governance and forensic (50 articles in total representing 1%) and bankruptcy (366 articles in total representing 6%). table 1: breakdown of the dataset into categories source: authors generating a histogram for the number of articles within the time frame, we find an asymmetrical distribution, a left-skewed distribution (negatively-skewed), with high density for the years 2000 to 2024, when we have an average of 236 articles per year, comparing with the previous period 1978 – 1999 when we had an average of 6 published articles per year. the pivot table output generated in excel can be reviewed in the annex of this article. figure 2: frequencies histogram chart for the number of articles source: authors in excel we generated a combo chart to combine the number of articles written per year with the number of citations, resulting a table showing the maximum number of articles have been published in 2023 (a total of 574 articles) and the highest number of citations are met in the year 2008 (12,424), followed closely by the year 2010 (10,263). most probably the articles written in the last 10 years will generate more citations within the next years, as new academic research will probably follow. keywords no. of titles % no. of funding details % no. of open access % no. of doi % accounting 3,271 55% 573 62% 956 58% 2,920 55% bankruptcy 366 6% 53 6% 94 6% 304 6% ethics 799 13% 117 13% 232 14% 686 13% forensic 50 1% 7 1% 12 1% 44 1% internal audit 1,504 25% 178 19% 362 22% 1,364 26% grand total 5,990 100% 928 100% 1,656 100% 5,318 100% % 100% 15% 28% 89% carmen mihaela bulău, mirela matei (pană), aura oana mustățea, mihaela denisa coman 67 figure 3: chart for articles evolution and citations source: authors below we can find the generated image extracted from vos viewer after combining all five .csv documents extracted from the scopus database for co-occurrence of the authors keywords selection. it was expected for corporate governance to be the most visible since is it the common link to all the datasets and searches. figure 4: vosviewer co-occurrence of keywords source: authors vos viewer generated a number of 14 clusters for 637 items with 9505 links between them. changing to density visualization we can assess better the dimension of the clusters connecting corporate governance with ethics, financial reporting, risk management, audit committee, earnings management, corporate social responsibility, and very small density for bankruptcy, forensic, and internal auditing. 2.000 4.000 6.000 8.000 10.000 12.000 14.000 100 200 300 400 500 600 700 articles evolution and citations no. of titles no. of citations the intersection of corporate governance, ethics, internal audit, and bankruptcy risk management: a bibliometric analysis 68 figure 5: vosviewer co-occurrence of keywords by density source: authors to have a better understanding of the vosviewer network visualization analysis, since there are so many items, a clustersț review was performed, choosing for each cluster the most relevant keywords considered by the authors helpful for further literature review research.  cluster 1 (79 items) built around the keyword corporate social responsibility brings cooccurrence connectivity with the main keywords selected as important by the authors in their research: governance, business ethics, sustainability, integrated reporting, accountability, financial performance, accounting, transparency, sustainable development.  cluster 2 (69 items) is built around the keyword ethics brings co-occurrence connectivity with the main keywords selected as important: management, fraud, risk management, auditing, accounting, compliance, corruption, corporate culture, corporate social responsability, artificial intelligence, business ethichs, decision making, sustainability.  cluster 3 (68 items) is built around the keyword corporate governance brings connectivity with earnings management, accounting conservatism, accounting conservatism, financial regulation, earnings management, risk-taking, ceo duality.  cluster 4 (61 items) is built around the keyword board of directors brings connectivity with audit committee, financial reporting quality, internal control, risk management, internal auditing, risk assessment, ethics, corporate responsibility.  cluster 5 (61 items) is built around the keyword firm performance brings connectivity with accounting fraud, bankruptcy prediction, corporate social responsibility disclosure, machine learning, survival analysis, performance measures, financial ratios, default risk, agency problem, credit risk.  cluster 6 (45 items) is built around the keyword accounting brings connectivity with: auditing, corporate fraud, forensic accounting, information technology, fraud triangle, organizational performance, fraud detection, corporate strategy, fraud prevention, corporate fraud. carmen mihaela bulău, mirela matei (pană), aura oana mustățea, mihaela denisa coman 69  cluster 7 (42 items) is built around the main keywords: bankruptcy risk, corporate governance standards, financial crisis, organizational culture, crash risk , code of best practice, corporate scandals, accounting standards.  cluster 8 (42 items) is built around the main keywords: artificial intelligence, internal audit function, management accountability, financial accounting, corporate governance mechanisms, international financial reporting standard.  cluster 9 (35 items) is built around the main keywords: bibliometric analysis, financial statement fraud, cybersecurity, vosviewer, accounting and finance, audit report lag, control.  cluster 10 (35 items) is built around the main keywords: accounting research, theory of the firm, corporate ethics, agency theory, sarbanes-oxley.  cluster 11 (34 items) is built around the main keywords: accounting scandals, metaanalysis, external auditing, internal governance, audit committee independence, restatement.  cluster 12 (34 items): codes of conduct, multinational companies, related party transactions, corporate social responsibility (csr), accounting disclosure, sustainable development goals.  cluster 13 (19 items): accounting choice, international accounting, profitability, crisis management, income smoothing.  cluster 14 (14 items): agency conflicts, external audit, management accounting, external audit, top management team, supervisory board. further research of the nationality of the authors who published these articles brings us a total of 107 countries, generating 17 clusters, out of which romania is interconnected with other 14 countries: australia, cape verde, colombia, germany, iceland, malta, mexico, netherlands, panama, peru, slovakia, spain, trinidad and tobago, ukraine. figure 6: vosviewer network visualization of authors per country source: authors the intersection of corporate governance, ethics, internal audit, and bankruptcy risk management: a bibliometric analysis 70 conclusions this study extends previous research by demonstrating the complementary roles of internal controls, forensic accounting, credit risk management, and ethics initiatives in governance's influence. when integrated within an ethical culture and robust control environment, these functions contribute to effective governance in practice for resilience and sustainability. this research identified the gap between several limited articles written on bankruptcy, forensic accounting, and ethics within the area of corporate governance. the internal audit component can be the link of governance principles and audit procedures to better enhance the company's resilience in terms of risk management for financial sustainability and fraud detection for resilience purposes as well. another aspect since the bibliometric study was performed combining accounting, ethics, bankruptcy risk management, internal audit, and forensic accounting was the lack of financial indicators and ratios involved taken into account for corporate resilience and sustainability except only one cluster where financial ratios had the occurrence 7 times. in the authors' opinion, all techniques and tools for fraud detection, risk management, and internal auditing are done on the accounting information in the form of ratios, and financial indicators. a search involving a large amount of data can have limitations in terms of lacking the in-depth search of the area, going article by article, which would mean a lot of time allocation to identify other gaps as well, maybe having a more qualitative significance than the quantitative approach by using vosviewer. maybe artificial intelligence tools will offer shortly the possibility to interconnect big data analysis with qualitative information generated in an easier way for both the scientific committee and corporations. in conclusion, this study provides empirical evidence of the intricate relationship between corporate governance, internal controls, forensic accounting, ethics, and bankruptcy risk. to enhance sustainability, organizations should consider these issues holistically, adopting an enterprise risk management approach rather than addressing them in isolation. therefore, a comprehensive examination of the interplay between soft and hard controls is warranted. the findings offer guidance to practitioners on strengthening organizational resilience through coordinated reforms in these interconnected domains. references 1. ajayi-nifise, a., olubusola, o., falaiye, t., mhlongo, n., & daraojimba, a. (2024, february 14). a review of u.s. financial reporting scandals and their economic repercussions: investigating their broader impact and preventative measures. finance & accounting research journal, 6(2), 183-201. doi:10.51594/farj.v6i2.787 2. bag, s., dhamija, p., luthra, s., & huisingh, d. (2023). how big data analytics can help manufacturing companies strengthen supply chain resilience in the context of the covid19 pandemic. the international journal of logistics management, 34(4), 1141-1164. doi:https://doi.org/10.1108/ijlm-02-2021-0095 3. beloff, b., tanzil, d., & lines, m. (2004, november 19). sustainable development performance assessment. environmental progress, 271-276. doi:https://doi.org/10.1002/ep.10045 carmen mihaela bulău, mirela matei (pană), aura oana mustățea, mihaela denisa coman 71 4. charl de villiers, dumay , j., & maroun, w. (2019). qualitative accounting research: dispelling myths and developing a new research agenda. accounting & finance. doi:https://doi.org/10.1111/acfi.12487 5. dun & bradstreet. (2023, may 29). how to build business resilience in times of crisis. preluat pe march 29, 2024, de pe https://www.dnb.co.uk/perspectives/master-data/howto-build-business-resilience-in-time-of-crisis..html 6. ellili, n. (2023). bibliometric analysis on corporate governance topics published in the journal of corporate governance: the international journal of business in society. corporate governance, 23(1), 262-282. doi: https://doi.org/10.1108/cg-03-2022-0135 7. florez-jimenez, m., lleo, a., danvila del valle, i., & sánchez-marín, g. (2024, january 2). corporate sustainability, organizational resilience and corporate purpose: a triple concept for achieving long-term prosperity. management decision. doi:https://doi.org/10.1108/md-06-2023-0938 8. kirby , a. (2023, february 20). exploratory bibliometrics: using vosviewer as a preliminary research tool. social and behavioral sciences, arizona state university. doi: https://doi.org/10.3390/publications11010010 9. lama, p. (2013). micro, small and medium enterprises (msme) in india-problems and prospects. business studies, 33. 10. lewison, g., & devey, m. (1999). bibliometric methods for the evaluation of arthritis research. rheumatology (oxford, england), 13-20. doi:https://doi.org/10.1093/rheumatology/38.1.13 11. mohammed, a., lopes de sousa jabbour, a., & diabat, a. (2021, september 28). covid19 pandemic disruption: a matter of building companies’ internal and external resilience. international journal of production research, 2716-2737. doi:https://doi.org/10.1080/00207543.2021.1970848 12. ninkov, a., frank, j., & maggio, l. (2022). bibliometrics: methods for studying academic publishing. perspect med educ 11, 173-176. doi:https://doi.org/10.1007/s40037-02100695-4 13. obłój, k., & voronovska, r. (2024). how business pivots during war: lessons from ukrainian companies’ responses to crisis. business horizons, 67(1), 93-105. doi:https://doi.org/10.1016/j.bushor.2023.09.001. 14. otivbo, f., & ofuan, j. (2023, november 2). does corporate governance cure financial distress? case study analysis of distressed firms. economic thought and practice. preluat de pe https://hrcak.srce.hr/en/309402 15. singh, s., & goyal, m. (2023). enhancing climate resilience in businesses: the role of artificial intelligence. journal of cleaner production, 418. doi:https://doi.org/10.1016/j.jclepro.2023.138228. 16. van eck, n., & waltman, l. (2009). vosviewer: a computer program for bibliometric mapping. erim report series reference no. ers-2009-005-lis. preluat pe january 20, 2024, de pe https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1346848 17. wu, y., & tham, j. (2023, september 21). the impact of environmental regulation, environment, social and government performance, and technological innovation on enterprise resilience under a green recovery. heliyon. doi:https://doi.org/10.1016/j.heliyon.2023.e20278 18. yao, c.-l., & wang, l.-y. (2024, january 18). corporate sustainable development performance through top management team’s transactive memory system and organizational resilience: a moderated mediation analysis. heliyon. doi:https://doi.org/10.1016/j.heliyon.2024.e24674 the intersection of corporate governance, ethics, internal audit, and bankruptcy risk management: a bibliometric analysis 72 annex 1: pivot table analysis of the dataset source: authors year no. of isbn no. of issn no. of titles no. of citations no. of doi no.of open access 2024 3 129 130 116 127 64 2023 86 501 574 970 543 211 2022 58 413 462 2,392 447 208 2021 61 373 429 3,784 392 191 2020 44 381 419 5,186 380 168 2019 31 302 331 5,125 285 119 2018 40 251 289 4,142 262 93 2017 51 225 273 5,050 239 63 2016 45 228 274 6,431 242 67 2015 39 276 310 8,710 263 77 2014 45 205 241 5,161 205 53 2013 29 231 254 7,492 229 54 2012 43 178 220 6,249 198 50 2011 49 200 246 6,442 206 45 2010 41 164 204 10,263 174 31 2009 54 207 256 8,023 217 37 2008 32 194 219 12,424 189 38 2007 23 129 153 6,831 132 21 2006 37 119 151 9,350 132 29 2005 24 137 157 8,755 136 14 2004 5 86 91 5,046 80 7 2003 11 73 84 2,799 52 6 2002 63 65 7,269 53 4 2001 30 30 3,688 29 1 2000 29 29 3,669 25 3 1999 18 18 2,132 15 1 1998 22 22 927 20 1997 12 19 547 12 1996 10 10 1,177 8 1995 7 7 280 7 1994 2 2 244 2 1993 4 5 194 5 1992 4 4 511 2 1990 2 2 83 2 1 1989 1 1 1 1988 1 1 323 1 1987 2 2 19 2 1986 1 1 21 1 1984 1 1 20 1 1982 2 2 61 2 1978 2 2 4 1 grand total 851 5,215 5,990 151,911 5,318 1,656 agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 19, no. 1 (2025), pp. 273-282 273 the digital environment and the new social space l. petrila, f.-a. popescu, l. benchea laurentiu petrila¹, felix-angel popescu², lucian benchea³ ¹ faculty of juridical and administrative sciences, agora university of oradea & faculty of history, international relations, political sciences & communication sciences, university of oradea, romania. https://orcid.org/0000-0001-8415-3327, e-mail: lauren.petrila@gmail.com ² faculty of economic sciences, agora university of oradea, romania. https://orcid.org/0000-0002-3020-2098, e-mail: felixangelpopescu@gmail.com ³ faculty of history, international relations, political sciences & communication sciences, university of oradea, romania. e-mail: luci_benchea@yahoo.com abstract: currently, the importance and essential place that digital culture occupies in the lives of romanian adolescents is undeniable. statistics regarding access to and use of the virtual environment and new technologies have recorded rapid increases, especially among this demographic category. advancement and evolution in this field are expected to continue, not only by virtue of a strong and natural trend, but also as a result of the international strategies and policies that romania has undertaken. the internet contributes greatly to socialization processes (institute of education sciences, 2017), interaction and formation of adolescents' identity. the educational process in today's society is also marked by the use of new information and communication technologies. the potential brought by them represents a permanent challenge for education, which must adapt to new realities on the fly. keywords: digital, environment, new, social, space, internet. 1. introduction although omnipresent, the digital-virtual phenomenon is not fully understood in terms of consequences and effects, and quantitative analyses on large databases provide important and relevant information regarding its scale and complexity, but elude causality and decisionmaking relationships. in order to understand the impact of this phenomenon, as well as the behaviors, motivations and reasoning that accompany it, the qualitative research approach is fundamental. digital culture profoundly influences the identity and social development of adolescents, and to fully understand its impact, both quantitative analyses and qualitative research are needed to explore the complex motivations and effects of technology use. internet communication represents a set of actions and processes mediated by computers through which interlocutors transmit information through messages that can take various forms (fârte, 2004). communication is an absolutely indispensable process for humanity, and over time messages have been transmitted through various means, thus taking on various forms and being used in various environments (thurlow, 2004). research on cmc largely focuses on the social effects of various computer-supported communication technologies. many recent studies involve internet-based social networks supported by social software. "digital media" refers to the set of technologies and platforms that enable the creation, sharing and consumption of digital content. it includes various components such as the internet, https://orcid.org/0000-0001-8415-3327 mailto:lauren.petrila@gmail.com https://orcid.org/0000-0002-3020-2098 mailto:felixangelpopescu@gmail.com mailto:luci_benchea@yahoo.com the digital environment and the new social space 274 social networks, mobile applications, streaming platforms, websites and other communication and information technologies. the digital media has transformed the way we communicate, work, learn and spend our leisure time, with a profound impact on society and the economy. the digital media has created a new social space that is redefining the way people interact, communicate and organize themselves. this transformation has been facilitated by communication technologies and online platforms, which allow for rapid and global social interactions. 2. characteristics of the new social space global connectivity: the digital environment allows people around the world to connect and communicate instantly, regardless of geographical distances. this facilitates the exchange of ideas and cultures and creates global communities (https://www.edu.ro). technologically mediated interactions: in the new social space, interactions are often mediated by technology, such as social networks, messaging platforms, and video conferencing applications. these technologies allow for both synchronous (real-time) and asynchronous (delayed) communication. technology is not just a trend, it has revolutionized the way we communicate. from skype or twitter used on a computer or laptop to today's smartphones, technology makes communication more efficient, effective, and in some cases instantaneous (https://www.droot.ro/). virtual communities: an online community is a variable group of people who communicate (maintain connections) frequently with each other through correspondence, telephone, internet network, etc., for reasons of personal, social, educational interest, etc. the term "virtual" emphasizes the fact that it is not a society with "face to face" communication, with personal contacts "in sight". there are pure virtual communities and virtual communities that nevertheless extend towards personal communication "face to/in face", that is, they activate from time to time and through direct meetings, scheduled reunions. if the communication takes place in the form of an interconnected social network that serves as a support for the mutual exchange of opinions, impressions, lived experiences, etc., then we speak of a social environment (https://creativecommons.org). online platforms allow the formation of communities based on shared interests, hobbies, professions or social causes. these communities can be very influential and can mobilize collective action. digital identity: digital identity is an electronic means of identifying someone. it consists of a certificate containing a "public key" that can be viewed and a "private key" that must be kept secret (https://support.apple.com). users have the ability to build and manage their digital identities, which can be different from their physical identities. this includes social media profiles, online game avatars, and personal blogs. participation and civic engagement: civic engagement has been defined by various authors, who agree in highlighting the relationship between this concept and the way in which people, exercising their citizenship, get involved in political and apolitical issues in their environment. in this context, being a citizen means being a member of a community, with equal rights with others and with the same opportunities to influence the fate of the community (https://www.yubrain.com). the digital environment facilitates civic and political engagement through access to information, discussion platforms, and the ability to organize and participate in online petitions, protests, and campaigns. laurentiu petrila, felix-angel popescu, lucian benchea 275 3. the impact of the new social space communication transformation: communication through language is essential to functioning in society, whether it is formal or informal discussions, with friends and family, negotiations at work or business meetings. through language we incorporate information and experiences into our minds and express our ideas, thoughts, feelings and perceptions. as a result, communication is more than an exchange of information, it is an influence (https://static.wixstatic.com). the way we communicate has been revolutionized, becoming faster and more diverse. social platforms allow the sharing of multimedia content (images, video, audio) and create new forms of expression. communication is a highly complex process, difficult to decipher, which requires its simplification in order to be understood. this sensitive process is carried out in two significant stages: • the first stage is the transfer of a thought, idea or order by the sender to the receiver. this involves: expressing the idea to be transmitted; encoding it in the form of a symbol, capable of expressing a message; transmitting the encoded message from the sender to the receiver through the chosen channel (visual, auditory, tactile, electronic). • the second stage consists of the receiver transforming the received message. this involves decoding the message, i.e. deciphering the transmitted symbol, and interpreting it, i.e. explaining its meaning (https://www.didactic.ro). effects on personal relationships: interactions that occur since childhood and the way they are formed and evolve influence the relationships of the future adult. attachment style is a specific behavior in relationships between people, from an emotional and psychological point of view. the attachment style that an adult has is learned in childhood, cultivated throughout life and reproduced for their own family. interpersonal relationships are influenced by online interactions, which can strengthen or, conversely, weaken social bonds. sometimes, digital communication can lead to feelings of isolation or a lack of authentic connection. social and political mobilization: social media has become a powerful tool for social and political mobilization. it has played a crucial role in major social movements and election campaigns. social mobilization is the process of bringing together all interested social partners to raise awareness of a group about a common problem, identify their needs, and provide support in identifying the resources and services needed to find ways to cope independently and take control of their own lives. “through community mobilization, members of a community become aware of a problem, recognize that it is important to their lives, and decide together on the steps needed to solve it and take action together” (thompson and pertschuk 1992) (https://www.asociatianoulval.ro/). digital economy: the digital economy is considered to be the fourth industrial revolution, characterized by its ability to transform economies, jobs and even society as a whole, through the introduction of new technologies and processes. it is expected that the digital economy will contribute to social and economic equalization. at the same time, technology will contribute to increasing access to education, jobs and financing, even if, in the short term, it could lead to the reduction of jobs with repetitive and non-value-added activities in almost all economic sectors, whether we are talking about industry, agriculture or services. in romania, we estimate that approximately 60% of existing jobs could be affected by the digital economy: the main causes are the development of the concept of e-government, the digital environment and the new social space 276 robotization and automation in industrial sectors and the transfer of services from the traditional area to the digital area. if previous industrial revolutions produced changes over several generations, the digital economy produces significant effects over much shorter periods. the new social space has created economic opportunities, including for digital marketing, influencers and e-commerce. companies can reach their target audiences more effectively and personalize user experiences. in the digital age, data protection has become an interdisciplinary area of law, which is gradually but surely making its way into all other areas of law. if future technologies will bring new risks to human rights, society must catch the wave of digitalization without sacrificing fundamental rights. categorically, the manipulation of digital identities determines the diversification and increase in the complexity of security risks and threats, such as hostile/influence actions carried out in the public space, disinformation, the spread of fake/fabricated news and possible, generating new security challenges. 4. challenges in the new social space the use of mass media as an instrument of hybrid conflict in recent years, taking as a temporary reference the referendum that took place in the united kingdom to leave the european union and, especially, after the presidential elections in the united states, which took place in november 2016, the media has focused a large part of its international information on warning about the danger that false news ‒ popularized by the name of fake news ‒ represents for western democracies. in recent years, especially after the brexit referendum and the 2016 us presidential election, the phenomenon of fake news has been widely discussed as a major threat to western democracies. disinformation campaigns, often orchestrated through social media and supported by state or private actors, have aimed to manipulate public opinion and undermine trust in democratic institutions. a notable example is the use by the uk leave campaign of the false claim that “£350 million a week” could be redirected to the nhs, a claim that was later debunked but which influenced public perception. also, in the 2016 us presidential election, social bot networks amplified content with low credibility, contributing to the polarisation of the electorate. these practices have been facilitated by algorithms that create “information bubbles”, in which users are predominantly exposed to information that confirms their existing beliefs, thereby reducing diversity of opinion and democratic dialogue. in this context, the european union has recognized disinformation as a serious threat to democracy, underlining the need for concerted measures to combat it. in its information objective, the media used all kinds of concepts, new to a large part of the public, such as cyberspace, cyberattack, cyberwarfare or hybrid warfare, to explain the events taking place through what we commonly call the internet, in which a state, in this case the russian federation, would use the digital sphere to interfere with the internal processes of another, with the aim of destabilizing its democratic systems. although brexit is currently considered an example of russian interference in the election campaign (bbc news uk, 2024) we found few references in the media, both during the campaign and in the post-referendum period, to accusing vladimir putin's government of trying to influence the referendum vote and defining these activities as hybrid warfare. for the most part, post-election analyses focused on the uncertainty generated by the united kingdom's laurentiu petrila, felix-angel popescu, lucian benchea 277 exit from the european union, the economic, political and social consequences that might follow, as well as the new role of the european union itself at that time. it was not until the 2016 us presidential election that the media largely reported on moscow's alleged cyberattacks against democratic party candidate hillary clinton and orchestrated disinformation campaigns to sway public opinion. at this time, the focus was on cyberspace and the vulnerabilities it presents to western democracies. despite this, it was only months later that reports began to emerge of the kremlin's possible interference in the british referendum, through the spread of fake news and the use of social media. these events marked the role that a foreign power would have played in trying to influence a domestic electoral process. they were a warning signal to european countries that, months later, they would be organizing different electoral processes. in this context, the guardian newspaper mentioned, in a headline, that the eu is stepping up its campaign against russian propaganda (adam et al., 2017) due to the fear that would have generated possible russian influence in the us elections, as this could spread to europe. it is worth emphasizing here that the european union will increase its efforts to counter russia's hybrid warfare campaign after the election of donald trump (baqués, 2015:41). the news refers to the east stratcom working group, an organization created in 2015 by the eu's european external action service, and therefore ahead of the processes presented here, to counter russian disinformation campaigns during the ukraine crisis. in this international context of disinformation, fake news, russian influence in electoral processes, cyberattacks and alleged hybrid warfare, spain was plunged into a major political and social crisis due to the convening of a referendum by the regional government of catalonia in early october 2017. the government's intention was to decide, through consultation, on the possibility of independence from the spanish state, without the consent of the spanish government. these activities were quickly incorporated into the information language. thus, the concept of cyberwar was used in a generic way, regardless of its meaning and possible implications, simply because certain activities were carried out through networks. the concept of cyberwar has been one of the most widely used in journalism to refer to activities that take place on the internet, but it has also generated confusion. richard a. clarke, former national coordinator for security, infrastructure protection, and counterterrorism of the united states and special advisor to the president for cybersecurity, defines cyberwar as those actions taken by a nation-state to penetrate computers or other networks of states with the aim of causing damage or changes (clarke et al., 2010). with the exception of the cyberattacks against the democratic party, for which they had access, in the campaign, to the data and information of the party's members, the propaganda activities that took place in brexit and the catalan conflict cannot be described as cyberwar, according to clarke's definition, as they would not have led to illegitimate access to the systems or networks of other states, with the aim of causing damage or changes, but, rather, would be categorized as influential and manipulative activities through networks. this new doctrine, developed in russia, seeks to weaken democracies by interfering in their electoral processes and fueling their internal conflicts, whether ideological or territorial, using tools such as fake news or manipulation of social media. instead, it is only stated that we are in a conflict (hybrid warfare) promoted by a state actor (russia), by spreading fake news via the internet and social media, with the ultimate goal of weakening western democratic the digital environment and the new social space 278 governments. also, the news reports regarding these activities present hybrid warfare as something new, which is part of the military doctrine of russian origin – the gerasimov doctrine. the origin of the gerasimov concept dates back to february 2013, with the publication of the article "the value of science in anticipation" by the chief of the defense staff of the russian armed forces, general valery gerasimov, in the magazine voyenno-promyshlennyy kuryer. for much of the western media and analysts, the article represents the foundational document of what, in the west, is known as the gerasimov doctrine. it is interpreted as a proposal for a new russian way of warfare that combines conventional and unconventional warfare with aspects of national power (gerasimov, 2013), which refers to indirect and asymmetric methods. with the events in crimea and ukraine, some of the elements set out in gerasimov's 2013 document were identified and the idea spread that it set out a new way of acting. then, hybrid crossed the border of strategic debate to become a word with common usage and was used to define the whole range of informational, destabilizing and subversive activities that the kremlin could carry out in a covert, semi-covert or clandestine manner, below the threshold of conflict. in short, gerasimov refers to hybrid warfare methods because he believes that russia should face these types of wars and therefore needs to know and adapt to them. in addition, it should be noted that gerasimov presents it in a scenario of armed war, while disinformation campaigns and fake news in the west would take place in a context of political and social tension and confrontation, but in the absence of an armed conflict. 5. the digital environment and the target of a cyber attack – russian interference in the french elections (2017) every day we are exposed, both at home and at work, to threats that originate in the virtual space. in most cases we are not even aware of this, or if we do realize it, we do not react to these threats in an appropriate manner. articles about security incidents appear daily in the media. these reported incidents are actually just the tip of the iceberg, in reality we are much more exposed than we think we are, considering that, unfortunately, the risks associated with the virtual environment are constantly increasing. anyone can be the target of a cyber attack. a cyber attack on an industrial control system can cause loss of control, shutdown, damage to facilities or alteration of the final product. these incidents are often accompanied by serious consequences in terms of security, economic and financial losses, and damage to the organization's image. the online environment has more and more connections with the physical space (romanian intelligence services). online identity theft is no longer an urban legend. third-party access to confidential data creates strategic advantages, and blocking users from accessing a set of data can cause considerable financial damage. in 2017, several european countries were due to hold elections, whether local, parliamentary or even presidential, as in the case of france. eu and nato leaders have taken into account the possibility that russia could intervene and manipulate the elections, in order to achieve certain strategic goals. the case of russian interference in the presidential elections in france is one of the textbook cases both in terms of the techniques used in the attack and the response given by france. laurentiu petrila, felix-angel popescu, lucian benchea 279 the aim of the attack was to undermine emmanuel macron's candidacy in the 2017 presidential election, so there were three main dimensions of the information operation: • disinformation campaign consisting of fake documents, rumors and fake news; • a cyberattack on the computers of macron's campaign organizers; • information leak of approximately 15 gb of information extracted from campaign computers, as well as 21,075 emails. the information was distributed on twitter (using the hashtag #macronleaks) through fake accounts (bots) and an army of trolls (russia often uses troll armies online to increase prorussian propaganda); these fake accounts distributed fake news branded as sputnik, rt, newsfront and amplified it on social networks. however, the attack was not directly attributed to moscow, but it seems that the russians received help in carrying out the attack from the american alt-right and the french far-right, as both factions are pro-russian. the cyberattack was carried out using fake web domains and phishing. trend micro, a japanese cybersecurity company, identified the march 15, 2017 phishing attack as being orchestrated by the apt28 group, which is known for its cyber espionage activities and is affiliated with the gru. one of the domains had an ip address similar to another identified by the us state department in a report on russian malicious cyber activity in the context of the 2016 us presidential election. most of the ips indicated that the attacks originated from ukraine, which is also a buffer state for cyber operations. facebook also said that 24 accounts were created on the platform to conduct surveillance operations on members of macron's entourage during the election campaign; the russian agents who created the accounts posed as friends of friends of macron's associates; the agents' main goal was to get macron's associates to download malicious software that could provide hackers with their login details, thus giving them access to private conversations or classified documents. the attack failed to have the desired effects, as france, expecting possible interference in the elections, took preventive measures, such as: deliberately planting false documents to create confusion among hackers; anssi (national association for information systems security) organized cybersecurity workshops for presidential candidates; collaborated with facebook to automatically close the fake accounts created; limited access to russian media in the second round of elections, etc. consequently, preventive measures and functional administrative instruments in france on the cyber dimension, along with the existence of international cooperation in the field of intelligence, especially between nato members, managed to diminish the effects of the cyber attack, as well as ensure an optimal climate for the presidential elections, in the end, to take place adequately. more specifically, in a world in the midst of globalization, cyber and communications infrastructures are developing at an accelerated pace, thus forming a dependence of state actors on digitalization; with these, both new threats and security vulnerabilities appear, thus creating a true cyber arms race. cyberspace offers the necessary opening for both conducting physical attacks on infrastructures (kinetic military actions, electronic warfare, etc.), as well as cognitive attacks (psychological operations, disinformation, propaganda, etc.) with the aim of inoculating various ideas to the population and distorting the way people perceive certain domestic or international events, as the case may be. more simply, we can say that cyberspace does not really know borders or if it does, they are not very well delimited, the main limitation from this point of view being the lack of clear and concrete jurisprudence on this segment at the international level (https://adevarul.ro). the digital environment and the new social space 280 6. conclusions the new social space created by the digital environment offers significant opportunities for connection and innovation, but also brings challenges that require careful management. it is important that users, institutions and society as a whole navigate this space responsibly, promoting safe and ethical practices in the use of digital technology. it is common to find news related to disinformation campaigns of russian origin that claim to be recorded in a context of hybrid warfare against the west. the main problem with the journalistic information presented here is that, for the most part, the authors do not expose even a brief approximation to the concepts used, their meaning and implications, such as disinformation, fake news, cyberwar or hybrid warfare. sometimes this leads to the use of some of these concepts as synonyms. possibly, one of the reasons for the confusion is the mixing of the use of recent concepts, in this case, those related to cyberspace, with others, which are traditionally located in a military and academic field, in an attempt to want to inform about changes occurring on the international scene. this is also due to the spiral that the media has entered, driven by a constant demand for information from citizens, wanting to inform, almost minute by minute, about the latest news, which implies a quantity of information rather than the quality of the messages transmitted. undoubtedly, russia’s use of cyber and intelligence has been the focus of attention in the news about hybrid warfare. but while it is true that this country has encouraged the use of information operations and has taken advantage of the potential of the digital environment in favor of its interests, the development of disinformation campaigns and the use of information and communication technologies cannot be identified exclusively with hybrid warfare. one of the characteristics of hybrid conflicts is the combination of various conventional and asymmetric elements, but the news has focused almost exclusively on the digital element, through which disinformation campaigns, fake news and the massive use of social networks have been developed. although they may be part of hybrid conflicts, given that, in recent years, the cyber element has gained enormous importance within conflicts, we cannot, however, say that these activities are movements of hybrid warfare. terms such as ‘disinformation’, ‘fake news’, ‘cyberwar’ or ‘hybrid warfare’ are often used vaguely and interchangeably in the media, which can lead to confusion about the nature and implications of these phenomena in the current geopolitical context. a rigorous delineation is essential for a correct understanding and effective approach to these challenges. therefore, if i were to conclude that the events that took place during brexit, the us elections and the catalan conflict cannot be described as hybrid warfare, a meaningful analytical framework for understanding the novelties of cyberspace and its impact on international relations in these scenarios could nevertheless be developed from the concept of the grey area. the concept defines those activities below the threshold of conflict, which take place in peacetime, as opposed to hybrid warfare, and which include cyberattacks or disinformation and propaganda campaigns that would have as a common feature the difficulty of determining their attribution. this concept would therefore allow for an analysis of activities that are not specifically described as acts of war but could become as decisive as a military conflict. the concept of the 'gray zone' describes strategic actions that remain below the threshold of open conflict, being characterized by ambiguity and difficulty in attribution, and includes cyber operations and disinformation campaigns conducted in peacetime. laurentiu petrila, felix-angel popescu, lucian benchea 281 the analysis presented in this essay has focused on the importance of conceptualizing and contextualizing the reported facts. it is clear that the practice of journalism differs from the academic field, but it is equally true that news should convey information with the greatest possible rigor and expose the reader to what is happening in their specific context, trying to use appropriate concepts in each case. we are still at an early stage in analyzing the capabilities of cyberspace, and reducing it to the use that a single state can make for the dissemination of propaganda campaigns would be to misunderstand its potential in international relations. in the digital age, rigor in the presentation of information becomes essential to understand the complex phenomena of cyberspace, which should not be reduced solely to propaganda tools used by certain states, but analyzed in the broad context of international relations. acknowledgement: this research has been conducted with the support of the erasmus+ programme of the european union, within the project 101127024, jean monnet module enmodemo enhancing and monitoring democracy in romania as a eu member state, cofinanced by european commission in the framework of jean monnet action references 1. abrudan elena (ed.), 2021. media în era digitală. oportunități și inovații. ed. presa universitară clujeană. http://www.editura.ubbcluj.ro/bd/ebooks/pdf/3136.pdf 2. adam karla, booth william, creșterea alarmei în marea britanie față de răzbunarea rusă în votul brexit, în the washington post, 17 noiembrie 2017. 3. baqués josep, rolul rusiei în conflictul din ucraina: războiul hibrid al marilor puteri, în journal of international security studies, p. 41, 2015. 4. cismaru, diana maria (2015). managementul reputatiei in mediul online, ed. tritonic. http://elibrary.snspa.ro/wp-content/uploads/2020/03/managementul-reputatiei-inmediul-online.pdf 5. clarke a. richard, knake k. robert, războiul cibernetic: următoarea amenințare la adresa securității naționale și ce trebuie făcut în acest sens, sua, harper collins publishers, 2010. 6. feg staff, 2016. global how? facilitarea educatiei globale. https://www.edu.ro/ sites/default/files/global%20how%20-%20facilitarea%20educatiei%20globale.pdf 7. gerasimov valeri, ценность науки в предвидении, în vpk, nr. 476, 8 martie 2013, https://vpk-news.ru/articles/14632, accesat în 23.06.2024. 8. institute of education sciences, 2017. internetul și mediile de socializare virtuale în viețile liceenilor, https://efaidnbmnnnibpcajpcglclefindmkaj/https://www.ise.ro/wpcontent/uploads/2018/02/internetul-si-mediile-de-socializare-virtuale-in-viataliceenilor_raport-final.pdf 9. https://www.doc.ro/sanatatea-copilului/ghidul-adolescentului-in-social-media-fiiinteligent-in-mediul-digital accessed on 03.06.2025. 10. https://oradenet.ro/blog/conectarea-umana-in-era-digitala-partea-ii/ accessed on 03.06.2025. https://vpk-news.ru/articles/14632 https://www.doc.ro/sanatatea-copilului/ghidul-adolescentului-in-social-media-fii-inteligent-in-mediul-digital https://www.doc.ro/sanatatea-copilului/ghidul-adolescentului-in-social-media-fii-inteligent-in-mediul-digital https://oradenet.ro/blog/conectarea-umana-in-era-digitala-partea-ii/ the digital environment and the new social space 282 11. https://www.juridice.ro/500753/dreptul-digital-spre-o-noua-paradigma-sociojuridica.html accessed on 03.06.2025. 12. https://www.drmax.ro/articole/stiluri-de-atasament-tipuri-simptome-efecte-asuprarelatiilor accessed on 03.06.2025. 13. https://re7consulting.ro/ce-este-social-media-definitie/ accessed on 03.06.2025. 14. https://www2.deloitte.com/ro/ro/pages/strategy/articles/impactul-economiei-digitaleasupra-proceselor-economice-si-administrative.html accessed on 03.06.2025. 15. https://arxiv.org/abs/1707.07592?utm_source=chatgpt.com accessed on 03.06.2025. 16. https://ilfovul.ro/care-sunt-avantajele-si-dezavantajele-internetului/ accessed on 03.06.2025. 17. https://www.socialmoms.ro/eveniment/33/parintii-copiii-si-tehnologia accessed on 03.06.2025. 18. https://www.bbc.com/news/uk, accesssed on 03.06.2025. 19. https://www2.deloitte.com/ro/ro/pages/strategy/articles/impactul-economiei-digitaleasupra-proceselor-economice-si-administrative.html accessed on 03.06.2025. 20. https://global-strategy.org/information-warfare-feed-information-withdisinformation/ accessed on 03.06.2025. 21. https://www.droot.ro/blog/5-instrumente-tech-pentru-a-stimula-interactiunea-cupacientii accessed on 03.06.2025. 22. https://creativecommons.org/licenses/by-sa/4.0/deed.ro. accessed on 03.06.2025. https://www.juridice.ro/500753/dreptul-digital-spre-o-noua-paradigma-socio-juridica.html https://www.juridice.ro/500753/dreptul-digital-spre-o-noua-paradigma-socio-juridica.html https://www.drmax.ro/articole/stiluri-de-atasament-tipuri-simptome-efecte-asupra-relatiilor https://www.drmax.ro/articole/stiluri-de-atasament-tipuri-simptome-efecte-asupra-relatiilor https://re7consulting.ro/ce-este-social-media-definitie/ https://www2.deloitte.com/ro/ro/pages/strategy/articles/impactul-economiei-digitale-asupra-proceselor-economice-si-administrative.html https://www2.deloitte.com/ro/ro/pages/strategy/articles/impactul-economiei-digitale-asupra-proceselor-economice-si-administrative.html https://arxiv.org/abs/1707.07592?utm_source=chatgpt.com https://ilfovul.ro/care-sunt-avantajele-si-dezavantajele-internetului/ https://www.socialmoms.ro/eveniment/33/parintii-copiii-si-tehnologia https://www.bbc.com/news/uk https://www2.deloitte.com/ro/ro/pages/strategy/articles/impactul-economiei-digitale-asupra-proceselor-economice-si-administrative.html https://www2.deloitte.com/ro/ro/pages/strategy/articles/impactul-economiei-digitale-asupra-proceselor-economice-si-administrative.html https://global-strategy.org/information-warfare-feed-information-with-disinformation/ https://global-strategy.org/information-warfare-feed-information-with-disinformation/ https://www.droot.ro/blog/5-instrumente-tech-pentru-a-stimula-interactiunea-cu-pacientii https://www.droot.ro/blog/5-instrumente-tech-pentru-a-stimula-interactiunea-cu-pacientii agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 18, no. 2 (2024), pp. 1-10 1 scientific-theoretical issues in the formation of a green economy a. abbasov anar abbasov azerbaijan cooperation university, azerbaijan https://orcid.org/0000-0002-4536-5279, e-mail: azercooperation@hotmail.com abstract: the late 20th and early 21st centuries witnessed significant global changes, including transformative shifts that have profoundly impacted the world economy. energy consumption plays a pivotal role in both the competitiveness of goods and the achievement of sustainable economic growth. in this context, the concept of a green economy has gained increasing prominence amid deepening globalization. since the 2020s, rising carbon emissions have underscored the urgent need for enhanced decarbonization efforts. for the first time in history, global calls to prioritize decarbonization are surpassing concerns over energy security. this shift reflects growing ecological imbalances and environmental stress caused by excessive carbon emissions. during the mid-20th century, economic crises and geopolitical tensions were largely centered on controlling energy resources. while this led to the development of numerous oil and gas fields, contemporary challenges associated with traditional energy sources have accelerated efforts toward decarbonization. global climate change further compounds these challenges, making the transition to renewable energy and green technologies imperative. the formation of a green economy is thus crucial to restoring ecological balance and fostering sustainable development. keywords: green economy, green technologies, renewable energy, non-renewable energy, green development, ecological balance, sustainable agriculture, water management, wind energy, hydro energy. 1. introduction the concept of the green economy and the necessity for its development stem directly from the aforementioned arguments. it is worth noting that the term green economy was first introduced into economic discourse in 1989 by leading british economists david pearce, edward barbier, and anil markandya (pearce, markandya, & barbier, 1989). research indicates that although these authors were the first to formally coin the term, discussions surrounding the need for a green economy can be traced back to the mid-20th century, driven by concerns over the excessive consumption of natural resources. in 1972, the club of rome published its seminal report, the limits to growth, which highlighted the depletion of natural resources, the negative environmental impacts of human activities, and the growing issue of waste (club of rome, 1972). analyzing the report's findings, it becomes evident that the overuse of natural resources—particularly non-renewable ones—is predominantly associated with industrial production. https://orcid.org/0000-0002-4536-5279 mailto:azercooperation@hotmail.com scientific-theoretical issues in the formation of a green economy 2 consequently, the report's authors argue for imposing limits on industrial output, as such measures could ultimately reduce reliance on non-renewable resources. scientific studies on the green economy suggest that david pearce, a prominent british economist, is a leading figure in this field (pearce, 1973, 1976). pearce’s works, including studies in environmental economics (1973) and environmental economics (1976), lay the foundation for understanding the depletion of natural resources and the overall loss of biodiversity caused by anthropogenic impacts on the environment. in 1992, pearce further explored the characteristics of the green economy, proposing that it represents a self-sustaining economic system. according to pearce, sustainability is a defining feature of the green economy. moreover, he posited that as the structure of the economy evolves—resulting in a decreased ratio of materials and energy used in the production of economic goods—its capacity for self-reproduction is enhanced (pearce, 1992). building upon pearce’s arguments, it can be inferred that distinct differences exist between the green economy and non-renewable economies. while both are inherently linked to nature, the green economy emphasizes sustainability and resource efficiency, contrasting with the finite resource consumption characteristic of non-renewable economies. these are similar points; however, when focusing on the differences, it is important to note that the extraction of non-renewable energy resources, such as fossil fuels, leads to increased carbon emissions (shkradyuk, 2010). moreover, a defining characteristic of nonrenewable energy resources is their expansion of anthropogenic impacts on the environment, resulting in continuous exploitation of natural resources (ushakov, 2009). this exploitation diminishes the ability to preserve these resources for future generations, relegating their intergenerational sustainability to the background, particularly in terms of economic efficiency. additionally, the use of non-renewable energy resources elevates carbon intensity, further exacerbating environmental degradation. (hajiyeva, et al., 2024) in contrast, as noted by david pearce, a defining feature of the green economy is its reliance on renewable and self-reproducing economic systems (pearce, 1992). the green economy is essentially a subset of ecological economics, which, although a relatively recent field, emphasizes the intricate relationship between nature and society. ecological economics is currently in a developmental phase, with foundational contributions by scholars such as robert costanza and herman daly (costanza, 1991; daly, 1991). their joint monograph, the scientific and managerial basis for sustainability of ecological economics, published in 1989, underscores the critical role of economic mechanisms in preserving nature and biodiversity (costanza & daly, 1989). viewed from this perspective, it is arguable that the foundational ideas of the green and ecological economy trace back to the early 20th century, with significant contributions from the ukrainian biologist and former soviet scientist v. i. vernadsky (vernadsky, 2004). vernadsky’s early work on environmental conservation laid the groundwork for sustainable resource management, emphasizing the efficient use of natural resources and their preservation for future generations. his contributions can be regarded as the rudimentary basis for the development of the green economy. the conceptual foundations of the green economy began to gain momentum in the late 20th and early 21st centuries. these foundations are closely linked to the fundamental principles of sustainable development. notably, the 1992 united nations conference on environment and development (unced) in rio de janeiro adopted the concept of sustainable anar abbasov 3 development (united nations, 1992). this was followed in 2012 by the "rio+20" conference, which produced the future we want declaration. the declaration highlighted the interconnectedness between the green economy and sustainable development, emphasizing the critical role of a sustainable future in eradicating poverty (united nations, 2012). the declaration took a conceptual approach to the green economy within the broader framework of sustainable development, asserting that the green economy is a tool for achieving sustainability. it also called for global cooperation, advocating the exchange of best practices, the application of various models and technologies, and the sharing of methodologies for assessing green economy development strategies. both the 1992 and 2012 un conferences identified three fundamental pillars for sustainable development: economic growth, social efficiency, and ecological balance. in this context, the green economy is most closely aligned with the first and third pillars. ensuring ecological balance, a core objective of the green economy, is central to its mission. the use of green technologies aims to ensure economic growth while reducing environmental harm, including carbon emissions, which is reflective of the world's ecological stability and sustainability. from this perspective, it can be argued that significant progress has been made in the conceptual foundations of the green economy, particularly from the late 20th century and into the early 21st century. efforts to address the impacts of global climate change on countries have continued systematically. since the 1990s, the growing focus on the economic and socio-economic implications of climate change, along with coordinated international efforts, has become an imperative. in this regard, the un framework convention on climate change was adopted in 1995, and the first conference of the parties (cop) meeting was held in berlin in the same year. the hosting of cop29 in baku, azerbaijan, is significant, not only in terms of enhancing the country's international image but also as an important contribution to the advancement of green economy initiatives. as mentioned previously, the green economy aims to reduce carbon emissions. in this context, article 6 of the paris agreement, within the cop framework, notes that implementing national climate plans can result in savings of up to 250 billion usd annually. although the formation of the green economy plays a crucial role in ensuring ecological balance, it must be acknowledged that the process is complex and multifaceted. this involves, first and foremost, the limitation of the use of non-renewable energy resources, the establishment of ecological balance, and the significant reduction of harmful carbon emissions, all of which require substantial financial investment. a key aspect of establishing the green economy is the transition to green energy sources and technologies across all sectors of the economy. 1.2. the classification of sectors hindering economic development and shaping the green economy. households, particularly in developing countries, are significant contributors to environmental pollution, especially by carbon dioxide. additionally, the release of waste pollutants from households into the environment often leads to harm to both soil and air resources (unep, 2016). in developing countries, households tend to rely more on traditional energy resources. for example, in cities, fuel and energy resources such as natural gas are commonly used, which results in the emission of carbon dioxide into the atmosphere (iea, scientific-theoretical issues in the formation of a green economy 4 2018). to eliminate carbon dioxide emissions from households, it is essential to first transition the technologies used in households to renewable energy sources (world bank, 2020). the second sector hindering the green economy is the transportation sector. the use of diesel fuel and gasoline in automobiles, particularly in developing countries, increases the release of carbon dioxide into the environment (international transport forum, 2021). the industrial sector also has a significant contribution to this issue, as industrial activities in both developed and developing countries cause environmental pollution, including contamination of soil, air, and water (unido, 2018). these sectors require fundamental changes. for example, when analyzing the carbon emissions released by these sectors in azerbaijan, it can be concluded that the consumption of non-renewable energy resources in household accounts for 33.5%, in the transportation sector 23.5%, and in the industrial sector 13.5% (ministry of ecology and natural resources of azerbaijan, 2020). the remaining consumption of non-renewable energy resources is observed in other sectors. it can be argued that, with the exception of the industrial sector, there are potential resources available to limit the consumption of non-renewable energy sources in other sectors. for example, to reduce the consumption of non-renewable energy sources such as oil and gas in households, it is crucial to improve household technologies, upgrade gas pipelines, and install solar panels on homes, which would help reduce carbon emissions (irena, 2019). similar trends can be observed in the transportation sector. for instance, customs duties on electric vehicles entering the country have been reduced to zero, and there are also lower customs duties for hybrid vehicles (azerbaijan state customs committee, 2022). however, challenges still remain in this sector. the number of battery charging stations for electric vehicles is still quite low, and the widespread installation of charging stations in residential areas could create significant opportunities for the sector (adb, 2021). as for the industrial sector, since it is primarily composed of the oil and gas sector and the chemical industry in azerbaijan, it is expected that problems in this area will persist for a certain period. there are also sectors that stimulate the development of the green economy, or more specifically, form the green economy. these sectors include:  forestry;  agriculture;  sustainable water management;  fisheries sector;  renewable energy sources;  tourism sector;  waste recycling process. regarding forestry, it is important to note that forests absorb carbon dioxide and release oxygen into the environment, playing a crucial role in preventing soil erosion. forestry is essential for the protection of ecosystems. therefore, actions such as preventing deforestation and protecting forests from fires could serve as traditional methods for safeguarding the green economy. anar abbasov 5 figure 1 showing the classification of sectors that either hinder or promote the green economy source: author’s own analysis based on the classification of sectors hindering and promoting green economy development, derived from the provided content on the topic. agriculture, which plays a vital role in meeting the food demands of the population, also has a key role in preserving biodiversity. if agriculture focuses on low-water consumption crops, reduces agrochemical loads, implements integrated pest management, and employs antierosion technologies, it can significantly contribute to the green economy. therefore, it is necessary to implement the required measures for the development of green agriculture and increase government subsidies for the development of ecological farming. water management also plays an important role in the development of the green economy. balancing water usage, particularly preventing wasteful use of water resources, can significantly help in the case of water scarcity. additionally, the recycling of used water, except for potable water, can play a critical role in meeting the water demands of other sectors. it is known that agriculture accounts for approximately 70% of total water usage. therefore, efficient use of water resources should be emphasized. fishing, particularly in natural and artificial fisheries, can provide a source of income for the population. additionally, the development of fishing can contribute to the protection of ecosystems and create favorable conditions for expanding renewable energy resources. thus, attention should be given to preventing the sharp decline in fish stocks. as for waste management and recycling, this sector plays a significant role in reducing carbon emissions. moreover, it also lowers production costs, ensures the availability of raw materials, and, in our opinion, the waste recycling sector can be a source of the green economy while increasing the competitiveness of produced goods. 2. discussions and results the use of green technologies primarily serves to reduce the cost of living within social categories, that is, to prevent social inflation. the calls for the use of green technologies in everyday life have become particularly relevant in recent times. these calls also include the utilization of renewable energy sources and the use of low-cost energy resources based on high scientific-theoretical issues in the formation of a green economy 6 technologies. one of the key factors conditioning the objective necessity of using green technologies is, first and foremost, the issue of limited resources, which is one of the fundamental economic challenges. the use of limited resources ultimately leads to the high cost of resources and the high production costs of manufactured goods. the application of green technologies serves, above all, to produce more competitive products economically. in this regard, the application of resource-saving technologies and the use of technologies related to the recycling of resources are crucial. moreover, the diversity of resources aimed at recycling increases the attractiveness of this process. as is known, resources are divided into renewable and non-renewable energy sources. therefore, the resources that have been consumed should be differentiated not only based on their consumption but also in terms of their resource potential. in this context, one of the most significant factors that makes the use of green technologies an objective necessity is the elimination of the harmful effects of anthropogenic emissions on the natural environment. the use of low-waste production technologies not only enhances the efficiency of energy equipment but also reduces the consumption of various material resources as well as the level of harmful emissions. the fundamental basis of green technologies is natural resources. in this regard, green technologies include wind energy, solar energy, hydro energy, geothermal energy sources, as well as biofuel production technologies and energy efficiency technologies. as productive forces and production relations develop within society, and with the deepening of the globalization process, the anthropogenic impacts on nature are intensifying. among the most significant problems humanity faces today are environmental pollution, the depletion and poor restoration of natural resources, and issues like hunger. the rapid and efficient solution of these problems will directly depend on the application of green technologies and the formation of a green economy. one of the characteristic features of green technologies is the application of environmentally clean production processes with low carbon emissions. all of these elements play an important role in various sectors of the economy, including households, industry, construction, transportation, and agriculture. figure 2 the trends for three key areas: the percentage of energy from renewable sources, the sales percentage of electric vehicles, and the increase in green building projects source: iea website. anar abbasov 7 thus, focusing on the application of green technologies from a single perspective, such as reducing carbon emissions through the use of solar, water, and wind energy, would not, in our view, provide a comprehensive understanding. the application of green technologies should be approached in a more complex, multifaceted manner. green technologies are aimed at reducing environmental pollutants, producing ecologically clean products, and applying less harmful production processes. green technologies also include issues such as waste recycling, air and water pollution, soil restoration, the reduction of harmful emissions into the atmosphere, and the production of alternative energy sources, among other factors. (muradov & hajiyeva, 2024) the use of traditional technologies, or more specifically, non-renewable energy resources, primarily leads to an increase in the energy consumption of the produced goods. it is no coincidence that, particularly in post-soviet and post-socialist countries, the cost of goods produced is higher compared to their counterparts produced in developed countries, primarily due to the higher energy consumption. all of this results in a decrease in the competitiveness of the produced goods. from this perspective, the application of green technologies has its own unique advantages, which can be classified as follows:  recycling of waste generated during the production process and ensuring its use;  reduction of energy consumption and the decrease in the energy cost of production;  the use of green technologies leads to a reduction in carbon emissions into the environment, which ultimately prevents air and environmental pollution;  the use of clean water resources and the implementation of water recycling;  stimulating the offer of competitive commodities in the global market;  creating favorable conditions for stimulating economic development. as for the first advantage of using green technologies, it should be noted that recycling waste ultimately leads to the offering of cheaper products in the market. this is one of the reasons why china now has the capacity to produce sufficiently competitive products for the global market. in china, the use of waste materials has significantly reduced the share of raw material costs in the structure of production costs. it is no coincidence that several companies and firms that export products to the global market now prioritize environmentally friendly alternatives. in this regard, products are being made from recycled paper, plastic mass, fabrics, glass, organic materials, metals, and even asphalt scraps. overall, modern global economics increasingly favors the production of goods based on recycling, which is particularly important in reducing the production cost of goods. the importance of the recycling process is primarily significant in terms of reducing the amount of waste and the decreased use of raw materials. the recycling process, after the utilization stage, opens up vast opportunities for producing more environmentally friendly products. (humbatova et al., 2024) scientific-theoretical issues in the formation of a green economy 8 figure 3 the renewable energy share in total energy production for the top 10 developed and developing countries over the past 5 years (2019-2023). source: irena and world bank it can be said that not only in developed countries but also in the markets of developing countries, products made from recycled materials are increasingly preferred. for instance, in stores, one can already see bags made from recycled plastic, packaging materials made from cardboard or paper, which, in addition to being environmentally friendly, also incur lower production costs. in other words, their production costs are lower, making these products more competitive in the market (pearce, markandya, & barbier, 1989). the second factor driving the superiority of green technologies, as mentioned above, is the reduction of energy consumption through their application. this, in turn, contributes to the decrease in the use of non-renewable energy resources, including hydrocarbons. the excessive consumption of limited resources has become one of the most pressing issues of the modern era. this process also creates favorable conditions for the reduction of harmful carbon emissions into the atmosphere (costanza, 1991). it is also important to note that non-renewable energy resources are primarily used in sectors such as industry, mining, transportation, and households. the use of non-renewable energy sources results in increased carbon emissions, which, in turn, leads to environmental pollution. particularly in urban areas, the intensive use of transportation vehicles accelerates the consumption of non-renewable energy resources, thereby generating significant carbon emissions. as noted earlier, one of the key advantages of green technology is its contribution to water purification and recycling. in addition to carbon emissions, water pollution and the scarcity of water resources have become critical global concerns. for instance, one in every nine people on earth lacks access to clean drinking water near their living areas. consequently, many developed firms worldwide are prioritizing water recycling and reuse. after the initial use of water, purification and recycling processes are carried out, allowing water to be repurposed for non-potable uses such as irrigation, cleaning sanitation systems, washing vehicles, firefighting, and meeting the water demands of other economic sectors (brodach, 2022). anar abbasov 9 another advantage of green technology is its role in enhancing the competitiveness of products. the use of traditional resources typically increases the production cost of goods, whereas recycling waste leads to the creation of more competitively priced products, making them more accessible to consumers. green technologies contribute to reducing production costs, thereby fostering more affordable products for consumers (piskulova, 2013). the final advantage discussed is the stimulation of economic development. the use of green technologies plays a crucial role in modernizing economies and applying advanced technologies. in particular, the recycling of waste leads to the production of various products that are safe for humans and can, in some cases, become branded goods. the application of green technologies in developing countries could create favorable conditions for their rapid development, and in this regard, china's experience could be especially beneficial. 3. conclusions the experiences of developed countries show that the application of green technologies, as a crucial component of the green economy, is widespread, particularly in scandinavian and northern european countries. for example, iceland is a global leader in green energy production per capita, accounting for 80%. in sweden, a significant portion of investments is directed toward the application of green technologies. this includes investments in ecologically clean transportation and renewable energy sources like solar and wind power. denmark has implemented measures to phase out non-renewable energy sources almost entirely by 2050. in 2014, denmark achieved a near-world record by sourcing nearly 40% of its total energy from green energy (vernadsky, 2004). as green technologies enhance the competitiveness of the products they are used to produce, member countries of organizations like the oecd pay increasing attention to boosting their budgets for scientific research in both energy and environmental protection. in these countries, state expenditure on green energy accounts for approximately 5%, and in european union member states, this figure exceeds 7%. the highest proportion is found in new zealand (14%) and japan and korea (12-13% in 2012). in contrast, countries like the u.s., russia, switzerland, and israel allocate less than 2% of their state budget to the implementation of environmental technologies. additionally, the u.s. spends slightly more than japan on green technologies, with $4.2 billion allocated to environmental protection, compared to japan's $3.7 billion (united nations, 2012). developing countries are also increasing their focus on environmental protection through green ecological technologies. in china and india, for instance, state expenditures on these technologies are on the rise. china currently has over 1,600 government-owned incubators and scientific parks, most of which are involved in green technology projects. the country has become a global leader in six key sectors, including wind energy, biofuels, and clean coal, with the most significant patents in these areas (piskulova, 2021). references 1. brodach, m. m. (2022.). green water supply and wastewater treatment. non-commercial partnership of engineers. retrieved april 13, 2024, from https://www.abok.ru/for_spec/articles.php?nid=4393 scientific-theoretical issues in the formation of a green economy 10 2. costanza, r. (1991). ecological economics: the science and management of sustainability. columbia university press. 3. efremov, n. a., efremova, m. i. (2021). global experience of using "green" technologies. oecomia-et-jus, 21-30. retrieved from http://oecomia-et-jus.ru/single/2021/1 4. humbatova, s. i., hajiyeva, n., fodor, m. g., sood, k., & grima, s. (2024). the impact of economic growth on the ecological environment and renewable energy production: evidence from azerbaijan and hungary. journal of risk and financial management, 17(7), 275. 5. importance of green technologies. (2024). environmentgo. retrieved april 12, 2024, from https://environmentgo.com/ru/importance-of-green-technology #24_advantages_and_disadvantages_of_green_technology 6. monographies.ru. (2023). monographs. retrieved from https://monographies.ru/en/book/section?id=10434 7. muradov, a., & hajiyeva, n. (2024). the application of the green economy policy of switzerland to the karabakh region of azerbaijan: a review and appraisal. green management: a new paradigm in the world of business, 97-119. 8. pearce, d. (1992). green economics. environmental values, 1(1), 3-13. https://doi.org/10.3197/096327192776680179 9. pearce, d. w., markandya, a., & barbier, e. (1989). blueprint for a green economy. earthscan. 10. pearce, d., markandya, a., & barbier, e. b. (1989). blueprint for a green economy. earthscan. 11. piskulova, n. (2021.). "green" technologies in the global economy. russian council. retrieved from https://russiancouncil.ru/analytics-and-comments/analytics/zelenyetekhnologii-v-globalnoy-ekonomike/ 12. piskulova, n. a. (2013). "green" technologies: development prospects. on the path to sustainable development of russia, 65, 25-39. 13. programme of action for sustainable development and rio declaration. (1993). new york. 14. shkradyuk, i. e. (2010). trends in the development of renewable energy sources in russia and the world. wwf russia. 15. united nations. (2012). resolution adopted by the general assembly on july 27, 2012, 66/288. the future we want. retrieved june 3, 2020, from https://www.unisdr.org/files/solves/n1147612.pdf 16. ushakov, e. p. (2009). ecologically clean technologies in overcoming the economic crisis: a model analysis. economic science of modern russia, 4, 54-64. 17. vernadsky, v. i. (2004). biosphere and noosphere (i. p. evseeva, trans.). iris-press. isbn: 5-8112-0320-9. 18. wikipedia contributors. (2024). bmt’nin i̇qlim dəyişmələri konfransı. wikipedia. retrieved from https://az.wikipedia.org/wiki/bmt’nin_i̇qlim_dəyişmələri_konfransı_(2024) 19. zhuravskaya, m. a., smorodintseva, e. e., morozova, o. y., & utkin, g. v. (2015). organization and development of multimodal passenger transportation: an important part of the ecological strategy of jsc "russian railways". innovative transport, 3(17), 18-22. 20. hajiyeva, n., burkadze, z., & khalil, s. (2024). fostering green entrepreneurship education and the socioeconomic inclusion of women in the south caucasus region. in marketing and resource management for green transitions in economies (pp. 154183). igi global. https://monographies.ru/en/book/section?id=10434 agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 19, no. 1 (2025), pp. 220-235 220 economic burden and policy gaps in noncommunicable disease management in georgia: a health economics perspective n. mikava, s. gabritchidze nino mikava¹, simon gabritchidze² ¹ business and technology university, georgia https://orcid.org/0000-0002-9567-3958, e-mail: nino.mikava@btu.edu.ge ² university of georgia, georgia https://orcid.org/0009-0003-3043-7254, e-mail: s.gabritchidze@ug.edu.ge abstract: noncommunicable diseases (ncds) present a significant economic challenge for healthcare systems, particularly in lowand middle-income countries such as georgia. beyond the health sector, the escalating burden of ncds has substantial macroeconomic implications, including long-term fiscal pressure on public healthcare budgets, diminished labor market productivity, and increased poverty due to out-of-pocket healthcare expenditures. collectively, these effects can impede national development and economic growth potential. this study employs a health economics perspective to examine the direct and indirect costs incurred by patients and caregivers, the economic inefficiencies of the current healthcare system, and the broader implications for labor productivity and national development. utilizing a mixed-methods approach—comprising literature review, qualitative focus group discussions, and quantitative survey—the study identifies key financial barriers, caregiving burdens, infrastructure deficiencies, and policy inadequacies. the findings inform economic policy recommendations, including expanded public financing, improved cost-efficiency of ncd care, and enhanced integration of ncd prevention into national development strategies. the study advocates for urgent health system reforms that not only improve health outcomes but also mitigate the long-term economic impact of ncds. keywords: noncommunicable disease management, economic burden of ncds, efficient management of ncds, healthcare policy gaps in lmics. introduction noncommunicable diseases (ncds), encompassing cardiovascular diseases, diabetes, cancers, and chronic respiratory conditions, constitute the predominant cause of global morbidity and mortality. as of 2023, these diseases account for 74% of global deaths (who, 2024). their chronic nature, coupled with associated socio-economic burdens and pronounced disparities in healthcare access, particularly impacts lowand middle-income countries (lmics), where premature ncd mortality rates are over three times higher than in highincome nations (ferrana et al., 2023). the management of ncds necessitates substantial healthcare resources, long-term treatment plans, and significant financial expenditures, often surpassing the capacities of both patients and national health systems. in lmics, out-of-pocket spending is a prevalent and significant concern, contributing to poverty and diminished access to essential services. studies from global and regional contexts underscore that effective ncd strategies require not only medical but also systemic responses, emphasizing the necessity for integrated health services, early intervention, and financial risk protection (gheorghe et al., 2018). mental health challenges, social stigma, and inadequate support systems exacerbate the difficulties encountered by individuals with ncds. stigma and social isolation can deteriorate clinical outcomes and diminish treatment adherence. consequently, comprehensive, patienthttps://orcid.org/0000-0002-9567-3958 mailto:nino.mikava@btu.edu.ge https://orcid.org/0009-0003-3043-7254 mailto:s.gabritchidze@ug.edu.ge economic burden and policy gaps in noncommunicable disease management in georgia: a health economics perspective 221 centered approaches that incorporate mental and social support are imperative (patel & chatterji, 2015). advocacy plays a crucial role in addressing policy gaps. effective advocacy enhances awareness, promotes equitable policies, and encourages community engagement. the 5a model—awareness, acceptance, action, audit, and advocacy—has been established as a framework to facilitate patient-centered reform (kalra et al., 2023). globally, advocacy efforts have increasingly focused on prevention, rights-based access to care, and the meaningful inclusion of patient voices in decision-making processes (kiknadze & beletsky, 2013). to inform this study, advocacy agendas from india, tanzania, rwanda, malaysia, the philippines, kenya, ghana, mexico, and malawi were analyzed. across diverse contexts, common priorities emerged: the protection of human rights and dignity of ncd patients, comprehensive preventive measures, equitable access to healthcare, and the inclusion of patients in policy-making. georgia bears one of the most significant burdens of ncds within the european region, with ncds responsible for 93–97% of all mortalities (russell et al., 2019). according to the institute for health metrics and evaluation (ihme), the primary contributors to this burden are cardiovascular diseases, cancers, chronic respiratory diseases, and diabetes. the principal risk factors include high tobacco and alcohol consumption, inadequate diets, physical inactivity, and obesity. in 2013, georgia introduced a universal healthcare system to enhance accessibility. nevertheless, challenges remain, including unequal healthcare utilization, substantial out-of-pocket expenditures, underfunded outpatient care, and disparities in disease prevention. the prevalence of obesity, hypertension, and diabetes continues to escalate. as of 2015, georgia reported 630.7 ncd-related deaths per 100,000 population annually, with an escalating public health crisis attributed to lifestyle and socioeconomic factors (russell et al., 2019). persistent challenges within the country's healthcare system encompass several critical areas. healthcare access remains limited and fragmented, particularly in rural regions (gotsadze et al., 2017). socioeconomic inequities are evident, with mortality rates disproportionately high among lower-income and less-educated individuals, especially women (lomia et al., 2020). furthermore, behavioral risks, including smoking, alcohol consumption, and poor dietary habits, are prevalent (antia et al., 2022). there are significant implementation gaps, as health promotion programs suffer from a lack of coordination and funding. informal caregivers, predominantly women, experience considerable stress, burnout, and income loss due to the absence of formal support structures. despite the existence of state-run ncds programs by the national center for disease control and public health (ncdc), prevention efforts are under-resourced. barriers include low public awareness, weak enforcement of health policies, inadequate screening programs, and insufficient investment in community-based interventions. in summary, georgia faces a multifaceted ncd crisis. although national programs are in place, their implementation remains weak, and the economic burden continues to escalate. this study is guided by the central research question: what are the economic and systemic challenges associated with ncd management in georgia, and how can targeted policy reforms mitigate their impact? the working hypothesis posits that individuals living with ncds and their caregivers in georgia encounter significant financial and access-related barriers, contributing to avoidable economic losses and systemic inefficiencies. these challenges are exacerbated by insufficient policy attention to preventive care, psychological support, and inclusive decision-making. furthermore, the present study investigates these challenges from an economic perspective to support evidence-based reforms aimed at improving health outcomes and economic resilience. nino mikava, simon gabritchidze 222 methodology this study utilized a mixed-methods approach to examine the economic and systemic challenges associated with ncds in georgia. the research design incorporated both qualitative and quantitative methodologies to ensure a comprehensive understanding of patient and caregiver experiences, healthcare access, financial burdens, and policy gaps. the initial phase involved an extensive review of international literature, including peer-reviewed academic publications, national health strategy documents, and advocacy reports. the countries analyzed included armenia, ukraine, moldova, estonia, as well as india, tanzania, rwanda, malaysia, the philippines, kenya, ghana, mexico, and malawi. the objective was to identify global best practices and recurring challenges in ncd management, particularly those related to healthcare financing, equity, and patient-centered advocacy. in the subsequent phase of the research, five focus group discussions (fgds) were conducted, encompassing 55 participants, including individuals with ncds and their caregivers. these sessions were convened in tbilisi and various regional locations to ensure geographical diversity. a purposive sampling method was utilized to capture variations in gender, age, disease type, and urban-rural residence. the discussions focused on economic barriers, access to healthcare services, caregiving responsibilities, discrimination, and psychological stress. data from these discussions were recorded, transcribed, and analyzed using content analysis to identify key economic and social themes. subsequent to this, a quantitative survey was conducted. building upon qualitative insights, a structured questionnaire was developed utilizing the ncd global alliance framework to quantify the prevalence and intensity of the identified issues. the instrument underwent pilot testing with seven respondents to ensure clarity and reliability. data were collected from 197 participants, both online and in person. the survey gathered demographic information, disease status, healthcare access, insurance coverage, caregiving responsibilities, and indicators of financial burden. quantitative data were analyzed utilizing microsoft excel. descriptive statistics, including frequency distributions and percentage breakdowns, were employed to elucidate patterns in economic burden, service utilization, and the impact of caregiving on employment and income. ethical approval was secured from the institutional review board, and all participants provided written or verbal informed consent. anonymity and confidentiality were preserved by de-identifying all personal data and securely storing the dataset. limitations: although the study provides comprehensive insights, it is constrained by the modest sample size for qualitative analysis (55 participants), which may not fully represent the spectrum of ncd experiences in georgia. the use of purposive sampling may introduce bias, and socioeconomic or ethnic diversity was not systematically assessed. while rural representation was included, it warrants further exploration given the unique challenges faced by non-urban populations. moreover, this study predominantly utilized self-reported data, which may introduce recall bias, as well as the potential for underreporting or exaggeration of certain experiences, such as income loss, caregiving burden, or discrimination. respondents might also have been subject to social desirability bias when responding to sensitive inquiries. while these limitations are prevalent in survey-based research, they underscore the necessity for triangulation with administrative health records or longitudinal data in future investigations. economic burden and policy gaps in noncommunicable disease management in georgia: a health economics perspective 223 table 1. overview of the mixed-methods design phase description key output literature review review of scientific articles, global and national ncd advocacy and economic impact frameworks identified global themes and policy benchmarks fgds 5 focus groups with 55 participants in tbilisi and regional centers thematic insights on economic and social burden survey structured questionnaire to 197 ncd patients and caregivers (online and in-person) quantitative evidence on financial and labor impact by integrating qualitative narratives and quantitative measurements, this methodology facilitated a comprehensive, multidimensional assessment of the economic and social impacts of ncds in georgia, thereby establishing a foundation for targeted health policy reforms. literature review according to the world bank (2022), public health expenditure in georgia remains below the regional average, with only approximately 2.7% of gdp allocated to healthcare, in contrast to the eastern europe and central asia regional average of 5%. the prevalence of high out-of-pocket payments, which constitute over 50% of health expenditures in georgia, has been linked to financial hardship and decreased healthcare utilization among low-income households. the imf (2022) underscores that underfunded health systems in lmics frequently lead to fiscal inefficiencies and increased long-term costs due to delayed disease detection and unmanaged chronic illnesses (cebotari et al., 2022). moreover, investment in preventive ncd programs has demonstrated significant returns; estimates from the world health organization (who) suggest a return of usd 7 for every usd 1 invested in prevention-focused interventions. ncds including cardiovascular disease, cancer, diabetes, and chronic respiratory illnesses, represent an escalating health and economic challenge in georgia and other resourceconstrained countries. evidence from georgia indicates that the financial burden of managing chronic conditions is frequently prohibitive for individuals and places a significant strain on the healthcare system. a study on multiple sclerosis revealed that the annual direct medical costs exceeded $7,000 usd per patient receiving disease-modifying therapies, with medications constituting the primary cost driver (gugutsidze et al., 2022). furthermore, in cardiovascular care, quality improvement interventions in the imereti region of georgia—targeting both primary and secondary prevention—led to significant improvements in treatment adherence and outcomes. for instance, use of multi-drug therapy for secondary prevention of coronary artery disease increased from 6% to 91% in outpatient settings. the intervention also led to over $600,000 in savings by reducing unnecessary treatments and diagnostics (chitashvili, 2015). chronic respiratory diseases, such as copd, are frequently underreported and likely underestimated in georgia. a survey revealed that actual prevalence rates are five times higher than official statistics, indicating significant gaps in diagnosis and data collection (chkhaidze et al., 2016). in resource-deficient countries, cardiovascular diseases represent one of the most substantial ncd-related costs. a global review indicated that the cost per episode of stroke or coronary heart disease can exceed $5,000, while even basic hypertension treatment averages $22 per month, which is disproportionately high relative to household incomes in many countries (gheorghe et al., 2018). similarly, diabetes presents an escalating financial challenge. while specific georgian data on diabetes costs are limited, global models estimate that diabetes treatment and https://consensus.app/papers/rationale-for-improving-integrated-service-delivery-chitashvili/3c742dab12775a5a82f5734e62f91841/?utm_source=chatgpt nino mikava, simon gabritchidze 224 complications (e.g., kidney failure, cardiovascular events) substantially raise healthcare expenditures in lmics. indirect costs due to reduced productivity are often equal to or greater than direct medical costs, compounding the burden (bloom et al., 2011). in pakistan, for example, the economic burden of mental illness was found to be $4.3 billion annually, with 59% attributed to lost productivity—a dynamic likely mirrored in other ncds like diabetes and heart disease (malik & khan, 2016). in georgia, the policy and legislative frameworks have encountered challenges in keeping pace with the escalating burden of ncds. the existing health laws lack standardized definitions for essential terms such as medical malpractice and informed consent, resulting in ambiguity in the delivery of care and the protection of patient rights (kiknadze & beletsky, 2013). additionally, barriers persist in health financing and workforce structure. a study on mental health services identified inadequate funding mechanisms, geographic disparities in service availability, and significant out-of-pocket expenses for medications and transportation (sulaberidze et al., 2018). these findings align with reports from the world health organization and the world economic forum, which highlight that weak primary healthcare and fragmented systems are central policy gaps in the ncd responses of resource-constrained countries (bloom et al., 2011). to review comparative insights from regional examining the management strategies for ncds in resource-constrained countries and neighboring nations offers valuable insights into georgia's healthcare landscape. for example, in armenia, despite the accessibility of primary healthcare (phc) facilities, utilization remains low, with only 4.1 visits per capita recorded in 2017. this underutilization is primarily due to concerns regarding the quality of care and associated costs. furthermore, a substantial portion of healthcare financing is derived from out-of-pocket payments, resulting in fragmented funding and inefficiencies in service delivery (world bank, 2024). another country under review is ukraine. prior to the healthcare reforms initiated in 2017, ukraine's system was characterized by high out-of-pocket expenses and inefficient hospital utilization. the reforms have sought to reduce dependence on hospital care, enhance phc, and implement payment models that incentivize the effective use of resources (swecare foundation, 2022). ncds are responsible for approximately 88% of annual deaths in moldova. efforts to address this significant health burden have included enhancing access to quality healthcare, reforming public health and primary healthcare (phc), and improving health system financing. despite these initiatives, challenges remain, particularly concerning the availability and quality of ncd services at the phc level (leon & xu, 2023). in contrast, estonia has implemented a comprehensive national strategy for cardiovascular disease prevention (2005–2020), which emphasizes risk factor management, health promotion, and the strengthening of phc. these efforts have led to a substantial reduction in preventable mortality and serve as a model for integrating public health initiatives into national health plans (european society of cardiology, 2020). the regional experiences highlight the critical importance of robust primary healthcare (phc) systems, equitable financing mechanisms, and comprehensive national strategies in the effective management of ncds. georgia can derive valuable insights from these countries to guide its own healthcare reforms and policy development. georgia's experience in managing ncds such as cardiovascular disease, diabetes, and chronic respiratory illness mirrors broader trends observed in lmics, characterized by a significant economic burden exacerbated by fragmented services and policy inertia. nevertheless, evidence from both georgia and other resource-constrained countries indicates that low-cost, evidence-based interventions and integrated care models can reduce costs and improve outcomes. to address these challenges, georgia must strengthen legal frameworks, enhance financing strategies, and expand integrated prevention and treatment programs nationwide. https://consensus.app/papers/from-burden-to-best-buys-reducing-the-economic-impact-of-bloom-chisholm/19b26f3b54ae554ba201a13bd2e41899/?utm_source=chatgpt https://consensus.app/papers/economic-burden-of-mental-illnesses-in-pakistan-malik-khan/76c0dae129ca54609cd62d266b208748/?utm_source=chatgpt economic burden and policy gaps in noncommunicable disease management in georgia: a health economics perspective 225 results qualitative findings: key challenges faced by patients with ncds in georgia focus group discussions (fgds) involving 55 participants elucidated a wide array of challenges encountered by individuals living with ncds and their caregivers in georgia. several core themes emerged from the discussions. the foremost theme is stigma and discrimination. participants reported pervasive stigma associated with obesity, diabetes, and cancer, manifesting in public, healthcare, and workplace environments. notably, weightrelated stigma, misinformation regarding diabetes, and discrimination against cancer survivors—such as perceptions of their incapacity to work and employers and coworkers questioning their productivity—were particularly prevalent. elderly patients were frequently perceived as burdens within healthcare facilities, and children with type-1 diabetes experienced bullying in school settings. the resultant social exclusion and emotional distress deterred many from seeking essential medical care. another key challenge was psychological and emotional burden. patients frequently experienced emotional distress, including anxiety, depression, low motivation, and emotional eating behaviors. cancer patients and caregivers reported limited access to mental health services and a lack of psycho-oncology support. psychological care was virtually inaccessible in rural areas, and there was a widespread need for structured mental health integration within ncd care. furthermore, geographic disparities in care access were widely reported, particularly in rural areas, where patients struggled to consult specialists like endocrinologists and cardiologists. long waiting times, absence of local rehabilitation services, and a lack of structured follow-up care for post-operative and oncology patients were noted. rehabilitation services for stroke, bariatric surgery, or cancer were especially scarce. financial constraints were still another challenge regarding ncd management. respondents frequently cited the high cost of diagnostics, medications, and rehabilitation services as barriers to continuous care. out-of-pocket expenses for obesity, diabetes, and cancer treatments were often prohibitive. state-funded programs covered only a fraction of necessary interventions, and patients with low income were often forced to forgo treatments. nutritional supplements, physiotherapy, and psychological support remained unaffordable for many. distrust in healthcare providers was underscored by the respondents. patients expressed skepticism about the effectiveness and empathy of healthcare professionals. many reported generic, non-individualized treatment plans and poor communication. the perception of healthcare providers as dismissive or judgmental—especially towards obese patients— contributed to a lack of engagement in care. moreover, georgia lacks peer support groups or patient advocacy platforms for individuals with ncds. many respondents expressed the need for environments where patients could share experiences, build motivation, and advocate for tailored policies. while online platforms exist, they are often commercialized and ineffective. one of the major problems in ncds management in georgia is a lack of multidisciplinary and holistic care. respondents strongly emphasized the need for integrated care models involving nutritionists, psychologists, and physical activity experts. patients often had to coordinate their care independently, and post-treatment rehabilitation was seldom available. school environments were reported as unsupportive of children with special dietary needs due to obesity or type-1 diabetes. similarly, low public awareness and a lack of accessible screenings contributed to delayed diagnoses and late-stage interventions, particularly for cancers and cardiovascular conditions. preventive health education in schools and public campaigns were largely absent. barriers to healthy living included the high cost of nutritious food and fitness services. nino mikava, simon gabritchidze 226 the qualitative analysis underscores the systemic, economic, and psychosocial burdens experienced by patients with ncds in georgia. these insights provide a foundation for evidence-based policy recommendations aimed at fostering equitable, person-centered, and economically sustainable ncd care. quantitative findings: to evaluate a degree of impact and importance of identified challenges and needs in the literature review and focus-group discussions, patients with ncds and/or caregivers were surveyed using structured questionnaire. this article presents an analysis of survey data collected from 197 respondents, focusing on chronic diseases, healthcare challenges, and public perceptions regarding treatment accessibility and caregiving. the insights are based on demographic details, healthcare barriers, and disease types. to review main aspects of the demographics, gender distribution shows a mix of male and female participants, where 67% of them were female and 33% male. the median age of respondents is 59 years, indicating that a majority of participants are from middle-aged and older populations (minimum age22 years; maximum age -90 years; standard deviation – 13.25 years). among respondents of the survey, 75% were individuals having one or more ncd and 25% were caregivers of the chronic patients (table 2). table 2. participants’ demographics table variable category percentage (%) gender female 67% male 33% age (mean: 59, sd: 13.25) 22–39 14% 40–59 39% 60+ 47% residence tbilisi 27% imereti 22% shida kartli 14% samegrelo-zemo svaneti 10% kvemo kartli and other regions 27% status person living with ncd(s) 75% caregiver of person with ncd 25% ethnicity georgian 93% armenian 3% azerbaijanian 3% ossetian 1% survey participants identified several areas of health protection and promotion that receive inadequate attention from national authorities. the most commonly cited issues include: 1. early disease prevention and healthcare access economic burden and policy gaps in noncommunicable disease management in georgia: a health economics perspective 227 o limited early screening programs o geographic disparities in access, especially in rural areas like javakheti o shortage of specialists for complex conditions o inadequate support for people with disabilities 2. neglect of healthy lifestyle promotion o inadequate promotion of healthy diets and exercise among children o widespread availability and advertising of unhealthy foods and beverages o absence of structured programs for encouraging lifelong healthy behaviors 3. poverty and health inequities o recognition of poverty as a root cause of chronic illness o lack of national strategies to mitigate the health consequences of poverty 4. demand for stricter regulations o public support for banning energy drinks, tobacco, and alcohol for youth o calls to enhance safety and infrastructure for walking and cycling 5. overall neglect of public health o respondents perceive a lack of political will and priority given to prevention o infrequent or ineffective public health campaigns (diagram #1 & diagram #2) diagram 1. health protection and promotion issues not receiving adequate attention from national decision-makers. diagram 2. challenges related to receiving care and support for the patients with ncds. nino mikava, simon gabritchidze 228 it needs to be emphasized, that when asked if their ncds could be prevented at earlier stage71% of respondents gave positive answer (diagram #3). those participants who answered, that ncds would have been possible to prevent, were asked further to select reason for not seeking medical care earlier. financial difficulties, as a reason for seeking medical care late, when ncd had already worsened – was chosen by 36% of respondents; 17% selected option – “due to travel difficulties and long distances, i sought medical care late, when my ncd had already worsened”; 15% answered – “i have little trust in my local family doctor and medical facility, so i delayed seeking medical help in other cities until my disease had already progressed” and 32% answered “other”. it should be emphasized that common topics in the comments of respondents, while explaining “other reasons” for not seeking medical care earlier were – lack of education about these conditions / low health literacy and lack of qualification of local, regional doctors (diagram #4): diagram 3. respondents’ views regarding possibility of prevention of ncds. diagram 4. reasons why prevention of ncds was not possible economic burden and policy gaps in noncommunicable disease management in georgia: a health economics perspective 229 another topic of inquiry was public engagement in reducing ncd burden. participants were also asked how they would like to be involved in ncd prevention and care efforts. according to the results, 61% would share experiences with peers; 41% supported engaging in discussions with policymakers; 21% favored contributing to awareness with healthcare providers and community organizations and 20% proposed founding new peer support networks (diagram 5). when asked what they needed to become more engaged in community-level ncd response, top responses included access to reliable information, support platforms, opportunities to connect with others, and structured engagement mechanisms. diagram 5. opinions of respondents how they would become more actively involved in reducing the negative impact of ncds in the country. diagram 6. challenges related to caring for individuals living with ncds. to review caregiving challenges for patients with ncds. caregivers reported a broad array of difficulties related to providing care for individuals with ncds. nino mikava, simon gabritchidze 230 the top-rated challenges were financial burden, burnout, and transportation logistics. additional concerns included: o high cost and difficulty of hiring professional caregivers o inflexible workplace policies o caregivers quitting jobs to provide full-time support o lack of caregiver training and resources o emotional exhaustion and mental health strain o perceived indifference and dismissiveness from healthcare providers (diagram 6). furthermore, when asked which caregiver-related issues were most neglected by government policy 62% highlighted the lack of caregiver training, consultation, and informational support; 57% of the respondents called for better access to respite care; 42% demanded protected leave policies and 29% emphasized the need for accessible infrastructure and transport for disabled individuals (diagram 7). diagram 7. issues related to the role of caregivers for individuals with ncds do not receiving adequate attention from national decision-makers. these responses confirm that caregivers, like patients, face systemic, emotional, and financial burdens—and are currently underserved in georgia’s ncd response framework. together, these findings further illustrate the broad scope of challenges faced by ncd patients and caregivers, emphasizing the urgent need for equity-based, multi-level health system reform. discussions studies in comparable resource-constrained countries have shown that investments in ncd prevention and primary care yield high returns on investment (roi). for example, the who estimates that every dollar invested in strategic ncd interventions generates a return of at least seven dollars in economic benefits due to avoided treatment costs and productivity losses. a cost-effectiveness analysis from india demonstrated that community-based hypertension and diabetes screening programs saved $2–3 for every $1 spent by reducing economic burden and policy gaps in noncommunicable disease management in georgia: a health economics perspective 231 complications and hospitalizations. similar outcomes were observed in mexico and kenya, where front-loaded investments in lifestyle interventions led to reductions in future healthcare expenditures and improved workforce stability. in georgia’s context, delayed detection of ncds and limited access to affordable care increase reliance on high-cost hospital services, which are financially unsustainable and less effective. this inefficiency in spending not only affects individual health outcomes but also places a long-term fiscal burden on the national healthcare budget. from a macroeconomic perspective, failure to address ncds effectively could have severe implications for national development. chronic illnesses disproportionately affect working-age adults, leading to increased absenteeism, early retirement, and reduced labor market participation. this trend can undermine georgia’s human capital, decrease productivity, and reduce tax revenue, thereby slowing economic growth. additionally, households facing catastrophic health expenditures are at greater risk of falling into poverty, further exacerbating socioeconomic disparities and weakening the consumer base needed for domestic economic resilience. while this study does not calculate precise monetary figures for indirect costs, it does identify and contextualize them within the framework of health economics. for example, survey data revealed that many caregivers—especially women—reported job loss, reduced working hours, or inability to work due to caregiving responsibilities. these effects translate into significant productivity losses at the household and national level. additionally, delays in seeking care due to cost or travel costs increase the long-term economic burden of ncds through complications and hospitalizations that could have been prevented. the findings of this study illuminate a significant economic load and structural inefficiencies within georgia’s response to ncds, resonating with broader concerns in health economics and public finance. the combination of inadequate funding for outpatient and preventive care, inequitable access to services, and high out-of-pocket expenditures underscores the urgent need for more cost-effective health system designs. these issues directly impact economic productivity, with working-age individuals and caregivers bearing financial and psychological strain that translates to lost labor hours and reduced workforce participation. according to world bank data, georgia’s public expenditure on health stood at approximately 2.7% of gdp in recent years, which is below the average for eastern europe and central asia, whereas oecd countries spend an average of around 8.8% of gdp on healthcare, according to oecd health statistics (2022). this underinvestment is reflected in gaps in primary care, prevention, and chronic disease management—areas critical to ncd control. additionally, over 50% of health expenditures in georgia come from out-of-pocket payments, posing a substantial financial burden on households and leading to care delays or avoidance. the disproportionate burden on low-income and rural populations reflects not only health disparities but also economic exclusion—hindering equitable economic growth. investment in early detection, preventive health education, and the integration of costeffective digital tools like telemedicine and remote monitoring are not merely health-sector improvements but economic imperatives. international evidence shows that investing in prevention and chronic care coordination can reduce long-term healthcare costs and enhance human capital outcomes. georgia’s current underinvestment in such services is a missed opportunity to mitigate future fiscal strain and social costs. moreover, the study’s findings on the invisibility of caregivers within national policy echo economic studies highlighting unpaid labor's hidden contribution to healthcare and welfare systems. providing financial and legal support to informal caregivers not only nino mikava, simon gabritchidze 232 addresses social justice concerns but also strengthens labor market resilience by reducing premature workforce exit, especially among women. the observed lack of patient and caregiver inclusion in policymaking also reflects a governance deficit with economic implications. stakeholder engagement in healthcare decision-making is associated with higher system efficiency, improved outcomes, and greater social return on investment. ultimately, the georgian case demonstrates the need for a comprehensive economic strategy that integrates health sector reform with broader social protection, gender equity, and labor policy. such an approach would move beyond siloed budgeting to a model where health investment is seen as a lever for national productivity and inclusive growth. conclusions and policy recommendations present study highlights the complex and interrelated challenges faced by individuals living with ncds and their caregivers, in georgia. key issues identified include inadequate healthcare access, systemic inefficiencies, high financial burden, stigma and discrimination, lack of psychological support, and insufficient caregiver assistance. healthcare accessibility and infrastructure problems are one of the central findings. patients—especially in rural areas—face prolonged waiting times and limited access to specialized care. rehabilitation services for post-treatment recovery are underdeveloped, and the absence of a multidisciplinary approach results in fragmented and ineffective care pathways. financial barriers should be emphasized as key challenge hindering seeking earlier care and prevention for the individuals living with ncds. state health programs provide limited coverage for medications, diagnostics, and post-treatment support. many patients face prohibitive out-of-pocket costs that delay or prevent access to timely care. preventive services are similarly underfunded, deterring early intervention. widespread social and mental health stigma, especially for obesity, cancer, and diabetes, impairs treatment-seeking behavior and worsens mental health outcomes. psychological services are largely inaccessible, particularly in non-urban settings. lack of prevention and education is a common cause of delayed diagnosis. poor public awareness and low engagement with preventive health services emerged as major barrier for the prevention and early treatment of ncds. schools and workplaces lack robust health promotion programs. to reduce long-term economic strain and prevent avoidable mortality, georgia must prioritize equitable funding mechanisms and scalable preventive services at the phc level. caregivers face emotional exhaustion, job loss, and lack of formal support mechanisms. protected/paid caregiver leaves, financial aid, and respite services are currently absent from policy frameworks. exclusion from policy making. there is little to no formal involvement of patients or caregivers in the creation of health policies. peer support networks and advocacy groups are scarce, limiting public engagement. according to the revealed challenges and situational analysis, as well as on the basis of reviewed best practices, policy recommendations are as follows: in order to enhance healthcare access and infrastructure expansion of telemedicine services is highly recommended, as well as, implementing structured follow-up and rehabilitation plans. financial support needs to be strengthened. broadening state coverage of diagnostics, medications, and rehabilitation, provision of subsidies for lifestyle interventions and healthy food and creation of financial aid programs for low-income patients and caregivers is advised. economic burden and policy gaps in noncommunicable disease management in georgia: a health economics perspective 233 to combat stigma and expand mental health support, launching national campaigns is recommended, to normalize ncds and reduce stigma. moreover, it is crucial to train healthcare providers in empathy and patient-centered care and to integrate psycho-oncology and general psychological counseling into ncd programs. for the purpose of improving preventive healthcare, national health education and early screening campaigns need further promotion. furthermore, to enforce regulations on alcohol, tobacco, and unhealthy food marketing and to incorporate ncd education into school curricula should be considered. to support caregivers, introducing respite care services, and policies for paid caregiver leave should be thought. moreover, workplace flexibility and provision of caregiver training and informational support are strongly recommended. still another important area of focus is facilitation of patient advocacy and participation. for this purpose, creating formal mechanisms for patients and caregivers to shape policy and to support the development of peer-led support and advocacy groups should be considered, ensuring the inclusion of individuals with lived experiences in national planning. table 3. summary of key challenges, impacts and recommended policy responses for ncd management in georgia challenge observed impact policy recommendation high out-of-pocket (oop) expenditures delayed care-seeking; financial hardship; increased disease burden expand state insurance coverage; subsidize essential ncd medications rural access gaps inequitable access to diagnosis and treatment; geographic disparities strengthen phc infrastructure in rural areas; deploy mobile/telemedicine units weak preventive service delivery late-stage disease detection; avoidable complications integrate ncd screening into routine phc; fund public awareness campaigns caregiver burden and lack of protections income loss, burnout, informal/uncompensated care introduce caregiver leave policies and social protection mechanisms fragmented health information systems poor continuity of care; inefficiencies in tracking and planning implement interoperable electronic health records (ehr) systems low provider incentives for prevention overemphasis on treatment rather than prevention reform provider payment models to reward preventive care and early intervention to enhance strategic planning and resource allocation, the following recommendations were analyzed and organized by timeframe and scope: short-term vs. long-term and low-cost vs. systemic reform. short-term and low-cost recommendations consist of: o launching national awareness campaigns to reduce stigma and promote early detection. o training healthcare providers in delivering empathetic, patient-centered care. o providing informational support and virtual peer platforms for patients and caregivers. o expansion of telemedicine services, particularly for rural communities. o strengthen school-based health education and prevention programs. nino mikava, simon gabritchidze 234 the following three reforms were prioritized based on their scope of feasibility and immediate impact: 1. increasing funding for outpatient care and essential medications, particularly targeting low-income and rural populations; 2. establishing structured caregiver support programs to address growing informal care burdens; 3. expansion of telemedicine and digital health services to bridge access gaps and improve cost-efficiency. moreover, other recommendations concerning medium to long-term systemic reforms include: o investing in rehabilitation services and multidisciplinary chronic disease management centers o formalizing patient and caregiver inclusion in policy development and health governance o implementing national ncd prevention and care strategy with integrated financing mechanisms o developing national ncd registry and digital health information system to enable better surveillance, outcome tracking, and policy evaluation. robust data infrastructure is critical for designing effective interventions, monitoring program performance, and informing equitable health financing decisions. by implementing these recommendations, georgia can strengthen its response to the growing burden of ncds, enhance system-wide efficiency, and significantly improve the health and wellbeing of patients and caregivers. references 1. antia, n., berg, c. j., sturua, l., gagnidze, n., lomidze, g., & goodman, m. (2022). research capacity training on environmental health and noncommunicable diseases in the country of georgia: challenges and lessons learned during the covid-19 pandemic. international journal of environmental research and public health, 19(13), 8154. https://doi.org/10.3390/ijerph19138154 2. bloom, d. e., cafiero, e. t., jané-llopis, e., abrahams-gessel, s., bloom, l. r., fathima, s., & weiss, j. (2011). the global economic burden of noncommunicable diseases. world economic forum. https://www.weforum.org 3. cebotari, a., garrido, l., kangur, a., tiffin, a., & vtyurina, s. (2022). financing vaccine equity: funding for day zero of the next pandemic (imf working paper no. 2022/099). international monetary fund. https://www.imf.org//media/files/publications/wp/2022/english/wpiea2022099-print-pdf.ashx 4. chkhaidze, i., maglakelidze, t., & mirtskhulava, v. (2016). chronic respiratory diseases at primary health care level in georgia: results of survey and spirometry testing. public health of georgia, 3(1), 20–25. 5. chitashvili, t. (2015). rationale for improving integrated service delivery: reduced cost and improved care in georgia / justificación de la mejora en la prestación de servicios integrados: reducción de costos y mejora en la atención en georgia. international journal of integrated care,15. https://doi.org/10.5334/ijic.2333. 6. european society of cardiology. (2020). eapc country of the month – estonia. retrieved from https://www.escardio.org/sub-specialty-communities/european-association-ofpreventive-cardiology-(eapc)/advocacy/prevention-in-your-country/country-of-themonth-estonia 7. ferranna, m., cadarette, d., varghese, b., & bloom, d. e. (2023). the macroeconomic burden of noncommunicable diseases and mental health conditions in south america: a modelling study. plos one, 18(6), e0285267. https://doi.org/10.1371/journal.pone.0285267 https://www.weforum.org/ https://doi.org/10.5334/ijic.2333 https://www.escardio.org/sub-specialty-communities/european-association-of-preventive-cardiology-%28eapc%29/advocacy/prevention-in-your-country/country-of-the-month-estonia https://www.escardio.org/sub-specialty-communities/european-association-of-preventive-cardiology-%28eapc%29/advocacy/prevention-in-your-country/country-of-the-month-estonia https://www.escardio.org/sub-specialty-communities/european-association-of-preventive-cardiology-%28eapc%29/advocacy/prevention-in-your-country/country-of-the-month-estonia economic burden and policy gaps in noncommunicable disease management in georgia: a health economics perspective 235 8. gheorghe, a., griffiths, u., murphy, a., legido-quigley, h., lamptey, p., & perel, p. (2018). the economic burden of cardiovascular disease and hypertension in lowand middle-income countries: a systematic review. bmc public health, 18, 975. https://doi.org/10.1186/s12889018-5806-x 9. gotsadze, g., tang, w., shengelia, n., & zoidze, a. (2017). determinants analysis of outpatient service utilisation in georgia: can the approach help inform benefit package design? health research policy and systems, 15, article 36. https://doi.org/10.1186/s12961-017-01975 10. gugutsidze, t., gigineishvili, d., & kutateladze, t. (2022). economic burden of multiple sclerosis in georgia. health economics and policy, 4(1), 55–64. 11. kalra, s., verma, m., & sahay, r. (2023). the 5a model for non-communicable disease advocacy. jpma: the journal of the pakistan medical association, 73(5), 1132–1133. https://doi.org/10.47391/jpma.23-35 12. kiknadze, n., & beletsky, l. (2013). overview of the gaps in the health care legislation in georgia. georgian journal of public health policy, 2(1), 14–19. https://consensus.app/papers/overview-of-the-gaps-in-the-health-care-legislation-in-kiknadzebeletsky/3d4868e3770e5beabdc74487beb707ae/?utm_source=chatgpt 13. leon, n., & xu, h. (2023). implementation considerations for non-communicable diseaserelated integration in primary health care: a rapid review of qualitative evidence. bmc health services research, 23, 169. https://doi.org/10.1186/s12913-023-09151-x 14. lomia, n., berdzuli, n., pestvenidze, e., sturua, l., sharashidze, n., kereselidze, m., & straypedersen, a. (2020). socio-demographic determinants of mortality from chronic noncommunicable diseases in women of reproductive age in the republic of georgia: evidence from the national reproductive age mortality study (2014). international journal of women’s health, 12, 89–105. https://doi.org/10.2147/ijwh.s235755 15. malik, m. a., & khan, m. m. (2016). economic burden of mental illnesses in pakistan. journal of mental health policy and economics, 19(4), 193–200. 16. organisation for economic co-operation and development (oecd). (2022). oecd health statistics 2022. oecd publishing. retrieved from https://www.oecd.org/en/data/datasets/oecd-health-statistics.html 17. patel, v., & chatterji, s. (2015). integrating mental health in care for noncommunicable diseases: an imperative for person-centered care. health affairs, 34(9), 1498–1505. https://doi.org/10.1377/hlthaff.2015.0791 18. russell, s., sturua, l., li, c., morgan, j., topuridze, m., blanton, c., hagan, l., & salyer, s. (2019). the burden of non-communicable diseases and their related risk factors in the country of georgia, 2015. bmc public health, 19, article 6785. https://doi.org/10.1186/s12889-0196785-2 19. sulaberidze, l., green, j., chikovani, i., uchaneishvili, m., & gotsadze, g. (2018). barriers to delivering mental health services in georgia: a qualitative study. bmc health services research, 18, 350. https://doi.org/10.1186/s12913-018-3161-2 20. swecare foundation. (2022). the digital transformation of healthcare – health by sweden. stockholm: swecare. https://www.swecare.se/healthbysweden/the-digital-transformation-ofhealthcare/ 21. world bank. (2022). georgia human capital review. washington, dc: world bank group. https://documents1.worldbank.org/curated/en/099435008172221325/pdf/p1735300c417d202 6096d50dd8d8218cd90.pdf 22. world health organization. (2024). progress on the prevention and control of noncommunicable diseases and the promotion of mental health and well-being: report of the secretary-general. united nations general assembly document a/79/762. https://cdn.who.int/media/docs/default-source/ncds/unsg-report-on-ncds-2025.pdf https://doi.org/10.1186/s12889-018-5806-x https://doi.org/10.1186/s12889-018-5806-x https://consensus.app/papers/overview-of-the-gaps-in-the-health-care-legislation-in-kiknadze-beletsky/3d4868e3770e5beabdc74487beb707ae/?utm_source=chatgpt https://consensus.app/papers/overview-of-the-gaps-in-the-health-care-legislation-in-kiknadze-beletsky/3d4868e3770e5beabdc74487beb707ae/?utm_source=chatgpt https://doi.org/10.1186/s12913-023-09151-x https://www.oecd.org/en/data/datasets/oecd-health-statistics.html https://doi.org/10.1186/s12913-018-3161-2 https://documents1.worldbank.org/curated/en/099435008172221325/pdf/p1735300c417d2026096d50dd8d8218cd90.pdf https://documents1.worldbank.org/curated/en/099435008172221325/pdf/p1735300c417d2026096d50dd8d8218cd90.pdf https://cdn.who.int/media/docs/default-source/ncds/unsg-report-on-ncds-2025.pdf agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 19, no. 1 (2025), pp. 154-162 154 fundamentals of innovation in modern banking services n. khudiyev, r. mammadli nizami khudiyev¹, ragib mammadli² ¹ ² azerbaijan state university of economics (unec), azerbaijan ¹ https://orcid.org/0000-0002-9164-4009, e-mail: nizami_khudiyev@unec.edu.az ² https://orcid.org/0009-0009-3721-3548, e-mail: mammadli.raqib.mammadali.2023@unec.edu.az abstract: in today's constantly evolving technological world, banks need to implement modern innovations to remain competitive in banking environment and meet the growing needs of their customers. innovative advancements help banks digitize their banking services, operations and management, improve efficiency, productivity and functionality, reduce costs, create new banking products and improve existing ones. in addition to their countless benefits, innovations also create numerous potential risks and challenges for banks. using a mixed research methodology, this article examines the main types of innovation implemented by banks in banking services and management, highlights their main characteristics and analyzes their common benefits and challenges. demographic analysis part of the article explores the number of users of digital banking services worldwide and the factors influencing their adoption of modern innovations. based on the findings of this article, the conclusion part offers brief recommendations to banks for the effective implementation of modern innovations and maximizing their benefits. keywords: banking innovation, innovative banking services, incremental innovation, disruptive innovation, substantive innovation 1. introduction until the 20th century, the primary activity of banks was accepting deposits and granting loans to individuals and legal entities. but, the invention of the computer in the 1960s and subsequent technological advances revolutionized all sectors, including finance and banking. they enabled banks to expand their operations and create new banking services. modern innovative technologies bring countless benefits to banks, improving their efficiency, productivity, and functionality, and making banking services more accessible to customers. however, there are several innovation strategies in the banking industry and banks should analyze and decide what type of innovation should be implemented to stay ahead of competitors. (campanella & peruta, 2020). the purpose of this article is to explore the main types of innovation in the banking sector, analyze the benefits and challenges of innovative banking services, and provide a detailed overview of how they are reshaping the banking environment. https://orcid.org/0000-0002-9164-4009 mailto:nizami_khudiyev@unec.edu.az https://orcid.org/0009-0009-3721-3548 mailto:mammadli.raqib.mammadali.2023@unec.edu.az nizami khudiyev, ragib mammadli 155 2. types of innovation in modern banking services innovation in banking refers to the creation of new services, products, or processes that enhance the existing banking experience. it is essential for meeting growing customer needs, improving efficiency and remaining competitive in the banking environment. below are examples of the main types of innovation implemented by banks to achieve different goals. incremental innovation in banking services incremental innovation plays an important role in improving banking services and products. instead of developing completely new services and products, incremental innovation concentrates on existing ones. it gradually and continuously improves the functionality, efficiency and convenience of existing banking services. incremental innovation has lower risks compared to other types of innovation strategies and allows banks to achieve noticeable results in a short period of time. (ravi, 2021). one of the main benefits of incremental innovation is the ability to facilitate customer access to banking services and products, meets their needs and increases customer satisfaction. from an internal banking management perspective, incremental innovation automates a large part of banking tasks, helps banks reduce operational costs and improve management processes. the main purpose of incremental innovation is to enable banks to respond immediately to new emerging market trends, meet growing customer needs, maintain their competitiveness and gain a technological advantage over their competitors in the banking sector. mobile banking applications perfectly illustrate the incremental innovation approach of banks. they regularly update banking apps to improve performance, strengthen security methods, add new features and improve the interface to make it more user-friendly. (parameswar & dhir, 2023). while incremental innovation helps banks reduce costs and optimize operational efficiency, implementing such minor technological improvements in banking management and services also requires financial investments. moreover, with the constant growth of customer needs and expectations and the rapid evolution of technological advancements, incremental improvements alone may not always be sufficient. in such cases, banks need to implement more advanced innovations in order to achieve long-term profits. disruptive innovation in banking services disruptive innovation fundamentally transforms the banking services landscape, brings new solutions to traditional services and drastically changes customer behavior. it introduces new banking services and financial products or creates cheaper, simpler, and more accessible alternatives to existing offerings. the primary objective of disruptive innovation is to offer banking services and products to underserved markets and people who are unbanked or live in remote regions and may not have access to conventional financial services. typically, such innovation begins with limited market adoption and offers fewer features compared to existing services. however, over time, it gradually expands its offering, demonstrates its value, and attracts new customers. as customer acceptance of disruptive innovation increases and it gains traction in the market, innovation begins to disrupt traditional banking business models in the banking sector and challenge the dominance of banking institutions. fundamentals of innovation in modern banking services 156 neobanks are a classic example of disruptive innovation. these digital financial institutions allow customers to use banking services completely online, without visiting a bank branch. unlike traditional institutions, neobanks operate only in digital format, without specific infrastructure or branches. by minimizing overhead expenses, they offer digital banking services with lower rates than traditional banking services. (world bank, 2023). peer-to-peer (p2p) lending platforms are another example of disruptive innovation. these platforms offer direct lending and borrowing services to customers and disrupt traditional banking models in two ways: by removing intermediaries (banks) between individuals, p2p platforms offer more favorable interest rates for both lenders and borrowers. secondly, these platforms facilitate access to credit for people who are not eligible for bank loans. despite its countless advantages, disruptive innovation also carries several risks. although it aims to offer more innovative services, customers accustomed to traditional banking services may refuse to adopt new and unfamiliar services. developing such innovative services and products also requires considerable financial investment. project failure can result in heavy financial losses for the organization. (sharma, 2022). additionally, newly developed services may present security and regulatory issues that require special attention from service providers. substantive innovation in banking services substantive innovation involves making major changes or improvements to existing banking services, products, management processes and banking business models to significantly improve productivity, efficiency and effectiveness. this type of innovation falls somewhere between incremental and disruptive innovation. substantive innovation does not completely disrupt existing business models, but it brings more significant improvements than incremental innovation and exerts a stronger impact on the banking sector. (kittiwat, 2023). substantive innovation often introduces new services, products, technologies or systems that improve the functionality and efficiency of banking operations, meets new customer expectations and brings additional value to the overall banking experience. it sometimes relies on customer feedback to improve banking services and products or find solutions to previously unmet needs. one of the most shining examples of substantial innovation is the integration of artificial intelligence (ai) technologies in the banking. these technologies enable banks to predict potential risks and identify signs of fraud and suspicious transactions. ai-powered programs help banks analyze large volumes of data in a short time and speed up the decision making process. (world bank, 2023). open banking is another example of substantial innovation, which is reshaping the relationship between banks, customers and third-party service providers. thanks to this technological innovation, banks securely share their customers' data (with their consent) with third-party service providers and enable them to create new banking services and financial products. these platforms then allow customers to access a wider range of financial services than those offered by banks. (arnaboldi, 2021). substantive innovation is characterized by a deeper and broader transformative impact on banking services, products, or management. the development of such innovation takes nizami khudiyev, ragib mammadli 157 considerable time and requires significant financial resources, but once introduced, it ensures long-term benefits and efficiency for banks. after the introduction, it is also necessary to train the bank staff, to teach them how to use the new technological advances correctly. to develop a substantial innovation, banks typically collaborate with other banks and financial institutions. by combining their resources and experience, banks and financial organizations accelerate the process of developing new technologies, share associated costs and maximize end results. open and closed innovations in banking the primary objective of each of the above-mentioned types of innovation is to improve banking services and management, as well as increase functionality and efficiency. however, there are also two sources of innovation in terms of banks obtaining these innovations: open and closed. open innovation involves banks acquiring a new technology, application, or service from external sources, such as technology companies or other financial institutions. acquiring from external sources allows banks to avoid research and development expenses and quickly access the latest innovations on the global market. however, innovation developed by thirdparty organizations sometimes do not offer banks exactly what they are looking for. additionally, such innovation is more sensitive in terms of security and increases the risks of cyberattacks, data theft and financial losses. (parameswar & dhir, 2023). technological advancement developed by banks themselves are called closed innovation. this innovation relies heavily on the internal resources of banks, which are developed based on the banks' ideas and research. (balkon, 2022). closed innovation helps banks develop innovation that meet their needs. furthermore, these types of innovations are more secure because they are known and used only by the bank. however, developing closed innovation can be time-consuming and more expensive than open innovation. 3. benefits of innovation in banking services from increased accessibility and efficiency to faster transactions and advanced features, innovation in banking services offer numerous advantages to both banks and customers. here's a brief overview of the key benefits: accessibility and convenience. innovative banking services such as mobile banking apps and online banking sites are available 24/7, anytime and anywhere, making them accessible and convenient for customers. with innovative advancements like live chat and robo-advisors, banks offer 24/7 customer support, resolving customer issues and answering their questions. transparency. innovative banking technologies allow banks and customers to view the details of all transactions and financial operations. customers can check their bank accounts and track the history of transactions. transparency also helps banks identify fraud and suspicious activities. (lin, liu & wei, 2023). cost efficiency. innovation helps banks automate most of the processes, which helps them reduce costs by reducing the need for large numbers of bank personnel and physical bank branches. reducing costs allows banks to offer banking services with lower fees. faster credit approval. innovative advances such as ai and big data allow banks to collect relevant customer data, analyze it quickly and speed up the loan decision-making process. (sharma, 2022). fundamentals of innovation in modern banking services 158 new services and products. innovation helps banks analyze market trends, identify unmet needs and develop new banking services and other financial products. it also allows banks to offer more personalized services to customers. (harchekar, 2021). improved financial inclusion. with the help of innovative banking platforms, anyone with internet access can open a bank account, obtain a loan, and send and receive money, regardless of their location. by offering banking services to the unbanked people, innovative technologies help improve financial inclusion. (indriasari, 2022). 4. challenges of innovation in banking services despite the numerous advantages that innovation brings to banking services and the banking environment, it also has a number of disadvantages. the following are the main challenges of innovative banking services: privacy concerns. innovative banking services collect and store a significant amount of personal and financial data about customers. although this data is used only to personalize financial services, customers are concerned about privacy and the risk of misuse of their personal data. (revathi, 2019). security risks. digital banking platforms are always under attack from fraudsters and cybercriminals. although banks use advanced security methods to protect themselves and their customers, the risk of manipulation and hacking remains. cybercriminals’ access to digital banking systems can lead to financial losses for banks and their customers. technical problems. innovative banking services depend heavily on technology and failures, downtime or bugs in banking system can prevent customers from accessing banking services. high implementation costs. innovations improve the efficiency, functionality and productivity of banks. however, developing or acquiring modern innovative achievements is very expensive. due to these high costs, many banks postpone or refuse to implement the latest technological innovations. (valverde, 2019). customer experience issues. customers accustomed to traditional services may struggle to adopt and use innovative banking services. additionally, online customer support may sometimes be unable to resolve more complex issues, which can lead to frustration. digital exclusion. while innovative banking services promote financial inclusion, they also drive digital exclusion. people without access to technology and the internet are unfortunately excluded from the benefits of modern banking services. (indriasari, 2022). 5. methodology this article employs a qualitative research approach to study the types of innovation in modern banking services, assess their benefits and challenges, and analyze the demographic adoption of digital banking services across the globe. a literature review was conducted to write this article using relevant academic articles, books, and journals. in addition, information is collected from both academic and industry sources including reports, regulations, customer surveys and comments from banking professionals to analyze the benefits and challenges of innovation. the demographic analysis of digital banking services was conducted using statistical data from official sources such as the world bank, international monetary fund (imf), and various national banks of the countries. these data were used to study the adoption of digital nizami khudiyev, ragib mammadli 159 banking services across key demographic variables including age, education level, income level, etc. however, the lack of detailed data on the adoption of digital banking services in developing countries is a major limitation of this study. although this article does not rely on primary data collection, it provides a comprehensive overview of the existing knowledge on innovation in modern banking services. 6. results demographic analysis of innovative banking services from a customer perspective, the primary banking innovation is digital banking services, which directly influence their behavior. this part of the article analyzes the demographic structure of innovative digital banking services, focusing on socioeconomic factors. figure 1: number of digital banking users 2019-2024 (in billions) source: world bank and imf reports. as shown in figure 1, the number of users of modern digital banking services continues to grow worldwide every year. especially during the covid-19 pandemic, lockdowns have boosted the use of these services. by 2024, more than 3 billion people use at least one digital banking service during the year. figure 2: percentage of adults using digital banking services in developed countries (2024) source: world bank and official websites of banks. 1.7 2.1 2.4 2.7 2.9 3 2019 2020 2021 2022 2023 2024 96 90 76 68 61 45 developed countries south korea singapore france united kingdom united states japan fundamentals of innovation in modern banking services 160 the percentage of the adult population using innovative banking services is generally higher in developed countries. (figure 2). a higher hdi, strong technological infrastructure, higher income and literacy levels are the main factors that positively influence the adoption rate of innovative advances by the population. figure 3: percentage of adults using digital banking services in developing countries (2024) source: world bank and official websites of banks. figure 3 shows that the adoption rate of innovative banking services among adults in developing countries is significantly lower than in developed countries. factors such as weak technological infrastructure, poor internet quality, low incomes and poverty slow down the adoption of modern innovations. younger generations are the primary users of innovative banking services globally. according to a 2024 survey, 93% of millennials and 81% of gen z use digital banking platforms for at least one financial service. while gen z customers adapt quickly to every innovation, millennials are the main users of innovative banking services. older generations favor traditional face-to-face banking services and the adoption rate of innovative services is relatively low among these customers. income level of customer has a direct impact on the adoption rate of innovative banking services. higher-income individuals tend to use modern banking platforms more frequently and require a wide range of financial services, such as investment advice, wealth management or cryptocurrencies. (brown & nyarondia, 2023). education is another factor influencing customer behavior. more educated customers generally have better financial literacy, easily understand and use digital banking services, and quickly adopt new innovations. 7. discussions/conclusions like other industries, modern innovation is transforming the traditional banking concept. application of innovation in banking services improves their accessibility, makes them more convenient for customers, increases transparency and efficiency, and reduces costs for both banks and customers. (lin, liu & wei, 2023). however, they also come with a number of challenges such as privacy, security and technical problems. these challenges require careful attention from banks and financial institutions. 42 30 19 15 11 5 developing countries brazil nigeria pakistan kenya bangladesh yemen nizami khudiyev, ragib mammadli 161 the demographic analysis in this article reveals that several socioeconomic factors, such as quality of life, country infrastructure, education level and income level of customers influence their adoption of digital banking services. (brown & nyarondia, 2023). moreover, analysis by customer age shows that older customers are more reluctant to use these services and prefer traditional banking methods. but today, the banking industry is unimaginable without innovative advances. every bank must implement innovation in banking services and management to remain competitive in the financial sector. to minimize the risks and problems associated with innovation, banks should follow these recommendations:  strengthen security mechanisms to protect data and prevent potential financial losses for both the bank and its customers.  regularly check innovative banking systems to identify errors, vulnerabilities, and potential risks.  implement 24/7 monitoring systems to prevent cyberattacks and detect suspicious transactions.  train bank employees on the proper use of technological devices and innovative programs used in the bank.  collaborate with other banks and financial institutions to share experiences in applied innovation and jointly find solutions to emerging threats and risks. it is obvious that the future of everything is formulated by innovation advancements. banks should always implement latest innovation in order to meet growing needs of customers and stay remain competitive in modern financial environment. references 1. arnaboldi, f. (2021). financial innovation in banking. journal of bank risk, governance and regulation. no.8. 2. balkon, b. (2022). impacts of digitalization on banks and banking. journal of economics and finance issue 6, pp. 21-26. 3. brown, h. & nyarondia, d. (2023). technological innovation in banking and payments. global business review. 4. campanella, f. & peruta, m. (2020). the effects of technological innovation on the banking sector. journal of the knowledge economy, special edition. 5. indriasari, e. (2022). intelligent digital banking technology and architecture: a systematic literature review. ijim journal. volume 16, no.19. 6. harchekar, j. (2021). digitalization in banking sector. international journal of scientific research and development. issue 11. 7. kittiwat, u. (2023). competition and innovation in banking services. international journal of innovation management. volume 2, issue 5. 8. lin, c., liu, s. & wei, l. (2023). banking and innovation: a review. journal of chinese economic and business no.4. 9. parameswar, n. & dhir, s. (2017). banking on innovation, innovation in banking at icici bank. wiley online library. january/february, 2017. fundamentals of innovation in modern banking services 162 10. ravi, h. (2021). innovation in banking: fusion of artificial intelligence and blockchain. asia pacific journal of innovation. issue 2. 11. revathi, p. (2019). digital banking challenges and opportunities. international journal of economic and business review. vol 7, issue 12. https://doi.org/10.36713/epra2012. 12. sharma, r. (2022). a study on innovation in banking and its impact on customer satisfaction. integrated journal for research in arts and humanities. volume 2, issue 3, may 2022. pp. 67-72. 13. valverde, c. (2019). the impact on digitalization on banking and financial stability. journal of financial management, markets and institutions. no.10. 14. world bank. (2023). inclusion through innovation in financial services. agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 18, no. 2 (2024), pp. 320-333 320 from origins to innovations: ai's role and the cost impact on computer vision k. tirana, e. bejleri kledia tirana¹, endri bejleri² university metropolitan tirana, albania ¹ https://orcid.org/0009-0008-0772-4243, e-mail: ktirana@umt.edu.al ² https://orcid.org/0009-0006-7586-4171, e-mail: endri.bejleri24@umt.edu.al abstract: the field of computer vision, a pivotal subdomain of artificial intelligence (ai), has seen extraordinary advancements since its emergence in the 1960s. this paper examines the historical development of computer vision technologies, tracing the journey from early foundational models, such as frank rosenblatt’s perceptron, to contemporary breakthroughs driven by deep learning. key milestones are explored, including the development of algorithms like scale-invariant feature transform (sift), viola-jones for face detection, and eigenfaces, which paved the way for modern solutions such as convolutional neural networks (cnns), yolo and facenet. the paper highlights the evolution of face detection and recognition techniques, contrasting traditional methods with the transformative capabilities of deep learning-driven approaches. additionally, we analyze the growing computational demands of modern algorithms, discussing the trade-offs between accuracy and efficiency and their implications for practical applications. this study underscores the rapid progression of computer vision, its challenges, and its role as a cornerstone in shaping the future of artificial intelligence. keywords: computer vision, algorithms, deep learning, artificial intelligence, convolutional neural networks. introduction computer vision, a critical branch of artificial intelligence (ai), enables machines to interpret and process visual data with minimal human involvement. what began as a set of basic algorithms in the 1960s has grown into a sophisticated field that powers applications across industries such as healthcare, automotive, and security. this paper explores the historical trajectory of computer vision, starting with early milestones like the perceptron, which showcased the promise of neural-inspired machine learning algorithms. subsequent breakthroughs, including feature-detection techniques like sift and early face detection models like viola-jones, set the stage for today’s sophisticated methods. the advent of machine learning and deep learning marked a turning point, introducing transformative technologies such as convolutional neural networks (cnns), yolo, and facenet. these models deliver remarkable accuracy and efficiency in object detection and recognition. through this analysis, the paper provides an in-depth perspective on the evolution of computer vision—from its experimental origins to its current status as a pivotal field shaping the future of ai. particular focus is given to the interplay between accuracy, computational efficiency, and practical usability, highlighting both the achievements and the ongoing challenges that define this dynamic domain. https://orcid.org/0009-0008-0772-4243 mailto:ktirana@umt.edu.al https://orcid.org/0009-0006-7586-4171 mailto:endri.bejleri24@umt.edu.al kledia tirana, endri bejleri 321 the rise of computer vision computer vision, a specialized subfield of artificial intelligence (ai), empowers machines to "see" and interpret visual data. by leveraging computer vision techniques, machines can process, analyze, and extract meaningful insights from images and other visual inputs without human intervention (ibm, n.d.). the origins of computer vision date back to the 1960s, when researchers began experimenting with algorithms to enable computers to interpret and analyze visual data, laying the foundation for this transformative field. in this discussion, we will explore the evolution of computer vision from its early experimental stages in the 1960s to its remarkable advancements in the 21st century (minsky, 1966). frank rosenblatt’s perceptron before we step into the origins of computer vision, first we need to understand frank rosenblatt’s perceptron. introduced in 1958 by frank rosenblatt, the perceptron was the earliest model that could demonstrate that machines could effectively learn and act from data. frank’s design was inspired by human’s neurons and the perceptron in itself was a simplified version of it. perceptron showcased that a simple algorithm can be further improved by exposing the model to batches of data, laying the foundations for the creation of the more complex algorithms such as the modern deep learning models and neural networks used in today’s era (rosenblatt, 1958). the perceptron is a binary classifier, meaning it decides whether an input or stimuli belongs to one or two binary classes. it included 3 crucial components which we can also recognize in today’s algorithms: inputs & weights, activation function and the learning algorithm. the way the perceptron works is that it takes one or more inputs, each assigned with an adaptable weight resembling the input’s contribution to the output. the weighted sum of the inputs is that ran through an activation function which determines if the output is classified as a 0 or 1 based on a set threshold. to get the desired output, the weights are adjusted according to the error in the output compared to the desired output (weight = current weight + (error ∗ input)), a form of a learning algorithm. despite its limitations of the time, the perceptron laid the groundwork for ongoing advancements in neural networks and machine learning. mit’s summer vision project during the 1960’s researchers had tried to develop ways for computers to recognize and understand visual data. on 1963, lawrence gilman roberts, known as larry roberts, presented his thesis “machine perception of three-dimensional solids” where he presented methods to reconstruct 3d objects from 2d images, paving the path for 3d computer vision. he also introduced the idea of edge detection to identify the boundaries of objects in an image as well as mathematical models, which all contributed to future developments of computer vision technologies (roberts, 1963). during the summer of 1966, the “summer vision project” at mit’s artificial intelligence laboratory led by marvin minsky and seymour papert was built to develop a computer system that could recognize objects in images. the project was quite ambitious for the time and marked the beginning for further research in the area of computer vision. its goal from origins to innovations: ai's role and the cost impact on computer vision 322 was to develop algorithms that could make machines able to “see” and interpret data from real environments (minsky, 1966). the project focused on: image processing: techniques for controlling and evaluating digital images, including filtering, enhancement and feature extraction. object detection: development of algorithms that could capture and localize objects or faces within images or videos. pattern recognition: development of methods for recognizing and differentiating patterns in visual information. while the project didn’t meet its initial objectives due to the difficulties of the time, including lack of processing power, sophisticated algorithms and computational models, it greatly influenced and inspired further research and innovations in the field of computer vision. david marr’s vision david marr was a british innovator and neuroscientist who made important contributions to the field of computer science throughout the years. during the late 1970s and early 1980s, marr developed a theoretical framework for understanding vision systems, changing the way researchers thought about vision systems. in the book named “vision” released on 1982, marr proposed a general framework of how the human brain processes visuals and how machines could replicate this process (marr, 1982). marr’s framework is divided into 3 levels to better understand how vision overall works: the computational level: the first level showcases the problem of what the vision is trying to accomplish. at the base, the computational level is about identifying this problem, specifically, the initial analysis is about trying to identify how the brain is able to create 3d objects from 2d images. the algorithmic level: the second level of analysis covers how to solve the problem the computational level puts on the board. it describes the specific methods used to tackle the issue. marr concluded that the human brain must perform specific complex calculations to extract the needed information. as the name of the level, he theorized in the face that these calculations could be implemented/transformed into an algorithm. marr proposed that detecting edges (contrast) is crucial for recognizing objects in a scene. implementation/physical level: the final level of the framework explains how the system or the human body can achieve the goal set in the computational level. in the case of human body, neural structures and neuronal activities present in the brain and eye. marr also put forward the “theory of visual perception” where he described the human vision as a hierarchical process, where the visual processing system includes several stages, from getting input as a two-dimensional visual array (on the retina) and progressing through different stages we will cover next to produce a three-dimensional description of the world as output (marr, 1982). kledia tirana, endri bejleri 323 primal sketch: the initial stage of the process describes how the first step to visual processing is to create a low-level image by extracting basic visual features like edges and textures without any context. 2.5d sketch: once a low-level image has been created, the visual system tries to convert the image into 3d by assigning depth, orientation and spatial relationship of edges. 3d model: in the final stage, a full 3d model is created, with every object identified and positioned independent of the observer’s viewpoint. david marr’s work in the theory of vision, to this day is highly regarded and serves as a cornerstone in the computer vision field. emergence of machine learning, computer vision machine learning algorithms during the 1980s and 1990s, with the increase of the computational power and advancements in the field of artificial intelligence technology, researchers started to experiment, develop and deploy advanced algorithms, machine learning algorithms to solve computer vision problems. in this section we will feature some important algorithms used throughout the years before the emergence of deep learning models which we will cover later on. scale-invariant feature transform scale-invariant feature transform (sift) is a feature detection algorithm introduced in 1999 by david lowe, a researcher in computer vision. sift is designed to identify distinctive features within an image that are invariant to changes in scale and rotation. this makes sift a valuable tool for various computer vision tasks, including object recognition, image matching, and scene analysis. the algorithm begins by detecting keypoints/features, which are distinctive and scale-invariant within an image, such as corners or edges. to achieve this, sift constructs a scale-space representation of the image by applying gaussian filters with varying levels of blur (lowe, 1999). mathematically can be described as: l(x,y,σ)=g(x,y,σ)∗i(x,y) where l(x,y,σ) is the blurred image at scale σ, g(x,y,σ) is the gaussian kernel, (x,y) is the original image and σ is the scale parameter. the image is also downsampled (reduced in size) after each octave, allowing features to be detected at smaller resolutions (or sizes) as well (lowe, 1999). differences between successive gaussian-blurred images, known as the difference of gaussians (dog), are used to identify keypoints. mathematically, the dog is represented as: dog(x,y,σ)=l(x,y,kσ)−l(x,y,σ) where k is a constant (typically around square root of 2) that controls the scale between successive gaussian images. this difference highlights the edges and key points in the image at various scales and then the algorithm detects keypoints by finding the maxima and the minima which are selected only if the specific pixel value is larger than all of these neighbors or smaller than them all (lowe, 1999). these keypoints are further refined by eliminating lowcontrast or poorly localized points to ensure that only the most stable keypoints are retained (lowe, 1999). from origins to innovations: ai's role and the cost impact on computer vision 324 once keypoints are identified, sift generates descriptors that describe the local appearance around each keypoint. this process involves analyzing the image gradients within a neighborhood surrounding the keypoint and creating a histogram of gradient orientations. the descriptor is constructed as a 128-dimensional vector summarizing these gradients, ensuring invariance to rotation and minor changes in lighting. these descriptors act as unique signatures for each keypoint, enabling robust comparisons between different images. to match keypoints between two images, sift compares their descriptors, by identifying and matching keypoints, sift enables computers to perform complex tasks such as recognizing objects, combining overlapping images into seamless panoramas, reconstructing 3d structures from multiple views, and analyzing spatial relationships within scenes. by finding and matching these keypoints, sift can help machines perform tasks like: object detection image stitching 3d reconstruction sift is a key part of many modern computer vision systems. it is applied in different fields of ai like object recognition where sift features can be used to identify objects in images or videos, image stitching where sift features can help stitch multiple images together to create panoramas, 3d reconstruction where sift features can be used to establish correspondences between images, enabling 3d reconstruction and augmented reality (ar) where sift features can be used to track objects or scenes in real-time for augmented reality applications (lowe, 1999). viola jones, face detection algorithm in 2001 paul viola and michael jones published a paper called “rapid object detection using a boosted cascade of simple features” where they first introduced the viola-jones algorithm. the viola jones algorithm revolutionized real-time face detection and despite being an older method, due to its low computational needs and fast speed, it still finds use as face detection model in the current day (viola, 2001). there are three main steps in face detection by viola jones algorithm: integral image: the first step creates a new image representation, known as the integral image, which allows for fast feature evaluation. adaboost: the second step utilizes adaboost, an algorithm to iteratively train weak classifiers on different parts of the training data. cascade classifier: the third step is to combine more complex classifiers in cascade structure which dramatically increases the speed of the detector by focusing attention on promising regions of the image. viola and jones used haar-like features (more complex) to detect faces in this algorithm. haar-like features help in detecting faces by capturing differences in intensity between rectangular regions of an image. these differences, often between contrasting areas, are key to identifying facial structures (viola, 2001). the viola jones algorithm maximizes speed while achieving high detection accuracy, making it suitable for live-video systems like surveillance systems. the algorithm, however is susceptible to image variations such as changes in lighting, non-regular frontal poses or kledia tirana, endri bejleri 325 different expressions, lowering its accuracy significantly. newer deep learning models can also outperform and outpace the viola jones algorithm. eigenfaces eigenfaces is a method used in face recognition, based on the idea of representing faces as a combination of principal components (or eigenvectors) of a set of training face images. it was introduced in the 1990s and is one of the earlier methods for face recognition (turk, 1991). the method uses principal component analysis (pca) to reduce the dimensionality of face images while preserving the key features required for distinguishing between faces. the eigenfaces method deconstructs face images into a small set of characteristic feature images, which form the basis of the initial training set. recognition occurs by projecting a new image into the "face space" defined by these eigenfaces. the new image is then classified by comparing its position to those of known eigenfaces. eigenfaces are a set of eigenvectors used in computer vision to address human face recognition. this approach focuses on capturing the variations within a collection of face images and uses this information to encode and compare individual faces in a holistic manner. the primary objective of the eigenfaces algorithm is to represent facial features in a lower-dimensional space by capturing the principal components of facial images. however, a notable limitation of pca is its sensitivity to variations in lighting conditions. since it captures overall variance, changes in illumination can significantly impact its effectiveness (tirana, 2024). fisherfaces another famous algorithm used for face recognition is fisherfaces, primarily of its ability to maximize the class distinguishing in the training process (belhumeur, 1997). fisherfaces combines pca (principal component analysis) to reduce face space dimension and lda (linear discriminant analysis) to obtain feature of image characteristic (martinez, 2001). fisherfaces is an extension of the eigenfaces method, designed to improve face recognition performance, especially when dealing with interchanging conditions. the key difference between eigenfaces and fisherfaces is in the way how they handle variations (belhumeur, 1997). eigenfaces focuses on the overall variation in the face dataset, while fisherfaces seeks to enhance the class separability by focusing on the variation between classes rather than just the overall variance (martinez, 2001). this approach utilizes lda to identify a projection that enhances the separation between classes (individuals) while minimizing variations within the same class. lda aims to maximize the ratio of between-class scatter to within-class scatter, emphasizing the discriminative power of features. the representation generated by fisherfaces is specifically designed to highlight differences between individuals, making the selected features particularly effective for classification (belhumeur, 1997). however, fisherfaces can be sensitive to certain challenges, especially in cases with small datasets or high within-class scatter. significant variability in the images of the same individual—such as differences in facial expressions, poses, or lighting conditions—can limit its ability to capture the distinguishing features necessary for accurate recognition. the method can also become computationally expensive, especially with large datasets (martinez, 2001). from origins to innovations: ai's role and the cost impact on computer vision 326 support vector machines (svm) support vector machines (svm) are supervised machine learning classifying algorithm designed to classify data into two distinct groups. they are widely used for their effectiveness in handling high-dimensional feature spaces, making them a popular choice for tasks like face recognition after the features are extracted. svms work by mapping data into a highdimensional space where separating different categories becomes easier, even when the data is not initially separable. the algorithm identifies the best separator, known as a hyperplane, which divides the data into distinct classes. once the data is transformed into this space, the hyperplane serves as the decision boundary (dasgupta, ray, & talukdar, 2018). when new data points are introduced, the model determines their classification based on their position relative to the hyperplane (cortes, 1995). svms are split into two main types: linear and non-linear svms. a linear svm is applied when the data can be perfectly separated by a straight line which happens rarely in real world applications, while a non-linear svm is used for scenarios where the data points cannot be linearly separated. in these cases, techniques like kernel tricks are employed to facilitate classification (cristianini, 2000). svm performs faster and more accurately when the data is linearly separable, and the kernel trick enables the algorithm to solve more complex problems. however, certain challenges in applications like face recognition must be addressed, such as selecting an appropriate kernel, managing inaccuracies with large datasets, and fine-tuning hyperparameters. while a classifier algorithm was essential in the past to perform facial recognition, the modern deep learning models often integrate built-in classifiers as part of their architecture (tirana, 2024). modern deep learning computer vision algorithms deep learning algorithms have immensely changed the field of artificial intelligence, especially the field of computer vision. by leveraging multi-layered neural networks, these algorithms are exceptional at finding complicated patterns within large datasets. convolutional neural networks (cnns) are in the center of this revolution and they are great identifying features in images, including facial characteristics. these algorithms automatically learn hierarchical representations of data, getting rid of the need for manual feature extraction (o’shea & nash, 2015). additionally different techniques have been created such as transfer learning which have further enhanced their performance, allowing pre-trained models to be well-tuned for specific applications. this chapter will explore the evolution of computer vision algorithms, focusing on deep learning's impact on facial recognition and detection technology. we will also compare the differences between the old machine learning algorithms and modern cutting-edge cnn-utilizing algorithms, showcasing the progress made in the 21st century in the field of computer vision. convolutional neural networks (cnn) before we get into the algorithms used in the modern era, first we need to understand how convolutional neural networks (cnns) are designed and how they work. cnns are at the core of every modern deep learning algorithm’s architecture. cnns are the extended kledia tirana, endri bejleri 327 version of artificial neural networks (ann) which are predominantly used to extract the feature from the grid-like matrix dataset. convolutional neural network consists of multiple layers like the input layer, convolutional layer, pooling layer, and fully connected layers (o’shea & nash, 2015). input layer: the first layer of the architecture, will take the raw input, prepare it for processing and hold the pixel values of the image. convolutional layer: this layer is key as it performs feature extraction. convolutional layers apply a convolution filter or kernel in which these filters are responsible for detecting low-level features like edges, textures, or gradients, which are then combined into higher-level features in subsequent layers followed by a non-linear activation function, such the rectified linear unit (relu). to further understand the structure, we must discuss relu. a non-linear activation function that has a simple derivative. (it eradicates negative values and only outputs positive values, the derivative of relu is either 0 or 1). relu has become the standard activation function in modern deep learning networks because it has an improved gradient propagation and it helps the network converge faster and mitigates the vanishing gradient problem (agarap, 2018). pooling layer: the layer will then perform downsampling along the spatial dimensionality of the given input, reducing their dimensions while retaining the most important information. fully connected layer: the last layer in the architecture, connects every neuron in the layer to every neuron in the previous layer (han, mao, & dally, 2015). it acts as a decision-making layer as it combines the extracted features into a prediction for the final output (taherdoost & madanchian, 2023). when these layers are stacked, a cnn architecture is formed (o’shea & nash, 2015). modern face detection algorithms, one stage vs two stage detection models modern face detection algorithms are split into two categories: one stage and two stage detection models. one stage detection models: object classification and bounding-box regression are done without using pre-generated region proposals (candidate object bounding-boxes) (redmon, 2016). two stage detection models: contrary to one stage detection models, two stage detection models utilize two steps, generation of region proposals either by selective search or region proposal network (rpn) and then object classification is done for each region proposal. two stage detection models are more accurate but require more computing power and are quite slower than their counterpart (ren, 2015). we will cover one state-of-the-art algorithm for each of these, respectively: yolo (you only look once) and faster r-cnn. yolo (you only look once) yolo is a very fast, accurate object detector, making it ideal for computer vision applications. as a one stage detection model, it is an approach of object detection that simplifies the process by treating it as a single regression problem rather than a traditional from origins to innovations: ai's role and the cost impact on computer vision 328 classification task and unlike many other detectors that focus on region proposals, yolo performs detection in one step, predicting both the class and location of objects in an image simultaneously hence the name you only look once. the core concept behind yolo is its efficiency: it looks at the image only once to detect what objects are present and where they are located (redmon, 2016). yolo’s architecture is composed of 24 convolutional layers followed by 2 fully connected layers. convolutional layers are responsible for feature extraction, while the fully connected layers handle the final predictions. the way yolo works is as follow: the system splits the image into a grid of cells, with each cell predicting b bounding boxes and confidence scores for those boxes. the confidence score reflects both the probability that the box contains an object and the accuracy of the predicted box. each grid cell in yolo predicts c conditional class probabilities, generating a single set of class probabilities per grid cell, regardless of the number of predicted bounding boxes b. during the testing phase, these class probabilities are multiplied by the individual box confidence scores, resulting in class-specific confidence values for each bounding box. these scores indicate represent the likelihood that the object in the cell belongs to a specific class, assuming an object exists and how the box fits the object. the algorithm also uses the intersection over union (iou) metric to assess the accuracy of bounding box predictions. by default, an iou threshold of 0.5 is used, which can be adjusted to control false positives and false negatives. a higher iou threshold reduces false positives but may increase false negatives, as only boxes with an iou greater than the threshold are considered valid detections. the output is then encoded as an s × s × (b ∗ 5 + c) tensor, where s × s are the grid dimensions, b is the number bounding boxes, 5 represents the 4 coordinate values for each bounding box + 1 confidence score and c stands for the number of classes. a key component of yolo is non-maximum suppression (nms), which ensures that each object is detected only once, even if multiple bounding boxes are predicted for the same object. nms keeps only the bounding box with the highest confidence score for each object and removes the others. after nms, yolo outputs the final set of bounding boxes, each associated with a class label and a confidence score showing the probability of the class and how well the bounding box fits the object. as yolo processes each image in a single pass, it is very fast (yolo processes images in real-time at 45 frames per second), doesn’t require the highest computational power but may lose in accuracy, especially when detecting small objects in the image compared to two stage detection models such as r-cnn which we will be covering next. yolo has been significantly improved since release, with each variation improving the issues of the latter, up to version yolov9 which is the latest release. r-cnn r-cnn is a two-stage detection model which operates by first generating potential object proposals and then classifying each proposal in the second stage. unlike one-stage models like yolo, r-cnn takes a more methodical approach by dividing the process into two steps, which contributes to its higher accuracy, especially in complex scenarios (girshick, 2014). kledia tirana, endri bejleri 329 r-cnn's architecture begins with a region proposal step, where potential object regions are identified using selective search. selective search generates a set of candidate object regions (bounding boxes) by grouping similar regions from the image. in the second stage, each of these proposed regions is then passed through a convolutional neural network (cnn), which extracts features for classification and bounding box regression. the network uses cnn features to perform a classification task where each region proposal is classified into one of the predefined object categories or marked as background. additionally, the algorithm predicts bounding box corrections to improve the accuracy of the initial proposals. this two-step approach ensures that r-cnn can focus on the most likely object areas, leading to more accurate predictions compared to one-stage models like yolo. while r-cnn achieves high accuracy, especially in detecting objects of various sizes and complexities, its main drawback is slowness and its very high computing power cost. this is due to the fact that r-cnn requires the cnn to process each individual region proposal separately, which is computationally expensive and time-consuming (liu, hu, weng, & yang, 2017). for every image, hundreds or thousands of proposals are generated, and each one is forwarded through the cnn for feature extraction, followed by classification. this multiplestep process makes r-cnn much slower than single-shot detectors like yolo. to improve efficiency, fast r-cnn was introduced, which shares convolutional features across all region proposals to reduce redundant computations, but it still maintains the two-stage approach. further optimization led to faster r-cnn, which integrated region proposal networks (rpn) into the pipeline, eliminating the need for selective search and improving both speed and accuracy. r-cnn is effective in detecting objects in a wide range of images, but its two-stage process makes it more suited for tasks where accuracy is prioritized over real-time speed, such as in applications where detection quality is critical, and computational resources are available. in summary, r-cnn's two-stage approach allows it to achieve high accuracy by focusing on region proposals and using a cnn for classification and bounding box regression. however, the method is slower and require more computation power compared to single-shot detectors like yolo, making it less suitable for real-time applications. despite this, r-cnn and its improved versions (fast r-cnn and faster r-cnn) remain vital in the evolution of deep learning-based object detection. modern face recognition algorithms, facenet facenet is a deep learning face recognition model introduced in 2015 by google researchers. the idea behind facenet is to transform images of faces into a fixed-length euclidean space, known as embeddings, where the distances reflect the similarity or dissimilarity between faces. this enables the system to perform both face recognition, verification and face clustering, using a process known as one-shot learning (schroff, 2015). facenet uses a deep convolutional neural network (cnn) architecture to learn a 128dimensional embedding for each face. this embedding is a compact representation of a face’s features, trained so similar faces are closer together in the embeddings and faces of different people are farther apart. its architecture follows the following schema: an input layer where each image is resized to 160x160 for standardization, followed by 22 convolutional layers, structured in 13 blocks. from origins to innovations: ai's role and the cost impact on computer vision 330 each block consists of convolutional layers followed by batch normalization and relu activation functions (huang, liu, & weinberger, 2016; lim, kim, choo, & choi, 2023; dubey & jain, 2019). multiple max pooling layers, placed after every few convolutional layers perform downsampling along the spatial dimensionality which help decrease the computational cost while maintaining the key features. to optimize facenet for face recognition, the network uses a triplet loss function. in this loss function, the network is trained using triplets of images: one anchor image, one positive image (same person as the anchor), and one negative image (different person). the goal is to minimize the distance between the anchor and positive image embeddings, while maximizing the distance between the anchor and negative image embeddings. this helps the network learn the similarity relationships between different faces. once the features are extracted, 3 fully connected layers containing 1024 neurons followed by batch normalization and relu activation, 512 and 128-dimensional embedding vector respectively process the output and give as output the 128-dimensional embedding vector which is then used to perform facial recognition or identification on the output layer. to verify if two faces belong to the same person, the embeddings of both faces are compared using the euclidean distance. if the distance is below a set threshold (typically 0.6), the faces are considered a match. due to its well-designed deep cnns architecture and the triplet loss function, facenet is extremely accurate as shown with its accuracy of 99.63% in the labeled faces in the wild (lfw) dataset. due to it utilizing the one-shot learning technique, facenet is also very fast. however, facenet requires large amounts of computational power due to its deep cnns architecture and the triplet loss function can be difficult to optimize. overall facenet is a massive improvement compared with its predecessors and comes inherently with a classifier so an algorithm like svm isn’t needed for classification. cost perspective: from perception to deep learning the journey of computer vision from its inception to the modern age has not only been marked by technical advancements but also by evolving cost structures. understanding this progression provides insights into the technological and financial investments required to achieve breakthroughs. the perceptron hardware was relatively inexpensive for its time, as it relied on simple circuitry to implement neural-like computations. however, the computational capabilities were limited (rosenblatt, 1958):  costs: low due to the simplicity of components and reliance on existing computing technologies.  performance vs. cost: inefficient for complex tasks due to hardware limitations and inability to solve nonlinear problems.  use cases: minimal, mostly experimental and limited to binary classification tasks. algorithms like scale-invariant feature transform (sift), viola-jones, and eigenfaces brought about practical applications but at varying costs:  sift: kledia tirana, endri bejleri 331  computationally expensive due to the need for gaussian blurring and keypoint detection at multiple scales.  costs were tied to the processing power of the time, which was growing but still limited for large datasets.  applications: object detection, image stitching.  viola-jones (viola, 2001):  lower computational cost due to simplified features and the use of adaboost.  suited for real-time face detection with modest hardware, making it accessible for security and surveillance systems.  eigenfaces (belhumeur, 1997):  high sensitivity to variations in lighting and pose.  cost tied to dataset preparation and pca computation.  effective for small-scale, controlled environments. with the introduction of support vector machines (svms) and fisherfaces, costs began to shift:  svms:  computational costs increased due to the need for hyperparameter tuning and kernel tricks.  effective but resource-intensive for large datasets.  fisherfaces (belhumeur, 1997):  combined pca and lda, increasing computational requirements while improving robustness.  performance depended heavily on dataset quality and size, adding costs for data preprocessing. the rise of convolutional neural networks (cnns) and models like yolo, r-cnn, and facenet has revolutionized vision capabilities but at a steep cost:  hardware:  requires gpus or tpus for training and inference, significantly increasing infrastructure costs.  cloud computing services (e.g., aws, google cloud) have democratized access but introduced recurring expenses.  energy consumption:  high during training due to large datasets and deep architectures.  yolo is optimized for real-time applications, lowering energy costs but with slightly reduced accuracy compared to r-cnn.  data preparation:  costs tied to collecting and labeling large datasets.  techniques like transfer learning help reduce training time and data needs, lowering costs slightly.  model complexity:  r-cnn variants achieve high accuracy but are resource-intensive.  yolo offers a trade-off, being faster and cheaper for real-time applications. from origins to innovations: ai's role and the cost impact on computer vision 332 the following tables summarizes the cost comparisons: technology cost (relative) performance/accuracy computational needs use case scope perceptron low minimal very low experimental sift medium good medium object detection viola-jones low moderate low real-time detection eigenfaces medium moderate medium face recognition svm high good high classification cnn (yolo) high very good medium real-time applications cnn (r-cnn) very high excellent very high accuracy-critical source: author’s own elaboration. (2024) conclusions the progression of artificial intelligence in computer vision showcases an extraordinary transformation from its early days of handcrafted feature-based methods to the advanced, deep learning-driven models we see today. in the realm of face detection, modern algorithms like yolo and r-cnn have significantly outperformed traditional approaches such as the viola-jones algorithm, offering higher accuracy and greater adaptability to varying conditions. similarly, advancements like facenet have surpassed earlier models, achieving exceptional precision that rival human vision. however, a trade-off exists: while these contemporary methods provide unparalleled accuracy, they demand substantial computational power and often operate slower than their predecessors, except for optimized models like yolo. despite the widespread adoption of cloud computing, the balance between accuracy and computational efficiency doesn't meet the needs of every business or use case. the evolution of computer vision algorithms underscores the rapid pace of innovation, suggesting that ongoing research and development will continue to optimize and refine these technologies as we advance into a promising era of artificial intelligence. references 1. agarap, a. f. (2018). deep learning using rectified linear units (relu). 2. belhumeur, p. n. (1997). eigenfaces vs. fisherfaces: recognition using class specific linear projection. ieee transactions on pattern analysis and machine intelligence. 3. cortes, c. &. (1995). support-vector networks. machine learning. 4. cristianini, n. &.-t. (2000). an introduction to support vector machines and other kernelbased learning methods. cambridge university press. 5. dasgupta, s., ray, s. n., & talukdar, p. (2018). hyte: hyperplane-based temporally aware knowledge graph embedding. conference on empirical methods in natural language processing. 6. dubey, a., & jain, v. (2019). comparative study of convolution neural network’s relu and leaky-relu activation functions. in lecture notes in electrical engineering. 7. girshick, r. d. (2014). rich feature hierarchies for accurate object detection and semantic segmentation. proceedings of the ieee conference on computer vision and pattern recognition. 8. han, s., mao, h., & dally, w. (2015). deep compression: compressing deep neural network with pruning, trained quantization and huffman coding. international conference on learning representations. 9. huang, g., liu, z., & weinberger, k. q. (2016). densely connected convolutional networks. 2017 ieee conference on computer vision and pattern recognition (cvpr). kledia tirana, endri bejleri 333 10. ibm. (n.d.). computer vision. retrieved from ibm: https://www.ibm.com/topics/computervision 11. lim, h., kim, b., choo, j., & choi, s. (2023). a domain-shift aware batch normalization in test-time adaptation. international conference on learning representations. 12. liu, z., hu, j., weng, l., & yang, y. (n.d.). rotated region based cnn for ship detection. international conference on information photonics, 2017 ieee international conference on image processing (icip). 13. lowe, d. g. (1999). object recognition from local scale-invariant features. proceedings of the seventh ieee international conference on computer vision. ieee. 14. marr, d. (1982, september). vision: a computational investigation into the human representation and processing of visual information. mit press. retrieved from https://www.researchgate.net/publication/235626691_the_vision_of_david_marr 15. martinez, a. m. (2001). pca versus lda. ieee transactions on pattern analysis and machine intelligence. 16. medium.com. (2023, november 1). frank rosenblatt’s perceptron, birth of the neural network. retrieved from https://medium.com/@robdelacruz/frank-rosenblatts-perceptron19fcce9d627f 17. minsky, m. a. (1966). summer vision project. mit artificial intelligence laboratory. 18. o’shea, k., & nash, r. (2015). an introduction to convolutional neural networks. 19. osowski, s., & siwek, k. (2020). cnn application in face recognition (vol. 96). 20. princeton. (2023). human cognitive. retrieved from https://pni.princeton.edu/researchareas/humancognitive#:~:text=human%20cognitive%20neuroscience%20is%20a,%2c%20language%20a nd%20problem%2dsolving. 21. redmon, j. d. (2016). you only look once: unified, real-time object detection. proceedings of the ieee conference on computer vision and pattern recognition. 22. ren, s. h. (2015). faster r-cnn: towards real-time object detection with region proposal networks. advances in neural information processing systems. 23. roberts, l. g. (1963). machine perception of three-dimensional solids. mit. 24. rosenblatt, f. (1958). the perceptron: a probabilistic model for information storage and organization in the brain. 25. schroff, f. k. (2015). facenet: a unified embedding for face recognition and clustering. proceedings of the ieee conference on computer vision and pattern recognition. 26. sciotex. (2023). a brief history of ai in vision systems. retrieved from https://pni.princeton.edu/research-areas/humancognitive#:~:text=human%20cognitive%20neuroscience%20is%20a,%2c%20language%20a nd%20problem%2dsolving. 27. sciotex. (2024, january). a brief history of ai in vision systems. retrieved from https://sciotex.com/a-brief-history-of-ai-in-visionsystems/#:~:text=artificial%20intelligence%20(ai)%20has%20revolutionized,incredible%20 technologies%20we%20have%20today.) 28. taherdoost, h., & madanchian, m. (2023). multi-criteria decision making (mcdm) methods and concepts. 29. tirana, k. (2024). a comprehensive evaluation of face recognition algorithms. agora international journal. 30. turk, m. a. (1991). eigenfaces for recognition. journal of cognitive neuroscience. 31. viola, p. &. (2001). rapid object detection using a boosted cascade of simple features. proceedings of the 2001 ieee computer society conference on computer vision and pattern recognition. 32. živanović, s., abramović, n., živanović, m., & smolović, s. (2023, 4). innovation management on the way to business excellence (vol. 17). agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 19, no. 1 (2025), pp. 204-219 204 strategic and economic feasibility of hydrogen integration in airports: a case study of tirana international airport a. mehmeti, e. elezi, a. xhebraj, y. bezo andi mehmeti¹, endrit elezi², armila xhebraj³, ylber bezo⁴ ¹ ² ³ ⁴ university college of business, albania ¹ https://orcid.org/0000-0002-6801-7912, e-mail: amehmeti@kub.edu.al ² https://orcid.org/0009-0004-4454-8817, e-mail: enelezi@kub.edu.al ³ https://orcid.org/0009-0009-4007-7882, e-mail: axhebraj@kub.edu.al ⁴ https://orcid.org/0000-0002-3284-7164, e-mail: ybezo@kub.edu.al abstract: hydrogen and fuel cell technologies are increasingly recognized as strategic tools for decarbonizing the aviation sector, offering not only environmental benefits but also operational and economic value. however, their effective integration within complex airport ecosystems remains underexplored, particularly concerning investment planning and infrastructure management. this study evaluates the technical, environmental, and economic feasibility of deploying hydrogen technologies at tirana international airport (tia), focusing on both stationary and mobility applications powered by rooftop photovoltaic (pv) systems. scenario-based modeling shows that allocating 25% of tia’s pv output could produce approximately 5,750 kg of green hydrogen annually—sufficient to supply 96 mwh of clean electricity or support 63,889 km of hydrogen-powered vehicle travel. the environmental assessment reveals a net annual co₂ reduction of 58,576 kg, primarily from mobility uses, which alone account for 70,181 kg of avoided emissions. economic analysis estimates the levelized cost of hydrogen (lcoh) at €6.91/kg under current conditions, with potential to decline to €4.45/kg in a lower-capex scenario. the corresponding cost for hydrogen mobility ranges from €1.16/km to €0.85/km, depending on technology and investment assumptions. these results highlight the importance of capital planning, utilization rates, and cost optimization strategies for real-world deployment. a swot analysis is used to identify strategic enablers and barriers, revealing key opportunities such as access to eu funding, public-private partnerships (ppps), employment creation, and the potential to position tia as a green infrastructure leader in the western balkans. the study concludes that hydrogen integration, if paired with targeted investment, institutional support, and coordinated stakeholder engagement, can significantly enhance airport resilience, energy autonomy, and economic competitiveness, aligning with both national policy priorities and broader european sustainability goals. keywords: hydrogen technologies, economic feasibility, strategic airport management, green energy transition, swot analysis https://orcid.org/0000-0002-6801-7912 mailto:amehmeti@kub.edu.al https://orcid.org/0009-0004-4454-8817 mailto:enelezi@kub.edu.al https://orcid.org/0009-0009-4007-7882 mailto:axhebraj@kub.edu.al https://orcid.org/0000-0002-3284-7164 mailto:ybezo@kub.edu.al andi mehmeti, endrit elezi, armila xhebraj, ylber bezo 205 1. introduction air transport is a key driver of global socio-economic development, generating direct, indirect, and induced economic impacts through employment, service provision, and supply chains (dimitrios & maria, 2018, p. 285; cristureanu & bobircă, 2007, p. 34). the expansion of airport infrastructure not only supports the aviation industry but also stimulates regional economic growth, enhances connectivity, and improves access to global markets (zhang & graham, 2020). albania has seen a significant surge in air passenger traffic, with over 10 million passengers processed at tirana's “mother teresa” international airport in 2024 (tirana international airport, 2024). following its planned expansion, the airport aims to handle up to 15 million passengers annually, reinforcing its role as a key regional hub. according to aci europe (2023), the total economic impact of airports in albania—including direct, indirect, induced, and catalytic effects—contributes approximately €0.4 billion to the national gdp and supports around 6,500 jobs. however, the rapid growth of tourism brings challenges related to safety, operational costs, and energy efficiency (baroutaji et al., 2019, p. 35). airports are highenergy consumers (ortega alba & manana, 2017, p. 5), and as operations expand, so do carbon emissions due to increasing power demands from terminals, ground vehicles, and infrastructure (el zein et al., 2025, p. 1363). to reduce their climate footprint, airports are adopting sustainability strategies focused on decarbonization, energy efficiency, and green infrastructure (degirmenci et al., 2023, p. 6). tirana international airport (tia) has embraced this transition by installing solar panels, replacing traditional lighting with leds, incorporating electric vehicles, and deploying energyefficient systems (farabbi, 2024, pp. 6-8). given their scale and energy demand, airports are well-positioned to adopt next-generation clean technologies. among these, hydrogen and fuel cell systems are emerging as promising solutions for decarbonizing operations. with global hydrogen demand expected to increase nearly eightfold by 2050 (rasul et al., 2015, p. 112), these technologies offer advantages such as high energy density, improved efficiency, and minimal noise, making them ideal for reducing emissions in airport environments (wu et al., 2025, p. 715). growing research highlights the feasibility of hydrogen and fuel cell systems in airport settings, including fixed installations such as microgrids and ground operations, as well as mobile applications like hydrogen-powered aircraft. studies explore energy efficiency, emissions reductions, infrastructure needs, and cost-effectiveness. for instance, zhou (2022) investigates hydrogen storage for low-carbon airport systems, while xiang et al. (2021) propose a hydrogen-solar microgrid for electrification. gu et al. (2023) address infrastructure needs for hydrogen-fueled aircraft, and testa et al. (2014) document environmental benefits in ground handling. degirmenci et al. (2023) assess the sustainability and cost structure of hydrogen supply chains, and baroutaji et al. (2019) provide a comprehensive review of aviation-related hydrogen technologies. recent literature also emphasizes the broader economic, innovation, and policy contexts driving such technological transitions. abbasov (2024) and korohod (2023) underline the importance of green economy frameworks and decarbonization strategies in addressing global environmental and energy challenges. živanović et al. (2023) highlight the role of innovation management in improving sustainability strategic and economic feasibility of hydrogen integration in airports: a case study of tirana international airport 206 performance and business excellence, while hysaj and sulҫaj (2024) demonstrate the positive impact of infrastructure-focused innovation on economic growth in the western balkans. framing hydrogen deployment at tia through the lens of the enterprise ecosystem further reinforces its strategic relevance. as nahara (2024) explains, enterprise ecosystems grounded in sustainable development promote cross-sectoral collaboration, knowledge exchange, and flexible innovation pathways. these ecosystems enable autonomous actors, such as airports, energy providers, and public institutions, to cooperate dynamically, thereby maximizing synergy and accelerating green transformation. positioning tia as a hub within such an ecosystem highlights its potential to contribute not only to albania’s decarbonization efforts but also to regional innovation and resilience. this study aims to explore the potential integration of hydrogen and fuel cell technologies within the tirana international airport (tia) ecosystem. specifically, it assesses the technical, environmental, and economic feasibility of applying hydrogen solutions for both stationary and mobile airport operations. additionally, a swot analysis is conducted to evaluate the strategic strengths, weaknesses, opportunities, and threats associated with hydrogen deployment at tia. 2. methodology this study applies a quantitative, scenario-based methodology to evaluate the feasibility, sustainability, and strategic implications of hydrogen and fuel cell deployment at tirana international airport (tia). the approach integrates technical modeling, environmental performance analysis, and economic feasibility assessments to explore the potential of green hydrogen use in stationary and mobility-related airport operations. specifically, the methodology includes:  energy modeling to estimate hydrogen production from photovoltaic (pv) systems and its conversion efficiency via proton exchange membrane (pem) fuel cells.  emissions analysis to quantify avoided co₂ emissions compared to diesel-based mobility and grid-based electricity.  levelized cost of hydrogen (lcoh) and cost-per-kilometer indicators to assess economic viability under different capital expenditure (capex) scenarios.  strategic evaluation tools, including a swot analysis, to capture the broader operational, regulatory, and investment dimensions relevant for airport management and policy planners. by combining techno-economic metrics with scenario planning and strategic analysis, this methodology provides not only a sustainability assessment but also decision-support insights for infrastructure managers, energy planners, and investors evaluating green transitions in the airport sector. 2.1.hydrogen production modelling hydrogen production from the airport’s rooftop photovoltaic (pv) system is estimated using the following relationship: h2 produced = epv,allocated ech2 (eq. 1) andi mehmeti, endrit elezi, armila xhebraj, ylber bezo 207 where: epv,allocated annual pv energy allocated for electrolysis (kwh/year); ech2 specific energy consumption of the electrolyzer (kwh/kg h₂) the hydrogen production potential was estimated based on the annual output of tirana international airport’s rooftop photovoltaic (pv) system (figure 1), which generates approximately 1,334 mwh/year. figure 1. solar panels installed on the roof of a building at tirana international airport. tirana international airport. source: vega group for modeling purposes, it was assumed that 25% of the airport’s energy consumption could be diverted to power an electrolyzer for green hydrogen production. this allocation was informed by an analysis of the official flight departure schedule for tirana international airport, which highlighted periods of reduced operational activity, particularly between 10:00 and 15:00. during these hours, the number of departing flights decreases significantly, as confirmed by a detailed breakdown of hourly flight data. these midday hours also align with peak solar photovoltaic (pv) generation, presenting a strategic window in which surplus solar electricity can be utilized without impacting critical airport operations. to estimate hydrogen output, the specific energy consumption of the electrolyzer was set at 58 kwh per kilogram of hydrogen, encompassing both stack performance and auxiliary system loads. in lowtemperature electrolyzers like alk, pem, and aem, energy consumption of about 55–60 kwh is expected per kg of hydrogen produced (franco and giovannini, 2023, p. 7). 2.2.energy recovery and mobility estimation following the estimation of hydrogen production potential, this section evaluates two key application pathways for the generated hydrogen: stationary energy recovery and airport ground mobility. each pathway is analyzed to estimate the energy output, operational implications, and corresponding environmental benefits. strategic and economic feasibility of hydrogen integration in airports: a case study of tirana international airport 208 hydrogen produced on-site can be converted back into electricity during periods of peak demand or grid instability using proton exchange membrane (pem) fuel cells. the energy recovered from hydrogen is calculated using the following relationship: 𝐸𝑟𝑒𝑐𝑜𝑣𝑒𝑟𝑒𝑑 = 𝜂𝐹𝐶 × 𝐻2 𝑝𝑟𝑜𝑑𝑢𝑐𝑒𝑑 × 𝐿𝐻𝑉𝐻2 (eq. 2) where: 𝐸𝑟𝑒𝑐𝑜𝑣𝑒𝑟𝑒𝑑 electrical energy recovered (kwh/year); 𝜂𝐹𝐶 electrical efficiency of the fuel cell (assumed 50%); 𝐻2 𝑝𝑟𝑜𝑑𝑢𝑐𝑒𝑑 annual hydrogen production (kg/year); 𝐿𝐻𝑉𝐻2 lower heating value of hydrogen (kwh/kg) hydrogen is also considered a clean fuel alternative for ground support equipment (gse) such as passenger transport buses, baggage tugs, and service vehicles, which are currently powered by diesel. the annual driving range achievable with the available hydrogen is estimated using: 𝑀𝑜𝑏𝑖𝑙𝑖𝑡𝑦 𝑅𝑎𝑛𝑔𝑒𝐻2 = 𝐻2 𝑝𝑟𝑜𝑑𝑢𝑐𝑒𝑑 ×100 𝐶𝑣𝑒ℎ (eq. 3) where: 𝑅𝑎𝑛𝑔𝑒𝐻2 total driving range (km/year); 𝐶𝑣𝑒ℎ average hydrogen consumption per 100 km (kg h₂/100 km) for the mobility analysis in this study, performance assumptions for hydrogen refueling stations (hrs) and fuel cell buses (fcbs) were drawn from established industry expectations. a specific fuel consumption of 9 kg h₂ per 100 km was used as the median value for estimating the annual driving range of hydrogen-powered airport vehicles (buss et al., 2022). the availability of the bus fleet was assumed to be 90%, ensuring consistent service levels comparable to conventional systems. refueling operations were modeled with a 10-minute average fill time, aligning with operational demands in airport environments. 2.3. levelized cost of hydrogen (lcoh) calculation the levelized cost of hydrogen (lcoh) is determined by assessing all costs incurred over the lifetime of a hydrogen production system, including capital expenditures (capex), fixed and variable operational expenditures (opex), and electricity costs, relative to the total hydrogen produced over the system’s operational period (equation (1)). 𝐿𝐶𝑂𝐻 = 𝐿𝐻𝑉 𝜂𝑠𝑦𝑠,𝐿𝐻𝑉 + (( ( 𝑖 100 ∗ (1+ 𝑖 100 ) 𝑛 ) (1+ 𝑖 100 ) 𝑛 −1 + 𝑂𝑃𝐸𝑋 100 ) 𝐶𝐴𝑃𝐸𝑋 𝜏 + 𝐸) (eq. 4) where lcoh: levelized cost of hydrogen [€/kgh₂]; lhv: lower heating value [kwh/kgh₂]; i: discount rate [%]; n: lifetime [a]; e: electricity costs [€/kwh]; ηsys, lhv: system efficiency related to the lhv; τ: full load hours [h]; opex: operational expenditures [capex/a]; capex: capital expenditures [€/kw] andi mehmeti, endrit elezi, armila xhebraj, ylber bezo 209 the lcoh was calculated using the umlaut & agora industry excel tool (v1.0, 2023). the analysis assumes a capital expenditure (capex) of €1,970/kw (clean hydrogen joint undertaking, 2024), annual operation and maintenance (o&m) costs equal to 3.5% of capex, a 20-year system lifetime, and a 5% discount rate. to reflect real-world infrastructure conditions, an additional 15% of capex was included to cover civil works, such as installation, site adaptation, safety systems, and integration. 2.4.emission reduction potential both application pathways—stationary energy recovery and hydrogen-powered mobility—contribute to the reduction of carbon dioxide (co₂) emissions at tirana international airport (tia). this section outlines the methodological approach used to quantify these environmental benefits. a) avoided emissions from grid electricity replacement when hydrogen is used in fuel cells to generate electricity on-site, it can reduce reliance on grid-supplied electricity. the emissions avoided from displacing grid electricity are estimated using the following equation: 𝐶𝑂 2,𝑎𝑣𝑜𝑖𝑑𝑒𝑑 𝑔𝑟𝑖𝑑 = 𝐸𝑟𝑒𝑐𝑜𝑣𝑒𝑟𝑒𝑑 × 𝐸𝐹𝑔𝑟𝑖𝑑 (eq. 5) where: 𝐶𝑂 2,𝑎𝑣𝑜𝑖𝑑𝑒𝑑 𝑔𝑟𝑖𝑑 annual avoided emissions from grid electricity substitution (kg co₂/year); 𝐸𝑟𝑒𝑐𝑜𝑣𝑒𝑟𝑒𝑑 annual energy recovered via hydrogen fuel cells (kwh/year); 𝐸𝐹𝑔𝑟𝑖𝑑 co₂ emission factor for diesel combustion (3.622 kg co₂/l), based on eco cost value idemat 2025reva6.xlsx database. this method provides a conservative estimate, as grid emission factors are subject to change depending on the energy mix and seasonal hydropower availability. b) avoided emissions from diesel replacement in mobility replacing diesel-powered ground support vehicles (gse), such as airport buses and baggage tractors, with hydrogen-powered alternatives significantly reduces emissions from combustion. avoided emissions from this substitution are calculated using: 𝐶𝑂 2,𝑎𝑣𝑜𝑖𝑑𝑒𝑑 𝑑𝑖𝑒𝑠𝑒𝑙 = 𝐹𝑢𝑒𝑙𝑑𝑖𝑠𝑝𝑙𝑎𝑐𝑒𝑑 × 𝐸𝐹𝑑𝑖𝑒𝑠𝑒𝑙 (eq. 6) where: 𝐶𝑂 2,𝑎𝑣𝑜𝑖𝑑𝑒𝑑 𝑑𝑖𝑒𝑠𝑒𝑙 annual co₂ reduction from diesel fuel replacement (kg co₂/year); 𝐹𝑢𝑒𝑙𝑑𝑖𝑠𝑝𝑙𝑎𝑐𝑒𝑑 diesel fuel equivalent (liters or kg) replaced by hydrogen use; 𝐸𝐹𝑑𝑖𝑒𝑠𝑒𝑙 co₂ emission factor for diesel combustion (3.622 kg co₂/l), based on eco cost value idemat 2025reva6.xlsx database. the equivalent diesel displacement is estimated by comparing the hydrogen-based driving range with the average diesel fuel consumption of gse operating under similar load conditions. 2.5.swot evaluation to assess the strategic feasibility of integrating hydrogen and fuel cell technologies at tirana international airport (tia), a swot (strengths, weaknesses, opportunities, threats) strategic and economic feasibility of hydrogen integration in airports: a case study of tirana international airport 210 analysis was conducted. this approach was chosen to systematically identify internal capabilities and external conditions that may influence the success of hydrogen deployment across both stationary and mobile airport applications. insights were informed by previous swot analyses published in various international contexts (ren et al., 2015; bednarczyk et al., 2022; khan & kamdi, 2023; bayssi et al., 2024; furuncu, 2025), offering valuable comparative perspectives on hydrogen market dynamics, implementation challenges, and strategic opportunities relevant to tia’s case. 3. results 3.1.hydrogen yield and operational potential table 1 summarizes the key energy conversion outcomes from the modeled integration of hydrogen systems at tirana international airport. based on the assumption that 25% of the airport’s rooftop photovoltaic (pv) output—equivalent to 1,334 mwh/year—is allocated to hydrogen production, approximately 333.5 mwh/year is available for electrolysis. using an electrolyzer with a specific energy consumption of 58 kwh per kilogram of hydrogen, the estimated annual hydrogen output is 5,750 kg h₂. assuming a 50% electrical efficiency for proton exchange membrane (pem) fuel cells and a lower heating value (lhv) of hydrogen of 33.3 kwh/kg, the recoverable energy from hydrogen is approximately 96 mwh/year. for mobility applications, with an average consumption of 9 kg h₂ per 100 km, the produced hydrogen could enable an annual driving range of approximately 63,889 km. table 1. summary of hydrogen production, energy recovery, and mobility potential at tirana international airport parameter value unit pv energy allocated for electrolysis 333.5 mwh/year total hydrogen production yield 5,750 kg h2/year recoverable energy from hydrogen (as electricity) 96 mwh/year estimated annual driving range (mobility) 63,889 km/year source: elaborated by authors 3.2.environmental feasibility figure 2 shows a comparison between avoided and induced co₂ emissions resulting from hydrogen deployment at tirana international airport (tia). the environmental feasibility analysis indicates that hydrogen application at tia offers significantly greater potential in mobility compared to stationary energy recovery. specifically, using hydrogen for on-site electricity generation via stationary fuel cells leads to a relatively modest annual reduction of approximately 252 kg of co₂, primarily due to albania’s already low-emission electricity mix. in contrast, replacing approximately 19,378 liters of diesel fuel used in airport ground transport yields a much larger emissions reduction of around 70,181 kg of co₂ per year. this highlights the significantly higher environmental value of prioritizing hydrogen for transport applications at tia. andi mehmeti, endrit elezi, armila xhebraj, ylber bezo 211 hydrogen production using photovoltaic (pv) sources induces emissions of approximately 2.062 kg of co₂ per kilogram of hydrogen, resulting in a total of roughly 11,857 kg of co₂ per year. these emissions stem mainly from upstream electricity-related processes. literature indicates that solar-powered pem electrolysis systems yield global warming potentials ranging from 0.61 to 2.8 kg co₂-equivalent per kilogram of hydrogen, depending on regional and operational conditions (ajeeb et al., 2024, p. 9). despite these induced emissions, the overall environmental balance remains strongly favorable. comparing the total avoided emissions (70,433 kg co₂/year) with the induced emissions results in a net annual reduction of approximately 58,576 kg of co₂. this outcome further reinforces the environmental feasibility and strategic advantage of emphasizing hydrogen integration in mobility solutions at tia. figure 2. comparison of avoided and induced co₂ emissions from hydrogen deployment at tia source: elaborated by authors 3.3.economic feasibility the economic feasibility of hydrogen production at tirana international airport (tia) was assessed by calculating the levelized cost of hydrogen (lcoh) and the levelized cost of electricity (lcoe) for hydrogen-powered stationary applications. the analysis assumes that 25% of the airport’s rooftop photovoltaic (pv) system’s annual output is allocated to an onsite electrolyzer operating for approximately 2,190 hours per year. based on a 155-kw modular electrolyzer functioning at 25% utilization, the lcoh was estimated at €6.91 per kilogram of hydrogen. this figure underscores the sensitivity of hydrogen production costs to utilization rates and infrastructure investment. under more favorable capital expenditure (capex) conditions—such as €1,300 per kw—the lcoh could decrease to approximately €4.45/kg h₂, highlighting the potential for cost reductions through technological advancements, economies strategic and economic feasibility of hydrogen integration in airports: a case study of tirana international airport 212 of scale, or improved operational efficiency. in parallel, the lcoe was calculated for electricity generated by converting hydrogen back into power using proton exchange membrane (pem) fuel cells operating at 50% electrical efficiency. based on a recoverable energy output of 96 mwh/year, and applying the same cost structure as the lcoh scenario, the resulting lcoe was €0.41/kwh in the base case. while this is relatively high compared to current grid prices, it provides a valuable benchmark for assessing the potential role of hydrogen as a clean, dispatchable, and locally produced energy source within airport operations. it is important to note that the full hydrogen-to-electricity conversion process at tia requires two distinct systems: a pem electrolyzer for hydrogen production and a pem fuel cell for electricity generation. while the lcoh reflects only the cost of hydrogen production, the lcoe incorporates both the cost of hydrogen and the capital and operational expenses associated with the fuel cell system. this dual-system configuration highlights the need for optimized system integration, cost-effective design, and high utilization rates to ensure the overall economic viability of hydrogen deployment within airport infrastructure. table 2. summary of levelized cost of hydrogen (lcoh) under different capex scenarios scenario capex (€ / kw) annual cost (€) lcoh (€/kg h₂) lcoe (€/kwh) hydrogen mobility cost (€/km) base case (high capex) 1,970 34,561 6.91 0.41 1.16 optimistic case (lower capex) 1,300 22,472 4.45 0.26 0.85 source: elaborated by authors in addition to stationary applications, the study also evaluated the economic feasibility of hydrogen for mobility. based on an average consumption of 9 kg of h₂ per 100 km and the previously calculated lcoh values, the fuel cost alone was estimated at €0.62 per km in the base case and €0.40 per km in the optimistic scenario. to provide a more comprehensive cost assessment, additional factors were considered: the capital cost of a hydrogen fuel cell bus (assumed at €650,000 in the base case and €500,000 in the optimistic case), depreciation over a 12-year operational lifespan with an annual mileage of 60,000 km, and maintenance costs estimated at approximately €0.15 per km. when all cost components are included, the total economic cost of hydrogen mobility is estimated at €1.16 per km in the base case and €0.85 per km in the optimistic scenario. these figures underscore that hydrogen-fueled mobility remains capital-intensive, particularly during the early stages of deployment. nevertheless, it offers significant operational benefits in airport environments, including fast refueling, zero local emissions, and low noise levels, making it an attractive option for fleet decarbonization, especially in contexts where vehicle range and operational uptime are critical. andi mehmeti, endrit elezi, armila xhebraj, ylber bezo 213 3.4.swot attributes table 3 illustrates the strategic potential of integrating hydrogen technologies at tirana international airport (tia). the integration of hydrogen technologies at tirana international airport (tia) presents several notable strengths, including compatibility with solar energy, enhanced energy independence, reduced operating costs, and rapid refueling capabilities with high efficiency. the development of green aviation infrastructure promises long-term savings and delivers both environmental and public health benefits (yusaf et al., 2022, p. 5). hydrogen can complement solar energy systems, enabling a more sustainable energy mix for airport operations (zhou et al., 2022, p. 7). this potential is reinforced by the recent doubling of tia’s photovoltaic (pv) system capacity from 1 mw to 2 mw, enhancing the airport’s ability to support on-site green hydrogen production and reduce grid dependency. it can further reduce reliance on conventional fossil fuels, enhancing energy security. over time, hydrogen's efficiency and scalability can lower operational expenses. hydrogen allows for faster refueling compared to battery-electric alternatives, making it suitable for aviation needs. refueling a hydrogen tank only takes minutes, whereas fully charging a battery may take hours, depending on the battery technology and the local electrical power limitation (offer et al., 2010, p. 28). table 3. swot analysis of hydrogen integration at tirana international airport (tia) strengths  renewable energy integration – on-site solar pv (1→2 mw), potential for wind energy, enabling 24/7 green hydrogen via electrolysis  energy resilience – reduced grid dependence, hydrogen storage for backup power during outages  operational advantages – faster refueling (3–5 min), longer range and uptime for ground support equipment, lower maintenance than diesel  environmental benefits – zero operational emissions, noise pollution reduction, improved air quality around the airport  policy alignment – matches eu green deal, supports albania’s ndc, complies with corsia  scalability – modular hydrogen systems allow for phased expansion as demand grows weaknesses  infrastructure gaps – no existing hydrogen production, storage or refueling systems; high capital investment required  regulatory barriers – lack of mature hydrogen safety standards and limited regulatory experience  technical expertise – shortage of skilled workforce for hydrogen system operation and maintenance  economic feasibility – high hydrogen cost and uncertain return on investment in current market conditions  limited domestic supply chain – dependence on foreign equipment and expertise increases implementation complexity opportunities  renewable expansion – potential for hybrid solar-wind systems to power hydrogen production continuously  smart energy systems – implementation of energy management systems to optimize supply-demand and resilience threats  market uncertainty – slow adoption of hydrogen-powered aircraft may delay infrastructure utilization  safety perceptions – public concerns over hydrogen safety may affect acceptance and implementation strategic and economic feasibility of hydrogen integration in airports: a case study of tirana international airport 214  health & community benefits – reduction in nox and particulate matter; improved health outcomes and public support  strategic partnerships – collaborate with airbus and eu hydrogen initiatives for codevelopment and visibility  branding & marketing – position tia as a balkan “green hub” to attract green tourism and eco-conscious airlines  funding & incentives – access to eu climate finance and support through publicprivate partnerships  technology demonstration – use the airport as a showcase for clean hydrogen technologies in the region  technology competition – battery-electric and sustainable aviation fuel (saf) technologies may become more dominant  supply chain risks – dependency on imported hydrogen tech and potential delivery delays  policy & bureaucracy – delays or reversals in national policy, limited government support or changing priorities source: elaborated by authors using the advantages of a hydrogen economy are counterbalanced by significant weaknesses, such as high initial investment requirements, safety and security concerns, and the current absence of a hydrogen distribution network. developing hydrogen infrastructure requires substantial upfront costs, including storage and distribution systems (ngyon & darekar, 2024, p.7). hydrogen is highly flammable and requires stringent safety measures for storage and handling. safety concerns are among the major barriers to the broad application of h2 as a fuel source (lavanya et al., 2024, p.3). in the production of green hydrogen, one of the main challenges is reducing the number of accidents, which are mainly related to electrical risk and oxygen contamination of hydrogen (calabrese et al., 2024, p.9). additionally, limited expertise, lack of financial incentives, and low public awareness present further barriers. the western balkans, especially albania, face a major skills gap in hydrogen technologies due to limited technical expertise, low public awareness, and inadequate vet and reskilling programs (radovanovic and stevanovic carapina, 2024, p. 5). despite these challenges, there are multiple opportunities to strengthen the initiative, including positioning tia as a green airport, generating new employment, reducing the airport’s carbon footprint, and integrating with sustainable public transport systems. integrating hydrogen technologies into this ongoing effort would mark a significant step forward in decarbonizing airport infrastructure. the expanded pv system also increases resilience, enabling more stable and reliable hydrogen production from renewable sources. hydrogen can serve as a clean energy source for ground support equipment, shuttle buses, and potentially even short-haul aircraft in the future, further enhancing tia’s environmental credentials. fuel cell electric vehicles emit only water vapor and warm air, producing no harmful tailpipe emissions. the development of hydrogen technology can also act as a powerful driver of economic growth and job creation. it opens up employment opportunities across a broad spectrum of sectors, including engineering, system design, installation, maintenance, logistics, and operations. as the hydrogen and fuel cell industries expand, a wide array of new jobs will emerge, ranging from high-tech positions to vocational and skilled trades, spanning different andi mehmeti, endrit elezi, armila xhebraj, ylber bezo 215 skill levels, tasks, and income brackets (bezdek, 2018, p. 9). this can support just transition strategies, particularly for workers from traditional fossil fuel industries. to help cover the substantial investment costs associated with hydrogen integration, tia can leverage access to eu and international funding instruments, such as the european green deal, horizon europe, and the connecting europe facility, all of which prioritize investments in sustainable transport and clean energy infrastructure. additionally, the airport could benefit from the formation of public-private partnerships (ppps), which unite government agencies, private investors, and technology developers to co-finance infrastructure, share financial risks, and accelerate implementation. ppps are increasingly recognized as crucial for fostering the development of emerging technologies, such as hydrogen applications (pinilla‐de la cruz et al., 2023, p. 6). these funding avenues and collaborative models offer a viable path to reduce the financial burden on tia, making the project more feasible while supporting both environmental goals and long-term economic resilience. nevertheless, external threats such as economic viability concerns, competition from other renewable technologies (e.g., solar + battery systems and sustainable aviation fuels), technical and regulatory challenges, public safety perceptions, and fluctuating energy markets may hinder implementation and long-term success. 4. concluding remarks this study explored the feasibility of integrating hydrogen and fuel cell technologies at tirana international airport (tia), with a focus on both stationary and mobility-related applications powered by rooftop photovoltaic (pv) energy. the results confirm that even partial use of available solar capacity (25%) could produce approximately 5,750 kg of hydrogen annually, enabling the generation of 96 mwh of electricity or powering more than 63,000 km of zero-emission vehicle travel. these findings align with earlier studies on hydrogen’s potential in airport ecosystems (wu et al., 2025; rasul et al., 2015). from an environmental perspective, the analysis shows a clear advantage for mobility applications. while stationary hydrogen fuel cells offer modest emissions savings (252 kg co₂/year), mobility uses deliver a significantly greater reduction (approximately 70,181 kg co₂/year), primarily through diesel displacement. even after accounting for induced emissions from pvpowered electrolysis (~11,857 kg co₂/year), the net reduction remains substantial—58,576 kg co₂ annually—confirming the environmental feasibility of mobility-focused hydrogen strategies. beyond technical and environmental performance, the economic and management dimensions are critical to the real-world viability of hydrogen integration. the levelized cost of hydrogen (lcoh) was calculated at €6.91/kg under current capex and utilization conditions, with potential to decrease to €4.45/kg in more favorable investment scenarios. for airport operators, these values highlight the importance of system optimization, financial planning, and policy alignment to improve cost-effectiveness. moreover, the levelized cost of electricity (lcoe) for hydrogen-generated power was estimated at €0.41/kwh—relatively high, but strategically valuable for peak shaving or emergency backup applications. in the case of mobility, total cost per kilometer was estimated at €1.16 in the base scenario and €0.85 in the optimistic scenario. while hydrogen vehicles remain capital-intensive during early-stage adoption, operational advantages such as fast refueling, reduced noise, and zero local emissions strategic and economic feasibility of hydrogen integration in airports: a case study of tirana international airport 216 make them attractive for airport fleet management, especially for ground support equipment with high uptime requirements. from a management perspective, this transition requires coordinated investment planning, infrastructure phasing, and workforce development. the swot analysis illustrates both opportunities (e.g., access to eu funding, branding as a green hub, job creation) and risks (e.g., skills shortages, regulatory gaps, and uncertain roi). hydrogen integration should therefore be framed not just as a technological innovation but as a strategic infrastructure investment, requiring involvement from airport leadership, public agencies, and private partners. strategically, hydrogen deployment positions tia within a broader enterprise innovation ecosystem (nahara, 2024), where cross-sectoral collaboration, modular design, and flexible financing mechanisms—particularly public-private partnerships (ppps)—are essential. this aligns with živanović et al. (2023), who emphasize the need for innovation management structures that support business excellence and long-term sustainability goals. additionally, evidence from the western balkans shows that infrastructure innovation contributes positively to economic growth (hysaj & sulҫaj, 2024), reinforcing the strategic value of this investment for albania’s green economy transition. in sum, while technical and environmental metrics confirm the feasibility of hydrogen systems at tia, long-term success will depend on addressing economic barriers, leveraging funding instruments, and embedding the project within a strategic airport management framework. acknowledgment this work was funded by the albanian national agency for scientific research and innovation (akkshi) through the funded project ekoalport (decision pti 1021/2, dated 16.07.2024), titled “multidimensional study and assessment of fuel cell energy systems in seaports and airports: boosting green tourism”. the content is the sole responsibility of the author (s) and does not necessarily reflect the views of akkshi. references 1. abbasov, a. (2024). scientific-theoretical issues in the formation of a green economy. academic international journal of economics and sociology, 18(2). https://doi.org/10.15837/aijes.v18i2.6935 2. aci europe. (2023). the benefits of airports and air connectivity: synopsis report. airports council international europe. https://www.acieurope.org/downloads/resources/aci%20europe%20synopsis%20%20benefits%20of%20airports%20%20air%20connectivity%20digital.pdf 3. ajeeb, w., neto, r. c., & baptista, p. (2024). life cycle assessment of green hydrogen production through electrolysis: a literature review. sustainable energy technologies and assessments, 69, 103923. https://doi.org/10.1016/j.seta.2024.103923 4. baroutaji, a., wilberforce, t., ramadan, m., & olabi, a. g. (2019). comprehensive investigation on hydrogen and fuel cell technology in the aviation and aerospace sectors. renewable and sustainable energy reviews, 106, 31–40. https://doi.org/10.1016/j.rser.2019.02.029 https://doi.org/10.15837/aijes.v18i2.6935 https://www.aci-europe.org/downloads/resources/aci%20europe%20synopsis%20-%20benefits%20of%20airports%20%20air%20connectivity%20digital.pdf https://www.aci-europe.org/downloads/resources/aci%20europe%20synopsis%20-%20benefits%20of%20airports%20%20air%20connectivity%20digital.pdf https://www.aci-europe.org/downloads/resources/aci%20europe%20synopsis%20-%20benefits%20of%20airports%20%20air%20connectivity%20digital.pdf https://doi.org/10.1016/j.seta.2024.103923 https://doi.org/10.1016/j.rser.2019.02.029 andi mehmeti, endrit elezi, armila xhebraj, ylber bezo 217 5. bayssi, o., nabil, n., azaroual, m., bousselamti, l., boutammachte, n., rachidi, s., & barberis, s. (2024). green hydrogen landscape in north african countries: strengths, challenges, and future prospects. international journal of hydrogen energy, 84, 822–839. https://doi.org/10.1016/j.ijhydene.2023.10.041 6. bednarczyk, j. l., brzozowska-rup, k., & luściński, s. (2022). opportunities and limitations of hydrogen energy in poland against the background of the european union energy policy. energies, 15(15), 5503. https://doi.org/10.3390/en15155503 7. calabrese, m., portarapillo, m., di nardo, a., venezia, v., turco, m., luciani, g., & di benedetto, a. (2024). hydrogen safety challenges: a comprehensive review on production, storage, transport, utilization, and cfd-based consequence and risk assessment. energies, 17(6), 1350. https://doi.org/10.3390/en17061350 8. cristureanu, c., & bobircă, a. (2007). airports driving economic and tourism development. the romanian economic journal, 10(25), 31–44. https://www.rejournal.eu/volume-10/issue-25/ 9. degirmenci, h., uludag, a., ekici, s., & karakoc, t. h. (2023). analyzing the hydrogen supply chain for airports: evaluating environmental impact, cost, sustainability, viability, and safety in various scenarios for implementation. energy conversion and management, 293, 117537. https://doi.org/10.1016/j.enconman.2023.117537 10. degirmenci, h., uludag, a., ekici, s., & karakoc, t. h. (2023). challenges, prospects and potential future orientation of hydrogen aviation and the airport hydrogen supply network: a state-of-art review. progress in aerospace sciences, 141, 100923. https://doi.org/10.1016/j.paerosci.2023.100923 11. dimitrios, d., & maria, s. (2018). assessing air transport socio-economic footprint. international journal of transportation science and technology, 7(4), 283–290. https://doi.org/10.1016/j.ijtst.2018.07.001 12. el zein, m., karimipanah, t., & ameen, a. (2025). airports—energy and sustainability perspectives. energies, 18(6), 1360. https://doi.org/10.3390/en18061360 13. farabbi, p. (2024, november 6–8). sustainability program at tirana international airport [conference presentation]. icao eur/nat and aci europe regional green airports seminar, almaty, kazakhstan. https://www.icao.int/eurnat/other%20meetings%20 seminars%20and%20workshops/regional%20seminar%20on%20green%20airpo rts,%206%20to%208%20november%202024/session2.farabbi.pdf 14. franco, a., & giovannini, c. (2023). recent and future advances in water electrolysis for green hydrogen generation: critical analysis and perspectives. sustainability, 15(24), 16917. https://doi.org/10.3390/su152416917 15. furuncu, y. (2025). pestel and swot analysis of hydrogen economy in turkey. international journal of hydrogen energy, 113, 161–169. https://doi.org/10.1016/j.ijhydene.2025.01.046 16. gu, y., wiedemann, m., ryley, t., johnson, m. e., & evans, m. j. (2023). hydrogen-powered aircraft at airports: a review of the infrastructure requirements and planning challenges. sustainability, 15(21), 15539. https://doi.org/10.3390/su152115539 17. hysaj, a., & sulҫaj, k. (2024). impact of innovation on economic growth in balkan countries. academic international journal of economics and sociology, 18(1). https://doi.org/10.15837/aijes.v18i1.6711 18. jive, buss, k., stolzenburg, k., whitehouse, n., & whitehouse, s. (2022). third best practice and commercialisation report (d3.25); second best practice information bank report (d3.8). https://doi.org/10.1016/j.ijhydene.2023.10.041 https://doi.org/10.3390/en15155503 https://doi.org/10.3390/en17061350 https://www.rejournal.eu/volume-10/issue-25/ https://doi.org/10.1016/j.enconman.2023.117537 https://doi.org/10.1016/j.paerosci.2023.100923 https://doi.org/10.1016/j.ijtst.2018.07.001 https://doi.org/10.3390/en18061360 https://www.icao.int/eurnat/other%20meetings%20%20seminars%20and%20workshops/regional%20seminar%20on%20green%20airports,%206%20to%208%20november%202024/session2.farabbi.pdf https://www.icao.int/eurnat/other%20meetings%20%20seminars%20and%20workshops/regional%20seminar%20on%20green%20airports,%206%20to%208%20november%202024/session2.farabbi.pdf https://www.icao.int/eurnat/other%20meetings%20%20seminars%20and%20workshops/regional%20seminar%20on%20green%20airports,%206%20to%208%20november%202024/session2.farabbi.pdf https://doi.org/10.3390/su152416917 https://doi.org/10.1016/j.ijhydene.2025.01.046 https://doi.org/10.3390/su152115539 https://doi.org/10.15837/aijes.v18i1.6711 strategic and economic feasibility of hydrogen integration in airports: a case study of tirana international airport 218 https://fuelcellbuses.eu/sites/default/files/documents/best_practice_report_2022_final%20_14 0072022.pdf 19. khan, m. i., & al-ghamdi, s. g. (2023). hydrogen economy for sustainable development in gcc countries: a swot analysis considering current situation, challenges, and prospects. international journal of hydrogen energy, 48(28), 10315–10344. https://doi.org/10.1016/j.ijhydene.2023.08.073 20. korohod, a. (2023). decarbonization as one of the ways to solve the problems of globalization. academic international journal of economics and sociology, 17(1). https://doi.org/10.15837/aijes.v17i1.5761 21. lavanya, m., shrivastava, s., lakshmi, t., sandadi, e. r., gour, s., thomas, n. a., ... & sudhakar, k. (2024). an overview of hydrogen storage technologies–key challenges and opportunities. materials chemistry and physics, 129710. https://doi.org/10.1016/j.matchemphys.2024.129710 22. nahara, m. (2024). enterprise ecosystem and sustainable development: immanent interdependence. academic international journal of economics and sociology, 18(1). https://doi.org/10.15837/aijes.v18i1.6718 23. nyangon, j., & darekar, a. (2024). advancements in hydrogen energy systems: a review of levelized costs, financial incentives and technological innovations. innovation and green development, 3(3), 100149. https://doi.org/10.1016/j.igd.2024.100149 24. offer, g. j., howey, d., contestabile, m., clague, r., & brandon, n. p. (2010). comparative analysis of battery electric, hydrogen fuel cell and hybrid vehicles in a future sustainable road transport system. energy policy, 38(1), 24–29. https://doi.org/10.1016/j.enpol.2009.09.027 25. ortega alba, s., & manana, m. (2017). characterization and analysis of energy demand patterns in airports. energies, 10(1), 119. https://doi.org/10.3390/en10010119 26. pinilla‐de la cruz, j., de miguel, m., & ramos, a. (2023). financing energy innovation through public–private partnerships: challenges and policy implications. energy policy, 176, 113556. https://doi.org/10.1016/j.enpol.2023.113556 27. radovanovic, n., & stevanovic carapina, h. (2024). green transition and smart specialisation in the western balkans. european commission, joint research centre, eur 31947 en, publications office of the european union. https://doi.org/10.2760/370696 28. rasul, m. g., hazrat, m. a., sattar, m. a., jahirul, m. i., & shearer, m. j. (2022). the future of hydrogen: challenges on production, storage and applications. energy conversion and management, 272, 116326. https://doi.org/10.1016/j.enconman.2022.116326 29. ren, j., gao, s., tan, s., & dong, l. (2015). hydrogen economy in china: strengths– weaknesses–opportunities–threats analysis and strategies prioritization. renewable and sustainable energy reviews, 41, 1230–1243. https://doi.org/10.1016/j.rser.2014.09.021 30. tirana international airport. (2024, december 19). 10 million passengers, tirana international airport reaches the record number before the end of 2024. https://www.tiranaairport.com/en/article/1122/10-million-passengers%2c-tirana-international-airport-reachesthe-record-number-before-the-end-of-2024 31. tirana international airport. (2024). flight departures schedule. https://www.tiranaairport.com/en/departures 32. umlaut, & agora industry. (2023). levelized cost of hydrogen calculation tool (version 1.0). https://www.agora-energiewende.org/data-tools/levelised-cost-of-hydrogen-calculator https://fuelcellbuses.eu/sites/default/files/documents/best_practice_report_2022_final%20_140072022.pdf https://fuelcellbuses.eu/sites/default/files/documents/best_practice_report_2022_final%20_140072022.pdf https://doi.org/10.1016/j.ijhydene.2023.08.073 https://doi.org/10.15837/aijes.v17i1.5761 https://doi.org/10.1016/j.matchemphys.2024.129710 https://doi.org/10.15837/aijes.v18i1.6718 https://doi.org/10.1016/j.igd.2024.100149 https://doi.org/10.1016/j.enpol.2009.09.027 https://doi.org/10.3390/en10010119 https://doi.org/10.1016/j.enpol.2023.113556 https://doi.org/10.2760/370696 https://doi.org/10.1016/j.enconman.2022.116326 https://doi.org/10.1016/j.rser.2014.09.021 https://www.tirana-airport.com/en/article/1122/10-million-passengers%2c-tirana-international-airport-reaches-the-record-number-before-the-end-of-2024 https://www.tirana-airport.com/en/article/1122/10-million-passengers%2c-tirana-international-airport-reaches-the-record-number-before-the-end-of-2024 https://www.tirana-airport.com/en/article/1122/10-million-passengers%2c-tirana-international-airport-reaches-the-record-number-before-the-end-of-2024 https://www.tirana-airport.com/en/departures https://www.tirana-airport.com/en/departures https://www.agora-energiewende.org/data-tools/levelised-cost-of-hydrogen-calculator andi mehmeti, endrit elezi, armila xhebraj, ylber bezo 219 33. wu, h., gao, j., tan, q., huang, n., gao, f., puranen, p., & rong, z. (2025). hydrogen fuel cell technology: a sustainable solution for revolutionizing aviation and achieving significant carbon reduction in the industry. international journal of hydrogen energy, 111, 711–722. https://doi.org/10.1016/j.ijhydene.2025.01.012 34. xiang, y., cai, h., liu, j., & zhang, x. (2021). techno-economic design of energy systems for airport electrification: a hydrogen-solar-storage integrated microgrid solution. applied energy, 283, 116374. https://doi.org/10.1016/j.apenergy.2020.116374 35. yusaf, t., fernandes, l., abu talib, a. r., altarazi, y. s., alrefae, w., kadirgama, k., ... & laimon, m. (2022). sustainable aviation—hydrogen is the future. sustainability, 14(1), 548. https://doi.org/10.3390/su140100548 36. zhang, f., & graham, d. j. (2020). air transport and economic growth: a review of the impact mechanism and causal relationships. transport reviews, 40(4), 506–528. https://doi.org/10.1080/01441647.2020.1738718 37. zhou, y. (2022). low-carbon transition in smart city with sustainable airport energy ecosystems and hydrogen-based renewable-grid-storage-flexibility. energy reviews, 1(1), 100001. https://doi.org/10.1016/j.energy.2022.100001 https://doi.org/10.1016/j.ijhydene.2025.01.012 https://doi.org/10.1016/j.apenergy.2020.116374 https://doi.org/10.3390/su140100548 https://doi.org/10.1080/01441647.2020.1738718 https://doi.org/10.1016/j.energy.2022.100001 agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 19, no. 1 (2025), pp. 189-203 189 implementing sustainable strategies: a case study analysis of the slovenian business environment n. lazar nuša lazar dekorina d.o.o. / b2 ljubljana school of business, slovenia https://orcid.org/0000-0002-5898-4968 e-mail: nusa.lazar@dekorina.si abstract: a sustainable business strategy integrates economic, environmental, and social considerations into core operations, aiming for long-term value creation for both the organization and its stakeholders, while ensuring resource conservation. this paper examines the implementation of sustainable business strategies and compliance with european sustainability reporting standards (esrs) within the slovenian business environment. it analyzes their content and strategic importance, particularly concerning evolving eu regulations. employing a methodology that combines a review of relevant literature, analysis of the esrs, and case study analysis of the slovenian business environment the research investigates the current state of sustainability practices in slovenia. the study examines a public initiative to boost slovenian enterprises' international competitiveness via sustainable business transformation. case studies showcase best practices in sustainable strategy implementation, emphasizing their critical role in maintaining competitiveness. supported by national programs like spirit slovenia and the gzs sustainability chains, slovenian companies are increasingly adopting these practices, reflecting global trends and leveraging local opportunities. keywords: sustainable business strategy, esrs, sustainability practices, slovenian companies. 1 introduction sustainability means meeting present needs without jeopardizing those of future generations. it's about balancing economic growth, environmental responsibility, and social well-being. beyond ethical considerations, sustainability drives value by fostering efficiency, attracting new customers, and creating competitive advantage (etoso, 2025). the european union (eu) is prioritizing the shift to a circular economy and sustainability, as demonstrated by the european green deal and the 2020 new circular economy action plan. this focus on circularity is now integrated into eu policies and funding mechanisms for 2021-2027, including cohesion policies, pre-accession policies, and the connecting europe facility. the core principle of a circular economy is to replace the traditional linear model of production, consumption, and disposal with a system that maximizes product lifespan and minimizes waste of materials and energy. the shift to circular economy means a shift towards sustainability (jaspers, 2022, pp. 5-6). consequently, the principles of the circular economy and sustainable development, originating from the eu's decision-making level and subsequently influencing national, https://orcid.org/0000-0002-5898-4968 mailto:nusa.lazar@dekorina.si implementing sustainable strategies: a case study analysis of the slovenian business environment 190 regional, and municipal policies, are now inexorably permeating business systems, compelling them to operate within and adhere to these evolving frameworks. a sustainable business strategy integrates economic, environmental, and social considerations into core operations, aiming for long-term value creation for both the organization and its stakeholders, while ensuring resource conservation (peoplethriver, 2025). sustainable strategy development relies on both enabling contextual factors and motivating drivers. these create opportunities for success and incentivize businesses to adopt new sustainable approaches (long, 2019). the global capitalist system and its markets generate sustainability issues like inequality, exploitation, and environmental problems. however, they also offer opportunities for sustainable strategies: for example, industrialization causes environmental damage and inefficient production leads to waste. the undervaluation and finite nature of natural resources also present opportunities for sustainable strategies through more accurate pricing, new products, and sustainable resource management. local community control can promote sustainable use and local benefits. finally, the lack of perfect information in markets leads to uninformed consumer choices, creating opportunities for sustainable strategies that address this knowledge gap (long, 2019). by establishing a prioritized framework, a sustainability strategy guides investment and performance, while simultaneously engaging internal and external stakeholders in corporate responsibility efforts (hardyment, 2015, pp. 2). 1. 1 different approaches to defining sustainable business strategies sustainable business strategies aim for positive environmental and/or social impact alongside shareholder benefits, with leaders increasingly recognizing their role in addressing global challenges and driving firm success. the triple bottom line framework measures success beyond profit, considering a company's impact on people and the planet (harvard business school online, 2020). this "three p's" (see table 1) approach encourages businesses to integrate sustainable practices to benefit society and environment while remaining profitable. table 1. three p’s of the triple bottom line profit the financial return an organization generates for shareholders. people an organization's commitment to positively impacting society. planet an organization's effect on the environment. source: harvard business school online, 2020. the triple bottom line framework does not position societal and environmental impact as trade-offs against financial profitability. rather, numerous organizations have demonstrated that a commitment to sustainable business practices can yield tangible financial benefits. sustainable business strategies not only allow companies to tap into the growing market for sustainable goods but also enhance investor appeal. while the triple bottom line is used internally, environmental, social, and governance (esg) metrics provide external validation and public accountability for a company's commitment to sustainable practices alongside financial profitability nuša lazar 191 many companies dilute their sustainability efforts by tackling too many issues simultaneously, resulting in a lack of focus and minimal impact. that is why (jay et. al, 2025) introduced the framework of four lenses. the framework empowers leaders to refine their sustainability strategies through four critical lenses: business value, stakeholder influence, scientific data, and organizational purpose (as presented in table 2). table 2. the four lenses framework lens key questions tools purpose (what do we stand for?)  what is our purpose, or put another way, why do we exist?  what are the values that drive the way we do business?  what is our vision: what is the future we want for our company, industry, and world?  facilitated dialogues across the organization  customer value proposition  mining organizational history stakeholder influence (what are people trying to tell us?)  what do internal stakeholders—employees and close venture partners, for instance—care about?  what do immediate external stakeholders—current and prospective customers, creditors, investors, suppliers, and regulators—care about?  what do other stakeholders—media, ngos, future talent, thought leaders, industry associations, and even policymakers—care about?  how do we gather their input, and how could we do it more proactively?  customer and employee roundtables  surveys that include ranking or point allocation  ai sentiment analysis science and technology (what does the data tell us about our impact and future?)  are there planetary boundaries (and ecological thresholds) that our firm is contributing to crossing?  are there net-positive impacts that our firm is creating?  are there social needs that are significant in the societies that are critical to our firm?  how will planetary changes affect our business?  what emerging technologies could create opportunities or threats to our impacts and profitability?  life-cycle analysis  living-wage analyses  climate physical-risk analysis  technology and reserve modeling business value (what affects our bottom line?)  how do regulations, fees, waste disposal, turnover, and reputation affect our costs?  when and where are customers willing to pay a premium for better business?  what risks do we face for inaction or increased cost?  cost/benefit analysis  risk analysis  investor research source: jay et. al, 2025. by analysing issues through these interconnected perspectives (through these lenses framework), leaders can identify strategic priorities that align with both internal goals and external pressures, ultimately driving impactful sustainability outcomes (jay et. al, 2025). corporate citizenship together with richard hardyment (hardyment, 2015, pp. 4-13) prepared a guide that simplifies sustainability strategy development by providing clear steps for creation or revision. it highlights opportunities and risks, and addresses key aspects like buy-in, target setting, and implementation. these steps are presented and explained in scheme 1. implementing sustainable strategies: a case study analysis of the slovenian business environment 192 scheme 1. corporate citizenship's steps in developing a sustainability strategy step 1: vision, mission, values definition relevance to sustainability strategy vision the desired end-goal; a picture of the future world that the organization wants to create. inspirational and business-relevant language to tie the strategy back to what the company is trying to achieve. mission how the organization plans to deliver its vision – what it does, who it does it for, and sometimes how. the mission of the company is a critical starting point for strategy as it explains what the business is setting out to do. whilst financial viability is still fundamental to success, many more companies are articulating a purpose beyond profit. values the guiding principles by which the organization lives and judges its behaviors. values should be reflected in the sustainability strategy. the strategy should provide some tangible means by which to bring the values to life. step 2 identifying the issues that matter materiality means identifying and understanding what issues are significant to the business, and its stakeholders, and prioritizing them for action. no business can address all the issues that all stakeholders are interested in. a rigorous process of identifying issues for inclusion in the strategy is therefore an essential starting point. a standard materiality matrix is illustrated to show how the issues are typically mapped. step 3 prioritizing effectively simply identifying the most important issues is not enough for a strategy. a good strategy involves deciding which issues to really focus on, and uniting the elements into a framework for setting targets. nuša lazar 193 step 4 targets and kpis target / goal: what you are trying to achieve key characteristics of good targets:  meaningful – targets should set out measurable improvements in performance (the change in a kpi) over a specified time period (e.g. we will reduce carbon emissions by x% over the next z years).  material – targets should be clearly linked to the key strategic goals and impact areas of the business.  complete – targets should cover the most important social, environmental and economic impacts of the business.  consistent – targets should remain relatively consistent over time, so internal and external stakeholders can assess how performance is changing year-on-year.  ambitious – companies should set targets that move beyond business as usual. key performance indicator (kpi): quantifiable measure used to monitor and evaluate performance towards a target/goal key characteristics of good kpis:  accessible – performance measures should be easily understood and interpreted by all stakeholders.  relevant – measures should make sense for business managers. they should tie into existing data collection systems and reflect other business performance measures.  responsive – kpis should reflect the major concerns of key stakeholders that are considered to be relevant by the business.  comparable – kpis should reflect measures that are recognized and significant to the industry in which a company operates. step 5 implementation a sustainability strategy is only as successful as its delivery. it is too easy to overlook the implementation stage when designing a strategy. but putting plans in place to deliver on the programs and targets before the strategy is launched can help to maximize performance in the years ahead. source: hardyment, 2015. developing a sustainability strategy allows businesses to assess progress, reassess risks and opportunities, and create a unique framework for focused, authentic action that differentiates them. this framework also streamlines reporting and communication and fostering meaningful stakeholder dialogue. effective sustainability strategies can drive innovation for growth, establish market leadership and competitive advantage, enhance risk resilience, strengthen reputation and brand, yield cost savings, and motivate employees (hardyment, 2015, pp. 13). 1. 2 european sustainability reporting standards under eu law, larger companies must publicly disclose how social and environmental issues affect their business (risks and opportunities), and how their operations impact people and the environment. this transparency, part of the european green deal, helps investors, ngos, consumers, and other stakeholders assess a company's sustainability performance (european commission, finance, 2025). implementing sustainable strategies: a case study analysis of the slovenian business environment 194 starting in january 2024, the european sustainability reporting standards (esrs), mandated by the corporate sustainability reporting directive (csrd), are transforming sustainability reporting in europe. the first companies have applied these new rules to their 2024 financial year, with reports published in 2025. these 12 standards aim to standardize and improve the transparency of environmental, social, and governance (esg) reporting, bringing it to the level of financial reporting. this initiative requires in-scope companies to disclose their esg impacts, risks, and opportunities, driving greater accountability and a more sustainable marketplace (plana, n.d., b). reporting under the csrd follows the european sustainability reporting standards (esrs). these standards are drafted by efrag (formerly the european financial reporting advisory group), an independent multi-stakeholder body (european commission, finance, 2025). the csrd significantly expands sustainability reporting requirements compared to the non-financial reporting directive (nfrd), which previously only applied to companies with more than 500 employees. currently, the csrd mandates reporting for all large companies exceeding at least two of these thresholds: 250 employees, €50 million turnover, or €25 million in total assets. additionally, all listed companies (except micro-enterprises) are now required to report. this will encompass around 50,000 eu companies, accounting for 75% of the eu's total turnover. in the future, the csrd will also apply to non-eu companies with substantial eu operations (€150 million+ net turnover within the eu) (plana, n.d., a). the csrd expands sustainability reporting obligations to more companies and demands a higher level of detail than the nfrd. beyond previous requirements, companies must now provide in-depth reports on segments described in table 3. table 3. corporate sustainability reporting directive – reporting topics reporting topic description environmental protection measures businesses must disclose specific initiatives to reduce their environmental footprint, including resource conservation and pollution prevention strategies. social responsibility and treatment of employees this includes everything from employee health and safety protocols to employee benefits and company culture. respect for human rights companies must discuss their policies on human rights and how they ensure these rights are not violated within their operations. anti-corruption and bribery measures businesses must explain their strategies to prevent corruption and bribery, including corporate governance measures and ethics training programs. diversity on company boards the csrd requires companies to provide a detailed breakdown of the diversity of their board members, focusing on aspects such as gender, age, and nationality. source: plana, n.d., a. these standards comprehensively address environmental, social, and governance issues, such as climate change, biodiversity, and human rights. designed to inform investors about companies' sustainability impact, they also ensure high interoperability with global standards (international sustainability standards board issb, global reporting initiative gri) to minimize redundant reporting for businesses. the international sustainability nuša lazar 195 standards board (issb) and the european commission services, together with efrag (organization, that serves the european public interest in financial and sustainability reporting), have worked together during the development of the european sustainability reporting standards (esrs) and the ifrs sustainability disclosure standards (issb standards) to achieve a high degree of alignment of the respective standards, with a specific focus on climate‑related reporting (efrag & ifrs, n.d., pp 2-3). 2 methodologies the initial chapters provided background on sustainability and sustainable business strategies through desk research. subsequent chapters employed a combination of scientific methods, including abstraction, concretization, generalization, specialization, qualitative research (observations, case study), analysis, and synthesis, to determine relevant knowledge and its application to the slovenian business environment. the research specifically investigated companies' approaches to developing sustainability strategies, the tools they use, and the resulting business advantages, particularly concerning the complexities of sustainability practices and their impact on competitive advantage. the organizations for the analysis were selected based on the following criteria:  recognition in the field of sustainable development: organizations publicly recognized for their activities and efforts in the field of sustainability were selected. this was determined based on data from the agency spirit slovenija (slovenian agency for the promotion of entrepreneurship, innovation, development, investment and tourism) and the results of online searches (review of company websites, sustainability reports, media publications, etc.).  diversity of industries: organizations from various economic sectors in slovenia were intentionally selected to gain a broader insight into the diversity of approaches to sustainable strategies.  availability of public information: organizations with sufficient publicly available information regarding their sustainable strategies and practices were prioritized for the analysis.  online search results: targeted online searches using keywords related to sustainability and the names of the selected organizations were conducted to gather relevant information about their strategies, sustainability reports, projects, and achievements. the analysis of the collected data was conducted using the content analysis method, through which key themes, patterns, and best practices in the field of sustainable strategy implementation in the slovenian business environment were identified. 3 a case study analysis of the slovenian business environment slovenia, as a member state of the european union, actively aligns its national sustainable development strategies and policies with the overarching eu green deal and related directives. the slovenian government translates these eu guidelines into national frameworks, often prioritizing areas such as the transition to a low-carbon circular economy, biodiversity conservation, and resource efficiency, as outlined in national development plans and legislative acts. for example, the slovenian development strategy 2030, also includes sustainable development goals in order to implement the global development plan set out in implementing sustainable strategies: a case study analysis of the slovenian business environment 196 the un’s 2030 sustainable development agenda (2030 agenda) (government office for development and european cohesion policy, 2017). these national strategies then inform regional development priorities, which are frequently supported by various eu funding mechanisms, including the european regional development fund, the cohesion fund, and specific programs dedicated to green transition and innovation. this financial support enables regions to implement projects aligned with eu and national sustainability goals, such as developing green infrastructure, promoting sustainable mobility, and supporting the adoption of circular economy practices at the local level. lazar (2024) highlighted the progress in understanding and funding sustainable development and the circular economy through different eu funds and schemes. eu funding opportunities offer municipalities and regions a way to partially finance their green transitions. consequently, slovenian companies operating within these regions are influenced by these developments through new regulations, incentives for sustainable practices, and evolving market demands driven by the broader green transition. furthermore, eu directives like the corporate sustainability reporting directive (csrd) directly mandate sustainability reporting for a significant number of slovenian companies, pushing them towards greater transparency and integration of sustainable practices into their core operations, thereby reflecting the top-down influence of eu policy and funding on the slovenian business environment. 3. 1 slovenian business environment and sustainability the green, sustainable, and circular development of the economy is both a trend and a necessity for maintaining long-term international competitiveness. the transition to a lowcarbon circular economy in slovenia is among its strategic development priorities. slovenia will achieve this goal by promoting innovation, new business models, digital transformation, the efficient use of raw materials by closing material and energy flows, and adaptation to climate change (gzs, 2022). with growing awareness of the environmental, social, and economic impacts of business operations, a rising number of slovenian companies are focusing on sustainable practices, and this is how it reflects on slovenia business environment based on the studies done by the portal električna prihodnost (električna prihodnost, 2023):  regulatory framework: in recent years, slovenia has adopted numerous laws and strategies promoting sustainable development. the european union, of which slovenia is a member, also dictates many guidelines and requirements in the field of sustainability, which influence the operations of companies in the country.  green economic orientation: slovenia is recognized for its natural resources and biodiversity. many companies are leveraging this natural heritage by promoting sustainable practices, green technologies, and ecological products.  certificates and labels: numerous slovenian companies are obtaining international certifications such as iso 14001 (environmental management) or emas (ecomanagement and audit scheme). these certifications help companies establish sustainable practices and communicate with stakeholders. nuša lazar 197  stakeholder engagement: sustainability efforts are reflected not only in internal company practices but also in interactions with customers, suppliers, local communities, and other stakeholders.  sustainability reporting: an increasing number of slovenian companies are publishing sustainability reports, where they transparently communicate about their environmental, social, and economic impacts.  education and training: successful implementation of sustainable practices requires continuous education and training of employees. many companies and organizations in slovenia organize seminars, workshops, and other events focusing on sustainability and corporate social responsibility.  partnerships and collaboration: slovenia has an active network of organizations, associations, and institutions that promote sustainable development. companies often collaborate with them for knowledge exchange, joint projects, and initiatives.  innovations for sustainability: many slovenian companies are investing in research and development to find new, more sustainable solutions, whether in the field of production, services, or technologies. many slovenian companies have consciously decided to overhaul their business operations and integrate sustainability aspects into every segment of their processes. naturally, companies are approaching this in various ways. the majority have addressed it in only one segment, primarily at the development-product level, often driven by customer requirements or positioning within global value chains. however, only a smaller proportion of companies have adopted a comprehensive or strategic approach (obrtno podjetniška zbornica slovenije, 2021). 3. 2 sustainable business transformation in slovenian smes: an analysis of a public support initiative the study we conducted, examines a public call aimed at enhancing the international competitiveness and export intensity of slovenian enterprises through the implementation of sustainable business strategic transformation. spirit slovenija, the public agency, actively began introducing comprehensive and strategically oriented sustainable business practices as early as the beginning of 2016 with a two-year pilot project titled establishing sustainable business strategies and business models in practice. nine slovenian companies, selected through a public call, participated in the project, becoming the first to embark on the path of strategic sustainable transformation: m sora, trgovina in proizvodnja d.d., lumar ig d.o.o., iskraemeco, merjenje in upravljanje energije d.d., hotel sava rogaška d.o.o., engrotuš podjetje za trgovino d.o.o, anton blaj d.o.o., sij d.d., steklarna rogaška d.o.o., talum d.d. (rejc buhovac, et. al, 2019). spirit slovenija afterwards prepared a handbook sustainable business strategies and sustainable business models in slovenian practice based on the experiences from the national pilot project mentioned above, which was implemented in the years 2016-2017 and in which the before-mentioned 9 slovenian companies have participated in (rejc buhovac, et. al, 2019). it was also created based on the experiences that the authors of this handbook gained in collaboration with leading global corporations in the field of sustainable business, such as nike, implementing sustainable strategies: a case study analysis of the slovenian business environment 198 p&g, the home depot, nissan north america, patagonia, and others. the manual offers: (i) precise explanations of concepts, (ii) answers to questions, why sustainable business is beneficial to business, (iii) the central part of the manual provides instructions on how to implement sustainable business into strategic and operational processes effectively, (iv) it also explains, how companies can benefit from the help of an external expert in implementing the process of sustainable corporate transformation. additionally, the indicated handbook advises on steps for slovenian companies to follow for sustainable transformation (rejc buhovac, et. al, 2019):  selection of strategic team members, where the key challenges are: o identifying the key experts and opinion leaders who are open to the changes required by sustainable business practices; o engaging participants to willingly cooperate; o ensuring the entire team works openly and with commitment, despite potential disagreements due to different perspectives; o achieving consensus.  identification of sustainable business opportunities, where the key challenges are: o including representatives of all key stakeholders in the sample of participants (survey respondents, interviewees); o many sustainable business opportunities are hidden behind the guise of sustainability risks.  analysis of the existing business strategy and business model, where the key challenges are: o to openly and critically identify gaps or weaknesses in the company; o to recognize the interconnectedness of the company's units and their interdependence when they influence these gaps and weaknesses.  writing the vision, where the key challenges are: o to reach an agreement on what the company should look like in the target year; o to include all essential sustainability challenges and their related risks, and to anticipate innovative solutions and target states.  developing a sustainable business strategy, where the key challenges are: o to select the right priorities; o to map out the sustainable business strategy as a logical series of hypotheses about cause-and-effect relationships, which also include stakeholder responses.  defining indicators for strategic control and their target values, where the key challenges are: o to define indicators that can be easily supported by information systems; o to anticipate which methods will allow for the efficient collection of new data needed to calculate the indicators; o to set meaningful target values (considering the variability of the environment and the company's capabilities. nuša lazar 199  developing a plan of projects and measures that support the implementation of the strategy, where the key challenges are: o to find the most suitable organizational solution to support sustainable business practices; o to find the most appropriate way to motivate employees to strive for the realization of the sustainable business strategy; o to appoint a colleague who can take on the tasks of project management – a coordinator of strategic activities and those participating in them.  preparation of a new business model, where the key challenges are: o to identify all the areas where the business model has changed; o to know how to document and emphasize its sustainable elements.  monitoring the implementation of the sustainable business strategy, where the key challenges are: o to consistently monitor progress; not to allow operational, day-to-day challenges to hinder regular monitoring and strategy review; o to insist that all those responsible for strategic activities participate in progress reporting.  communicating sustainable and business performance, where the key challenges are: o to prepare engaging yet credible content for the sustainability report; o to ensure regular, truly frequent communication. insights from practice confirm the weaknesses and strengths that companies face during the sustainable transformation of their operations. building on the exceptional results and impacts achieved by the aforementioned pilot project, an additional public call was open for slovenian companies aiming at enhancing the international competitiveness and export intensity of slovenian small and medium-sized enterprises (smes) through the implementation of sustainable business strategic transformation. the primary objective of the initiative was to facilitate the adoption of sustainable practices and the development of new business models within these enterprises. this was pursued through two key activities: (i) the engagement of at least 60 smes in a strategic transformation process, leading to the formulation of sustainable business strategies, novel business models, and proposals for implementation projects; and (ii) the provision of financial support for a minimum of 60 implementation projects demonstrably contributing to the realization of the aforementioned sustainable business strategies. this intervention, conducted between 2019 and 2021, represents a targeted effort to integrate sustainability principles into the core operations of slovenian smes to bolster their global market position (spirit slovenija, 2019). key insights of the intervention reveal that successful strategic sustainability transformation hinges on mature awareness, and motivated leadership capable of addressing identified weaknesses. while awareness of sustainable business needs varies, its direct link to financial improvement is often poorly understood. companies tend to under address their weaknesses, which become critical in crises. tailoring the transformation process to each company (considering its specifics) and broadly engaging employees are vital for building trust and commitment. many smes lack long-term strategies and defined kpis, hindering monitoring and timely action. establishing clear, fact-based indicators can drive improvement and accountability. crucially, rapidly detecting changes and implementing sustainable strategies: a case study analysis of the slovenian business environment 200 risks is increasingly important for proactive action and future success (obrtno podjetniška zbornica slovenije, 2021). 3. 3 slovenian practices and sustainable strategies the chamber of commerce and industry of slovenia (gospodarska zbornica slovenije – gzs) introduced the sustainability chains (tranjostne verige), a platform and community dedicated to connecting, educating, and empowering slovenian companies on their journey of sustainable transformation. they recognized that sustainability is a path they build together with employees, partners, companies, institutions, and individuals – united by the vision of creating a fair, responsible, and green future. the experiences and challenges in establishing sustainable strategies for individual companies included in this community/platform are listed as examples of good practices below (gzs, 2025):  adria mobil already developed its first sustainability strategy in 2020. in 2021, they calculated the company's carbon footprint. in 2023, they updated their sustainability goals, and in 2024, they also began sustainability reporting.  iskraemeco has a holistic approach to sustainable development, which is increasingly embedded in the company's strategy, values, and culture. they strive for complete transparency in their operations and conduct. since 2024, they have also had a working group within the company with a responsible person for sustainable development.  corporate social responsibility, ecological efforts, and the sustainable orientation of the company are also part of the business strategy of unichem. they also invest heavily in the education of employees and the wider society through their gaia magazine.  sid bank promotes the financing of sustainable projects and companies through its sid zelen (sid green) program. insurance is provided through the eif guarantee scheme. sid bank is also transitioning to sustainability reporting in accordance with csrd for its 2025 reporting. it is also aligning its requirements for companies' esg data with the disclosure requirements of the csrd directive and esrs standards. a good case example in the field of sustainable operation of companies in slovenia is the talum group (talum, n.d.). the sustainable development of the talum group is based on increasing the scope and complexity of products and services, improving productivity and efficiency, and ensuring the highest quality with an emphasis on environmental protection and efficient energy use, health and safety at work, fair treatment of employees, information security, risk management, and the code of business conduct within the talum group. the talum group has adopted a sustainable development policy of the talum group, which covers the aforementioned areas, together with set goals, in accordance with which it also operates. the sustainable development policy has been in effect since june 1, 2023, and defines the foundations of operation in the areas of quality, working conditions and human rights, which include respect for human rights, the right to equal opportunities and treatment of employees, the prohibition of child and forced labor, the limitation of working hours, and the right to freedom of association and collective bargaining. an effective occupational health and safety system, an efficient environmental and energy management system are established, where they are particularly committed to mitigating and adapting to climate change, preserving nuša lazar 201 biodiversity, and the use and consumption of natural resources and energy. they care for the quality of air, soil, and groundwater, and in waste management, they follow the waste management hierarchy. they are committed to the responsible sourcing of input materials, especially critical minerals from conflict zones. they operate in accordance with the adopted business code of conduct, effectively manage risks, and with the established information security system (tisax), we protect confidential data and information from unauthorized access, use, disclosure, alteration, or destruction. they also prepare a sustainable development report of the talum group (available online for 2022 and 2023) (talum, n.d.). another example of the successful implementation of a sustainable business strategy is the company menerga. menerga is a high-tech engineering company that provides energyefficient air conditioning, ventilation, heating, and cooling solutions. at the end of 2021, the company presented the sustainable strategy 2022 – 2025. the strategy outlined activities defined by a broader group of menerga employees based on the co-creation of a shared company vision for 2025. the sustainable business strategic transformation preparation program, which resulted in the sustainable strategy document, aimed to establish sustainable strategic foundations for business operations and adopt appropriate values that serve as the basis for building true, better company value in new business, social, environmental, and economic situations (menerga, 2021). discussions/conclussions to build lasting organizations and thriving communities, leaders must prioritize sustainability today. in an era of heightened transparency, a robust sustainability strategy that integrates employee well-being and environmental responsibility is not just a future trend, but the essential path to enduring prosperity (peoplethriver, 2025). while businesses have historically contributed to environmental problems, they are also uniquely positioned to drive positive changes through the adoption of sustainable practices. adopting sustainable business practices offers numerous benefits, driving internal innovation by prompting a reassessment of operational inefficiencies and material sourcing, potentially leading to cost savings. investing in renewable resources also improves environmental and supply chain risk management. furthermore, a strong sustainability program attracts and retains talent, particularly millennials, and expands audience reach by appealing to sustainably minded consumers, ultimately building brand loyalty. utilizing fewer or more sustainable resources directly reduces production costs. opting for sustainability can also generate positive publicity, enhance a company's standing in a competitive market by differentiating its brand, and even set industry trends, potentially inspiring broader adoption of sustainable practices (harvard business school online, 2021). corporate sustainability in slovenian companies reflects global trends while also capitalizing on local opportunities and specificities. with the increasing need for sustainable business operations and the commitment to the sustainable development goals, this trend is expected to continue to grow in slovenia. as presented herein, a significant number of slovenian companies have already embarked on their journey towards sustainable business practices and the development of sustainable business strategies. to further facilitate this transition, companies can leverage implementing sustainable strategies: a case study analysis of the slovenian business environment 202 insights from the outcomes of past spirit slovenija calls for proposals (presented in this paper), utilize available resources such as the aforementioned handbook “establishing sustainable business strategies and business models in practice”, and engage with initiatives like the gzs sustainability chains program, which is empowering slovenian companies on their journey of sustainable transformation. also financing sme projects and investments for reducing environmental impact is important. two most used financing possibilities for slovenian companies are (obrtno podjetniška zbornica slovenije, 2021):  sid bank provides financing in the areas of renewable energy sources, efficient energy use, clean transport, pollution prevention and control, and the circular economy, etc.  the eco fund offers non-refundable grants and favorable loans to companies planning environmentally friendly investments in areas such as heating and ventilation, insulation and windows, efficient energy use, electricity self-sufficiency, construction or comprehensive renovation of buildings, vehicles and sustainable mobility infrastructure, water, air pollution reduction, waste management and asbestos removal, and initial investments in environmental technologies. reconciling economic profit with social and environmental value creation is central to sustainability, requiring a delicate balance often explored in strategy literature through 'winwin' scenarios. while legitimizing sustainability, this focus can limit action by overlooking opportunities where significant social or environmental gains necessitate minor economic trade-offs. consequently, potentially impactful initiatives with slight economic costs may be deemed illegitimate, hindering substantial societal and environmental improvements (long, 2019). looking ahead, integrating sustainable business strategies is a fundamental imperative for long-term viability and competitive advantage. future success depends on organizations proactively embedding environmental, social, and governance factors into their core operations, recognizing the interconnectedness of planetary health, societal well-being, and economic prosperity. this requires systemic transformations, fostering innovation in circular economy models, resource efficiency, and equitable value creation, driven by increasing stakeholder demands and the urgency of global challenges. references 1. efrag & ifrs. (n.d.). esrs–issb standards: interoperability guidance. retrieved on 18.4.2025 at https://www.efrag.org/sites/default/files/sites/webpublishing/siteassets/esrsissb%20standards%20interoperability%20guidance.pdf 2. električna prihodnost. (2023). trajnostni razvoj podjetja – odgovorno podjetništvo danes za lepši jutri. retrieved on 10.5.2025 at https://elektricna-prihodnost.si/trajnostni-razvojpodjetja/ 3. etoso. (2025). how to build a more sustainable service business. retrieved on 4.4.2025 at https://etoso.io/resources 4. european commission, finance (2025). corporate sustainability reporting. retrieved on 10.4.2025 at https://finance.ec.europa.eu/capital-markets-union-and-financialhttps://www.efrag.org/sites/default/files/sites/webpublishing/siteassets/esrs-issb%20standards%20interoperability%20guidance.pdf https://www.efrag.org/sites/default/files/sites/webpublishing/siteassets/esrs-issb%20standards%20interoperability%20guidance.pdf https://elektricna-prihodnost.si/trajnostni-razvoj-podjetja/ https://elektricna-prihodnost.si/trajnostni-razvoj-podjetja/ https://etoso.io/resources https://finance.ec.europa.eu/capital-markets-union-and-financial-markets/company-reporting-and-auditing/company-reporting/corporate-sustainability-reporting_en nuša lazar 203 markets/company-reporting-and-auditing/company-reporting/corporate-sustainabilityreporting_en 5. government office for development and european cohesion policy. (2017). slovenian development strategy 2030. ljubljana: government office for development and european cohesion policy. 6. gzs. (2022). zeleni prehod gospodarstva. retrieved on 6.5.2025 at https://www.gzs.si/skupne_naloge/stalisca_in_komentarji/vsebina/podro%c4%8dja/indu strijska-politika/zeleni-prehod-gospodarstva 7. gzs. (2025). verige trajnosti gzs. retrieved on 6.5.2025 at https://okolje.gzs.si/trajnost/ 8. hardyment, richard. (2015). sustainability strategy: simplified. corporate citizenship. london, uk. retrieved on 4.4.2025 at https://corporate-citizenship.com/wpcontent/uploads/dlm_uploads/sustainability-strategy-simplified1.pdf 9. harvard business school online. (2020). the triple bottom line: what it is & why it’s important. retrieved on 5.4.2025 at https://online.hbs.edu/blog/post/what-is-the-triplebottom-line 10. harvard business school online. (2021). making the business case for sustainability. retrieved on 5.4.2025 https://online.hbs.edu/blog/post/business-case-for-sustainability 11. jaspers. (2022). jaspers working paper: best practices developing circular economy strategies in europe. retrieved on 4.4.2025 at https://rra-podravje.si/assets/docs/22-09-20best-practice-in-ce-strategy-making-in-the-eu-final-draft_jaspers.pdf 12. jay, j., isaacs, k., & nguyen, hong, l. (2025). getting strategic about sustainability. harvard business review, 01 (2025). retrieved on 5.4.2025 at https://hbr.org/2025/01/getting-strategic-about-sustainability 13. lazar, nuša. (2024). the importance of eu-funded projects for the sustainable development of local communities. agora international journal of economical sciences, 18 (1), p. 111-123, doi: 0.15837/aijes.v18i1.6715 14. long, thomas b. (2019). sustainable business strategy. in leal filho, w., azul, a.m., brandli, l., özuyar, p.g., wall, t. (eds.) encyclopedia of the un sustainable development goals: decent work and economic growth. springer, uk. 15. menerga. (2021). trajnostna strategija podjetja menerga 2022 – 2025. retrieved on 8.5.2025 at https://www.menerga.si/blog/2021/12/08/trajnostna-strategija-menerga-20222025/ 16. obrtno podjetniška zbornica slovenije. (2021). prihodnost je v trajnostni naravnanosti. retrieved on 11.5.2025 at https://www.ozs.si/novice/prihodnost-je-v-trajnostninaravnanosti-6050922e2114e06ad665fe82 17. peoplethriver. (2025). what is a sustainable business strategy? retrieved on 4.4.2025 at https://peoplethriver.com/what-is-a-sustainable-business-strategy/ 18. plana. (n.d.), a. corporate sustainability reporting directive (csrd). retrieved on 10.4.2025 at https://plana.earth/policy/esrs-european-sustainability-reporting-standards 19. plana. (n.d.), b. european sustainability reporting standards (esrs). retrieved on 10.4.2025 at https://plana.earth/policy/esrs-european-sustainability-reporting-standards 20. rejc buhovac, a., hren, a., fink, t., savič, n. (2019). trajnostne poslovne strategije in trajnostni poslovni modeli v slovenski praksi. spirit slovenija, javna agencija. ljubljana 21. spirit slovenija. (2019). javni razpis »spodbujanje trajnostne poslovne strateške transformacije in razvoj novih poslovnih modelov v slovenskih podjetjih za lažje vključevanje v globalne verige vrednosti«. retrieved on 10.5.2025 at https://www.spiritslovenia.si/razpis/323 22. talum. (n., d.). trajnostni razvoj. retrieved on 10.5.2025 at https://www.talum.si/trajnost.html https://finance.ec.europa.eu/capital-markets-union-and-financial-markets/company-reporting-and-auditing/company-reporting/corporate-sustainability-reporting_en https://finance.ec.europa.eu/capital-markets-union-and-financial-markets/company-reporting-and-auditing/company-reporting/corporate-sustainability-reporting_en https://www.gzs.si/skupne_naloge/stalisca_in_komentarji/vsebina/podro%c4%8dja/industrijska-politika/zeleni-prehod-gospodarstva https://www.gzs.si/skupne_naloge/stalisca_in_komentarji/vsebina/podro%c4%8dja/industrijska-politika/zeleni-prehod-gospodarstva https://okolje.gzs.si/trajnost/ https://corporate-citizenship.com/wp-content/uploads/dlm_uploads/sustainability-strategy-simplified1.pdf https://corporate-citizenship.com/wp-content/uploads/dlm_uploads/sustainability-strategy-simplified1.pdf https://online.hbs.edu/blog/post/what-is-the-triple-bottom-line https://online.hbs.edu/blog/post/what-is-the-triple-bottom-line https://online.hbs.edu/blog/post/business-case-for-sustainability https://rra-podravje.si/assets/docs/22-09-20-best-practice-in-ce-strategy-making-in-the-eu-final-draft_jaspers.pdf https://rra-podravje.si/assets/docs/22-09-20-best-practice-in-ce-strategy-making-in-the-eu-final-draft_jaspers.pdf https://hbr.org/2025/01/getting-strategic-about-sustainability https://www.menerga.si/blog/2021/12/08/trajnostna-strategija-menerga-2022-2025/ https://www.menerga.si/blog/2021/12/08/trajnostna-strategija-menerga-2022-2025/ https://www.ozs.si/novice/prihodnost-je-v-trajnostni-naravnanosti-6050922e2114e06ad665fe82 https://www.ozs.si/novice/prihodnost-je-v-trajnostni-naravnanosti-6050922e2114e06ad665fe82 https://peoplethriver.com/what-is-a-sustainable-business-strategy/ https://plana.earth/policy/esrs-european-sustainability-reporting-standards https://plana.earth/policy/esrs-european-sustainability-reporting-standards https://www.spiritslovenia.si/razpis/323 https://www.talum.si/trajnost.html agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 18, no. 2 (2024), pp. 170-184 170 bread, power, and neoliberal municipalism: the halk ekmek a.ş. as a case of bread and circuses politics e. mete emre mete national university of public service, hungary https://orcid.org/0000-0002-5921-0569, e-mail: emremete76@gmail.com abstract: this article explains the historical process and political importance of halk ekmek a.ş., a public bread production company, since its establishment. in this context, halk ekmek a.ş. was considered an example of a socialist municipality in the past, but today, it is used as a political tool in neoliberal municipalism. although municipal enterprises such as halk ekmek, which are taken as an example in this study, are generally presented as social enterprises, they have also become enterprises of profitability and political gain, especially as a result of neoliberal municipal practices. bread is both a fundamental part of culture and nutrition for the turkish people and a unique part of the control system in which the government is also involved. for this reason, public bread enterprises, such as halk ekmek a.ş., are seen as valuable by those in power to control society and create a political argument. as a result of this examination, it will be investigated that this order established through public means is essentially a part of a "bread and circus" politics that appeases the public and strengthens the political power of the governments. as a result of the findings obtained, it will be seen how municipality participation can create a system that serves political purposes and kills competition. this study contributes to the public administration literature, where there are very few studies on this subject, by critically analysing how the socialist municipality period implemented in the historical process has essentially transformed into neoliberal municipal practices. as a result, the sustainability of this system will be questioned. “life, misfortune, isolation, abandonment, poverty, are the fields of battle which have their heroes; obscure heroes, who are, sometimes, grander than the heroes who win renown…. firm and rare natures are thus created; misery, almost always a step-mother, is sometimes a mother; destitution gives birth to might of soul and spirit; distress is the nurse of pride; unhappiness is a good milk for the magnanimous.” (hugo, 2017: 433). keywords: bread and circus, socialist municapilism, halk ekmek, neoliberal governance, public bread 1. introducti̇on bread, which contains only flour, water, salt and yeast, has been the most fundamental source of nutrition in the whole world. especially in anatolia, bread, which has many varieties, has a significant and even sacred place in terms of society. in fact, the famous traveller evliya çelebi also states in his seyahatnâme that the angel gabriel brought wheat to adam for the first time. he also states that adam was the first person to make bread in the world (yerasimos, 2019: 71-73). bread, which finds its place in novels, poems, social texts, and religious teachings, and its relationship with poverty makes bread a social phenomenon. in fact, during https://orcid.org/0000-0002-5921-0569 mailto:emremete76@gmail.com emre mete 171 the french revolution although its accuracy is debatable it is claimed that marie antoinette said, "qu'ils mangent de la brioche" [then let them eat bricohe] when the french queen was told that the peasants had no bread to eat. this situation is still used today to describe the deep gap between the misery of the people and the aristocracy (thompson, 2003). for this reason, bread has become a field of control and power both socially and publicly. in the ottoman empire, therefore, the laws stated what kind of a product bread was, how it was to be produced, and what the bread production should be. after the establishment of the republic of türkiye after the ottoman empire, policies based on the economic, social and political aspects of bread continued. halk ekmek discussions in social sciences the literature on social sciences does not broadly discuss bread or halk ekmek a.ş. (people’s bread). outside the field of social sciences, bread is seen as food, which is why food engineers, agricultural experts, and gastronomy experts have examined bread as a "product." however, due to its unique status, bread is the most political item in türkiye, and even türkiye's economic situation is understood by how much bread can be consumed per household. in the literature in the field of public administration, authors such as malbeleği (2018) and özdemir (2008) examined halk ekmek within the scope of municipal economic enterprises. these researchers saw these companies as an element of a neoliberal municipality, in which municipalities switched to a business model. in this model, municipalities establish many companies to provide public services instead of using money from the central budget. these local government companies create more space for their budgets, and municipal economic enterprises implement public policies in areas such as transportation, infrastructure, energy, food, etc. in addition to profitability, this situation is also politically beneficial for municipalities. these companies provide additional income to their budgets and votes from the poor classes, which is like a win-win deal. municipalities that present the policies of these companies as social services create a control system behind populist rhetoric. however, although they have the social phenomenon of bread behind them, it is also a reality that bread calls for a political reality. what makes this study different is that it addresses the halk ekmek a.ş. issue as a form of control outside of this rhetoric, that is, as a part of the "bread and circus" policy, which is what makes this study more original. the problem statement of the study is that municipal economic enterprises such as halk ekmek a.ş. are a reflection of populist discourses. in order to prove the hypothesis in the article, court of accounts reports, policy documents, and different research will be used. halk ekmek a.ş. is affiliated with local governments in türkiye as a public bread production centre, and local governments carry out these economic enterprises as an element of socialist municipality. therefore, before starting the discussion, it is necessary to examine the historical roots of the relationship between bread and the municipality in türkiye. 2. roots of socialist municipalism in europe, since the thirteenth century, when city governments first emerged, the social character of municipalities emerged when they began to collect taxes from the public for public services, which is the basis for the emergence of modern municipalities. naturally, in the past, there were city-states in ancient greece, or the “municipal” management model in rome, and bread, power, and neoliberal municipalism: the halk ekmek a.ş. as a case of bread and circuses politics 172 various commune managements. however, while the modern municipality model emerged in the nineteenth century, this situation was based on the collection of taxes in european cities from the thirteenth century onwards. in the past, cities were the places of epidemics, military conflicts, food shortages, and urban death crises. this situation caused many people to be in need of assistance. for example, in hamburg in 1787, while 10 per cent of the population was in need of assistance, 20 years later, 32 per cent of the population was in need of assistance, which also led to an increase in chaos and crime rates in cities. this chaotic society led to the emergence of voluntary aid organisations, especially those based on religion, throughout europe. these religious-based organisations emerged as organisations that helped people experiencing poverty, widows, the elderly, and blind people (clark, 2009; oktay, 2008: 12). the first example of the idea of social municipality was experienced in the paris commune, which emerged in 1871 also as the first administrative experience of the working class. the paris commune constitutes the politicisation process of local governments in a historical sense, in other words, the first core of the modern understanding of municipality. in this short-term self-government experience, public services were implemented through direct initiative, and it was demonstrated that direct democracy could be applied in a metropolitan city (güler, 2009: 127-128). however, this experience was relatively short-lived, and later on, modern examples of social municipality emerged in the nineteenth century with the experience of "municipal socialism". the shocking effects of the industrial revolution were very evident in these cities, and as a result, the demographic structure changed, especially in europe with the industrial revolution, and it increased late from rural to urban areas. in england, which was considered one of the centres of industrialisation in the nineteenth century, the country's population more than doubled between 1750 and 1850. many people migrated from rural areas to industrial cities because of their proximity to factories. at the same time, improvements in health and increased food production reduced the mortality rate. this extreme situation created a public policy problem for the poor working classes in crowded industrial cities (wilde, 2020). the problems experienced by the working masses in the cities infectious diseases, water, sewage, garbage, housing, etc. made it very difficult to manage daily life. in the face of these problems that occurred in industrial cities such as london, liverpool and manchester, the british parliament made a series of regulations under the name of the "public health act" in 1848. the british government saw these problems only as a matter of poverty and tried to overcome them only with legal regulations. later, in 1858, with the local government act, local administrators were elected to office more radically, and thus, practical consequences arose for the working class (prest, 2011). during this period, policies aimed at improving living conditions and public health were implemented in various cities in england with the resources of local governments. in this direction, social reforms were attempted to be carried out by local governments, and all these practices were seen as "municipal socialism", and municipal socialism was widespread, especially in cities such as glasgow and birmingham (gehrke, 2016). according to ruşen keleş, municipal socialism aims to provide a public service approach instead of an individualistic profit motive. this approach, which argues that it is more appropriate for public services to be carried out by local factions, was developed by the webbler and fabian socialists and was eventually based on various principles. according to emre mete 173 these principles, an order based on the will of the plural, not landowners, should prevail in cities. as a result of this approach, municipalities should undertake most of the local services. ultimately, municipal socialism sees small communities (local governments, cooperatives and unions) as the basic unit of human life. developments in the nineteenth century increased the needs of local communities. this approach against the nationalisation of these needs, and they see the nationalisation of services as a movement against municipal socialism. finally, it assumes that local governments should benefit from a particular area of freedom (keleş, 2014: 41-43). the main arguments of the administrations where municipal socialism is implemented are to maintain order in cities, to prevent the spread of diseases, to improve public health and to reduce crime. in working-class cities such as glasgow and birmingham, municipal socialism is implemented, and it aims to improve living standards in the neighbourhoods where workers live intensively. in other words, the driving force of municipal socialism, which expresses socialism applied in matters related to local governments, has been the working class (bayramoğlu, 2015: 36-37). this understanding has been developed further over time, and municipalities have been given entrepreneurial, distributive and productive duties; it has taken on an understanding that defends the welfare of the people and distributes social aid in a social sense. socialist municipal practices continued until the 1980s, especially in england in the 19th century; these services (electricity, water, housing, etc.) that were implemented with continuity were at a level that could compete even with the socialist states of that period. however, these practices seen through municipalities manifested themselves with central government policies after 1945. these practices, which are described as the welfare state approach, have enabled the socialist municipality approach to spread to the state (bayramoğlu, 2015: 52-53). 3. socialist municipality practices in türkiye with the establishment of the republic, the aim was to restructure cities with practices carried out with the principles of etatism. this all-out revival and the adoption of statism policies in production would also show itself at the town level, and the production of many public services would be “municipalised”. here, municipalities aimed to create “healthy” and “civilised” cities (tekelioğlu, 2012). the municipalities bank was established in 1933 to provide financial support for the development of these cities and to realise the drinking water investments of the municipalities. however, all these practices were practices aimed at improving public services that were intertwined with the state. socialist municipality practices, which had been seen in england since the nineteenth century, would only be possible in türkiye in the 1970s (bayramoğlu, 2015:149). the reason for the socialist municipality movement that emerged in türkiye in the 1970s was political and economic crises. some social democratic mayors who emerged during this period pursued policies that aimed to end the understanding of municipalities under the control of party leaders. the profound social and service problems that emerged in the cities during that period brought such a situation to the forefront. as a result, the 1973 elections were elections in which urban problems directed the political conjuncture (güler, 2009: 134). in the 1973 elections, the fact that the central government and the local government were from different parties created a contradiction between them. at the centre of this contradiction, for the first time, social democratic mayors won the elections with the votes they received from bread, power, and neoliberal municipalism: the halk ekmek a.ş. as a case of bread and circuses politics 174 the shantytowns of the city and shaped their policies through shantytown policies (tekelioğlu, 2012: 245). because most of the urban problems were undertaken by the shantytowns. the period, called the socialist municipality in türkiye, was remembered with the names of social democratic mayors who were elected to solve the problems in the big cities. mayors such as “vedat dalokay (1973-1977) in ankara, ahmet i̇svan (1973-1977) and aytekin kotil (1977-1980) in istanbul, i̇hsan alyanak (1973-1980) in izmir” shaped this period. socialist municipality studies in türkiye are generally explicitly addressed in these periods. apart from these examples, the period when fikret sönmez was the mayor of fatsa, the period when osman özgüven was the mayor of dikili, and various projects carried out by various municipalities (such as the milk lamb campaign and neighborhood committees) are also seen as reflections of the socialist municipality (bayramoğlu, 2015: 150-151). what is really important in the social municipality is that some actions are visible, and the first of these visible actions is to open the door to a socially just structure. the reason for the application that will especially please the shantytowns is to show that this socially just structure is being served. this situation is also expected to be reflected in the voting rates. in addition to the socially just structure of social municipalities, the aim is to establish a municipality that is productive rather than a supervisory one, where all layers of the public participate in the participation process, where the municipality does not allow monopolistic rent (tekelioğlu, 2012: 251-255). 4. neoliberal municipalism and “bread and circus” politics the latin phrase “panem et circenses”, literally “bread and circuses”, was a political term in roman times symbolising the well-being of the population. as the roman satirist juvenal put it: “iam pridem, ex quo suffragia nulli vendimus, effudit curas; nam qui dabat olim imperium fasces legiones omnia, nunc se continet atque duas tantum res anxius optat, panem et circenses”. (juvenal & persius, 2004: 372). “now that no one buys our votes, the public has long since cast off its cares; for the people that once bestowed commands, consulships, legions, and all else, now meddles no more and longs eagerly for just two things – bread and games.” the concept of “bread and circus politics” proposes that the vast masses in society can voluntarily exchange their democratic freedoms for a stable but controlling government. to this end, in the roman period, the roman emperors used tools such as food distribution, baths, exotic animals, and theatre to prevent the people from rebelling, eliminate their discontent, and prevent anarchy from emerging. in this context, the concept is used as the general definition of compassion for government policies that ensure the continuation of dominant ideologies and offer short-term solutions to social unrest (esdaw, 2022; dove, 2024). local governments, as the closest administrative unit to the people and their problems, do not hesitate to pursue palliative “bread and circus” politics under the name of “social municipality” in order to turn the destructive effect of mass power into an advantage. these policies will likely increase, especially in periods when economic crises are experienced, and deep poverty spreads to the whole society. in türkiye, organisations such as the “deep poverty network” have focused on the impact of poverty that has deepened in society since 2018 (deeppovertynetwork, 2024). emre mete 175 as anticipated, the minimum services expected from local governments are providing the city’s infrastructure services, preparing urban planning, providing garden and garden services, allocating drinking water to citizens, and finally, collecting and disposing of the city’s waste. all of these duties are public services that the public demands from local governments at a minimum level. however, in addition to these needs, local governments can also implement social municipality practices that will ensure the unity of the society, develop social and cultural relations, and reduce poverty. in türkiye, municipalities with a population exceeding 50 thousand have been authorised to offer all kinds of social and cultural activities. the social and cultural duties of these municipalities include “opening women’s shelters, producing houses and plots for low-income people, allocating plots for disaster victims, cooperating with the disabled and their associations, and carrying out various social projects through the city council” (kurt, 2009: 287). the social municipality practices that we have mentioned so far have been minimised due to the neoliberal municipality approach that came into effect in the 1980s. the neoliberal municipality sees such social practices as unnecessary burdens on municipal budgets, and public policies that were previously offered as “services” are now transformed into “sectors”, and various services (education, health, water, etc.) are commodified. in parallel with general economic doctrines, the main goal of a neoliberal municipality is to privatise public services as much as possible. social services have now been replaced by “social services” surrounded by populist discourses aimed at gaining votes. the aim here is to consider social services as a political element and to receive more votes from the poor community. we can understand this situation from the budgets that municipalities allocate to social responsibility and social municipality practices. for example, in the 2014 general budget of çanakkale municipality, social services only covered 1 per cent of the budget (i̇pek & çıplak, 2016: 209). according to the “local government social budget monitoring report”, denizli metropolitan municipality spent 2.49% of its budget on social expenditures in 2009, bursa municipality 4.69%, diyarbakır metropolitan municipality 15.66%, kocaeli metropolitan municipality 2.62%, and kadıköy municipality 9.7% (şeker, 2011). in a more recent study, the total average of social expenditure rates of adana, mersin, i̇zmir and ankara metropolitan municipalities between 2010-2017 corresponds to 3.1% (karadağ & şahin i̇pek, 2020: 189). the reason behind the increase in social expenditures is local elections. local governments increase social expenditures, which constitute a tiny portion of their budgets, in order to gain votes before the elections. within this framework, social expenditures now take the form of “social politics”, and municipalities pursue social politics through the companies they establish. for example, the istanbul metropolitan municipality has exactly 28 joint stock companies affiliated with the fields of transportation, construction, environment energy, services and it (information technologies). these enterprises, which are called municipal economic enterprises (mees), are defined as “private law legal entities established by municipalities or in partnership with them for the purpose of carrying out many local services, with independent budgets, and subject to private law provisions as a rule” (malbeleği, 2018: 34). although these institutions are seen as public organisations, they are essentially private law legal entities subject to private law rules. these private companies were established with the aim of providing most of the public services and social-cultural services with a “profit margin”. bread, power, and neoliberal municipalism: the halk ekmek a.ş. as a case of bread and circuses politics 176 the reasons for the establishment of municipal economic organizations (meos) were, firstly, the desire to establish a company outside of public control and in the field of private law. thus, bureaucracy and its legal limitations were reduced to a minimum level, and a new source of income was created for the municipality through companies. in addition, populist politics was also implemented in the elections due to uncontrolled personnel recruitment. they can also employ those who are close to their political parties in the areas they create in different areas. these personnel also have the opportunity to receive higher salaries than central government officials. since these municipal economic organizations are not subject to the "state personnel regime", people can be employed freely. in türkiye, there is an increase in personnel employment in both general and local elections. there is always a decrease in personnel employment in the year following the election. based on this study, there has been an increase in personnel recruitment in the local election years 1999, 2004, 2009, and 2019 in türkiye in the last 20 years. there was a decrease in civil servant recruitment in the year following the election. this situation alone shows that icts are actually part of a "social employment policy" that goes far beyond their social purposes (oğuz, taşbaşı, & soykut sarıca, 2020). although it seems to be established for the purpose of reducing poverty in society, the aim is to provide more income to municipal resources. municipalities implement neoliberal municipal practices by becoming companies and transferring resources from companies (malbeleği, 2018: 38-40). municipal economic enterprises (mees) are established as partnerships by the municipality, which has more than half of its capital in the municipality. the reason for this partnership is the idea that social service maximisation will be provided through companies. through this relative autonomy, bits are freed from regulatory provisions such as the “state tender law, general accounting law, court of accounts law” and are able to position themselves in an area outside the tutelary control of the ministry of internal affairs (özdemir, 2008: 43-44). in short, mees are private, municipal joint ventures that provide non-audited public services but are not public institutions. according to karanfiloğlu, these enterprises are groundless in terms of the municipalities law: “there are only two provisions in our legislation that allow municipalities to establish companies and participate in established companies. the first of these is the provision of article 19, paragraph 5 of the municipality law, and the second is the provision added to the municipality law by law no. 5656. according to these provisions, companies, which are one of the institutional principles outside the municipal organisation, can only be used in public transportation, meat transportation and housing construction listed in the law. this situation leaves many municipal companies established today without a legal basis” (karanfiloğlu, 2020: 58). among the companies established by municipalities, companies have been established in many unrelated sectors such as textile, apparel, forest products, vegetable oil, cement, construction, plastic paint production, weapons, tourism, television, etc. (karanfiloğlu, 2020: 60). municipalities can create monopolies in local areas far from the control of the central government through these companies. in this study, halk ekmek a.ş., a municipal economic enterprise, will be taken as an example. emre mete 177 5. istanbul halk ekmek a.ş. as a case study halk ekmek is one of the most important and most profitable companies among the mees mentioned in the previous section, which makes it possible to describe this company as a public bread initiative. although it was one of the subsidiary organisations with a more social aspect when it was founded, halk ekmek later became a tool -especially in shantytownsto gain votes in big cities. the poor classes in türkiye mainly apply bread-based diets, which is also proven by statistics. türkiye ranks first among the countries that consume the most bread, with an annual bread consumption of 199.6 kg (440 pounds) per capita. of course, this statistic also includes other pastries such as simit, pide, and lahmacun, but the most consumed pastry is "somun" bread (martinez, 2023). this makes bread the most consumed food in türkiye. for this reason, bread attracts the attention of politicians and becomes both a social and political phenomenon. for this reason, it is helpful to examine the bread issue from different aspects. according to official figures, i̇stanbul halk ekmek a.ş. produces 1.8 million bread daily in istanbul, which has a population of 15.4 million and is at the heart of the bread market, with more than 3,000 buffets located almost everywhere. according to the data shared by i̇stanbul halk ekmek a.ş., it meets the bread needs of 12% of the people of istanbul (i̇he, 2024). in this way, i̇stanbul halk ekmek emerges as the city's largest bread producer. halk ekmek a.ş. was established as a private subsidiary affiliated with the municipality based on the provision in article 71 of the municipality law, "the municipality may provide its services with special income and expenses by establishing a business within the budget with the permission of the ministry of environment and urbanization" (mevzuat, 2005). municipalities in türkiye use their social background to establish such subsidiaries, thus opening the door to a social policy and generating additional income for their budgets. this is true even for water. although mains water is a public service, packaged water is dependent on private subsidiaries. hamidiye a.ş. -which is affiliated with the istanbul metropolitan municipalityproduces water and exports the produced water to forty-two countries, acting as if it were operating as a business rather than a social enterprise (malbeleği, 2018: 47). the state has both regulatory, supervisory and controlling powers for bread. the first regulation is realised by intervening in bread prices, which is called the "price ceiling implementation", so the aim is to sell bread at the maximum selling price. the price ceiling is the maximum selling price that official institutions set for the sale of goods. although the private sector seems to be in the hands of bread, the state has a dominant role in pricing, and the municipality intervenes in the bread market through price intervention, that is, by setting a price. according to aydın, this is a manifestation of oligopoly behaviour (aydın, 2021: 2158). price control on bread first emerged in the ottoman empire and was implemented in the republic of türkiye. the "law on the obligation of non-haggling sale" numbered 3489, enacted in 1928, was aimed at the seller to label their goods and not to sell goods below the label price. the control of these prices was also given to the municipalities with the law numbered 1580 enacted in 1930. today, pricing is prepared by the chambers to which the tradesmen are affiliated according to the "law on tradesmen and craftsmen professional organizations" numbered 5362. however, in case of objection to these prices, a commission is convened within 15 days upon the application of the highest civil administrator, governor and mayor of that place. however, this pricing changed in 2017, and more institutions became bread, power, and neoliberal municipalism: the halk ekmek a.ş. as a case of bread and circuses politics 178 involved in the pricing of bread (yaman, 2022: 262-263). the price change process on the ministry's website is defined as follows with the latest update: “first of all, the chambers of tradesmen and craftsmen, whose members are registered in the profession of bakery and flour products manufacturing and trade, prepare the bread/simit price tariff and apply it to the union they are affiliated with. the union that receives the application will carry out the procedures for establishing a commission consisting of the representatives of the relevant municipality, provincial directorate of trade, provincial directorate of agriculture and forestry, chamber of trade and industry or chamber of commerce and the relevant chamber in order to ensure that the bread/simit price tariff presented by the chamber is discussed by holding a meeting with the participants stipulated in the said regulation. the representatives above should be informed that participation in the commission is mandatory, and the invitation should be made in writing. suppose anyone does not accept this written invitation. in that case, this should be clearly stated when sending it to our ministry for approval, and the invitation letter sent to the representatives should be made an annexe. the commission decision received should first be sent to the turkish bakers federation by the relevant union for its opinion. then, the commission decision should be submitted to our ministry by the relevant union together with the opinion of the federation for its opinion. suppose the opinion of our ministry is positive. in that case, the bread price tariff will enter into force after the relevant union approves the tariff after the opinion of our ministry is received. however, suppose the tariff requested by our ministry is given a negative opinion. in that case, the union will re-submit the new tariff request with its justifications to our ministry without convening a commission and will approve it after the opinion is received.”. (ministry of trade, 2024) as it appears, many state institutions in the pricing system show that bread price tariffs are now centralised. bread and simit bakers are faced with a strict pricing policy by the central government, and they are also forced to compete with municipalities since municipalities are direct producers. for tekelioğlu, the notion of the municipality has changed; the notion of “producer municipality, not controller” has come into play. because municipalities produce public goods, including bread (tekelioğlu, 2012: 254). municipalities feeling responsible for the pricing, production and distribution of bread in this way is not a phenomenon we encounter frequently in other countries except türkiye (akalın, 2003: 42-43). there are public bread factories and thousands of sales buffets in 12 metropolitan municipalities throughout türkiye. in these cities, where over 37 million citizens live, a total of 534 million somun bread is produced in a year (yaman, 2022: 269). in big cities, the class differences between the rich and the poor are visible, and the poor masses live densely in big cities. it is possible to normalise this situation by helping the poor living in big cities. however, even in cities with small populations, such as afyonkarahisar, düzce, and kastamonu, there are public bread factories, and they produce thousands of bread per day. for the first time, in 1978, the bread production process of municipalities was based on the notion of cheap, healthy, high-quality production in order to provide better service to the people of istanbul. nevertheless, this notion changed, and producing bread was used as a political argument. however, before focusing on the problem of municipalities producing bread, we need to address what bread means economically and emre mete 179 socially and what kind of sound it is. in other words, the problem is whether bread is a public good or a private good. bread is considered a private good due to its characteristics and its marketability, and due to these economic features, the private sector must produce bread. if bread is to be considered a social good or a virtuous good, it must be subsidised by municipalities from their main budgets. however, in türkiye, on the contrary, bread production is carried out by municipal companies in a way that competes with the other bakeries in the market. in fact, the istanbul metropolitan municipality is considering selling the halk ekmek company because of its high profitability (karar, 2024). in a place where there is a liberal market economy like türkiye, it would be logical for the halk ekmek companies not to enter the market at all, assuming that a market with so many producers will find its equilibrium price. municipalities may be willing to produce bread for two reasons. the first reasons that will allow municipalities to enter the market are stated as "preventing bakers from forming cartels among themselves, that is, ensuring competitiveness", or the second reason is "eliminating income inequality in cities, preventing poor people from being able to eat or even facing hunger" (akalın, 2003: 4344). in both cases, municipalities should not be in a position to eliminate competition. the competition board reports show that municipalities do not assist competition in the market for social purposes. on the other hand, municipalities could not eliminate monopolisation; on the contrary, municipalities themselves show the potential for monopolisation, and these reports also reveal how large the halk ekmek companies are. for example, in a case filed in 2010, an application was made by a local bakery owner to the competition board with the claim that “the general managers of ankara halk ekmek ve flour factory a.ş., i̇stanbul halk ekmek factories a.ş. and besaş bursa bread ve nutrient ind. came together and decided not to increase the prices of public bread”. it was stated that, according to the rapporteurs, there was no need to open an investigation. however, istanbul halk ekmek general manager salih bekaroğlu stated at that time that “they were selling 300 grams of white bread for 40 kuruş, that when the recent price increases in raw materials were added to the cost, this increase did not necessitate a price hike for the price of the bread, and that as an enterprise, they were not bound by the decisions of any other bread company, that while a worker working in a normal bakery produces 200 loaves of bread per day, a worker in their own factory can produce 2,500 somun bread per day, and therefore a great cost advantage was achieved, and that istanbul halk ekmek was currently one of the most profitable companies of the istanbul municipality” (competition board, 2010). as can be understood from this, halk ekmek is essentially a large enterprise. other local bakery actors in the market do not have a chance to compete with halk ekmek a.ş. -especially in cities such as istanbul, bursa and ankara, where the majority of the population in türkiye lives, agreements to be made due to political conjuncture can lead to a “cartelisation”. one of the advantages that halk ekmeks have -as a public institutionis that they can obtain the raw material they need for production much more cheaply. they also have a very high storage capacity. the bread production and storage areas of the relatively minor private capital are not large enough to allow them to produce bread cheaply. in addition, small businesses have to buy more expensive agricultural products like flour, wheat, and nuts than municipalities, and there have been many complaints about this unfair competition to the competition board in türkiye. for instance, in 2010, a bakery owner stated that he wanted to bread, power, and neoliberal municipalism: the halk ekmek a.ş. as a case of bread and circuses politics 180 produce and sell the golden bread and golden cake. however, the turkish grain board sold roasted hazelnuts to i̇stanbul halk ekmek at a 60% discount, and according to him, i̇stanbul halk ekmek caused unfair competition by allowing these hazelnut products to be sold both at its own sales points and private sales points and by benefiting from state support. then he applied to the competition board with the request that the necessary be done. however, the competition board similarly stated that halk ekmek was not dominant in the market, that its activities should not be considered predatory pricing or discrimination for abuse, and that “as a result, there are reasonable economic and political reasons for turkish grain board to sell roasted and chopped hazelnuts to i̇stanbul halk ekmek at a low price by using the authority granted to it by the council of ministers, without exceeding its founding purpose” (competition board, 2010b). at this point, it was decided that competition was not distorted. however, it was not stated for which public benefit a public-looking main company produced golden bread and golden cake. apart from these two examples, there have been many claims that halk ekmek prevented competition in the market. these examples were the subject of complaints not only in i̇stanbul but also in malatya and sakarya, which are relatively more minor settlements. no positive result was obtained from any of the 8 applications made between 1999 and 2010. in addition to the competition board reports, the court of accounts reports also reflect the irregularities committed and show the areas in which halk ekmek spent its income. in the 2015 court of accounts audit report of istanbul metropolitan municipality halk ekmek a.ş., the commercial profit of the company was declared as 6,047,157.00 tl. according to this report, halk ekmek a.ş. is ranked 623rd among the 1000 most prominent companies in türkiye and 94th among all public companies. despite this profitability, the company also includes problematic practices such as: some personnel working in the company taking annual paid leave in violation of the legislation to fulfil their military service provision of supplementary health insurance for board members, general manager and assistants, personnel working as consultants, managers, chiefs and their family members faulty practices and payments regarding price differences the partnership structure of the company consists of 5 founders, a habit dating back to the period of law no. 6762 failure to use marketing and advertising expenses in a way that would increase the company’s profitability although the company employs two lawyers, only one of them follows up on lawsuits filed in favour of and against the company the personal expenses of personnel who go abroad are paid from the company budget. these findings essentially show that the company is poorly managed and that there are many irregularities. the most interesting of the problems identified in the court of accounts reports is that halk ekmek a.ş. pursues policies that are entirely incompatible with halk ekmek's social vision, such as advertising, sponsorship, and organising congresses. according to the court of accounts report, halk ekmek advertised in tv and radio programs, newspapers and emre mete 181 magazines for 1,182,402.00 tl (391,262 euro) in 2015 and signed various sponsorships with different companies. the situation becomes more apparent when the euro exchange rate is added in parentheses. while the euro exchange rate was around 3.50 tl against tl in 2015, 1 euro is around 35 tl in 2024. similarly, halk ekmek revealed they paid 318,253.00 tl (105,386 euro) for the rental fee of the wyndham grand istanbul hotel, where the 15th international cereals and bread congress also held 11,800.00 tl (3,907 euro) for the stand rental fee at the world technology innovation and entrepreneurship conference, and 20,672.00 tl (6,844 euro) for the food served to the guests. as if to confirm the ekmek circus politics concretely, halk ekmek paid 295,000.00 tl (97,682 euro) to the istanbul municipality sports club association, which is a football team. it has also been revealed in the court of accounts reports that 122,720.00 tl (40,625 euro) was paid to web tv advertisements shown in the municipal social facilities (sayıştay, 2016). according to the report, it is clear that these organisations are subsidiaries of the istanbul metropolitan municipality and various press and publication organs. the court of accounts report states that the ihe company should follow various paths to increase its profitability and that it is necessary to follow a path that is in line with the requirements of commercial life without forgetting that it is a structure that uses public resources to a large extent (sayıştay, 2016: 22). in this context, halk ekmek transfers its source of income by advertising to its other municipality budget's subsidiaries; the organisation that halk ekmek advertises for is another municipal company. in short, halk ekmek is a company that aims to increase the municipality budget rather than its social aspect. we can understand this situation from the statements of halk ekmek company that the somun bread called typical bread has very little commercial return. therefore, they have turned to other products and from the court of accounts reports. while halk ekmek uses the loaf of bread for social purposes, it also uses other luxury derivative bread and bakery products to maximise profitability. therefore, it reveals that halk ekmek's social aspect is only apparent. practices that will support this argument also emerge in ankara metropolitan municipality halk ekmek a.ş. outside of istanbul halk ekmek. in the 2020 court of accounts report, it was reported that ankara halk ekmek had 15 defective practices. in addition to the defective practices committed commercially, practices that prevent competition in the bread market were also revealed (court of accounts, 2020). these findings are “not accruing late payment interest at the end of the year for receivables that could not be collected on the due date; not using the severance pay account; incomplete recording of monthly commission fees that were not paid by the contractor; not tracking program and license purchases in the rights account; not applying late payment interest to commission fees that were not collected within the payment period; not entering any record in the inventory book at the end of the activity period; exceeding the upper limit in purchases made based on exception provision 3-g of the public procurement law; making new contracts in a short period of time with two companies whose contracts were terminated by mutual agreement on the grounds that they could not procure flour from the market; carrying out work that should be done through open tender by dividing it into parts using the direct procurement method; signing of contracts exceeding the representation authority amount by the general manager without a decision of the board of directors 9. delaying the application of delay penalty until after the termination of the contract; applying a delay penalty based on the missing day to the bread, power, and neoliberal municipalism: the halk ekmek a.ş. as a case of bread and circuses politics 182 contractor company that does not fulfill its commitments on time; signing a contract with a company in composition; exceeding the limit regarding the annual overtime working period determined in the labor law” (court of accounts, 2020). 6. conclusions many metropolitan municipalities changed hands for the first time in the 2019 local elections in favour of the opposition parties. after 25 years, the chp won in istanbul and ankara, where more conservative voters were elected in 2019. although this election success did not affect the 2023 general elections, the opposition parties managed to hold more metropolitan municipalities in their hands in the 2024 local elections. local governments, especially big municipalities, are places where deep poverty is most felt, which has affected the attitude of the voters. because deep poverty and economic crises also create such opportunities for politics, the social municipality discourses of municipalities showed their effect in the 2024 local government election. although it is not the primary duty of municipalities, metropolitan mayor candidates used some election promises for voters in 2024, such as "neighbourhood nurseries, market shopping assistance, assistance to retirees, student scholarships".social municipal policies -targeting such poor classeshave become the determinant of turkish politics, and halk ekmek a.ş., as a municipality subsidiary, is seen as an element of this social policy. halk ekmek affiliates, which had social purposes since their establishment, emerged with the aim of reducing the social inequalities of the poor in society and became institutions expected to provide a kind of social justice. however, the neoliberal municipality understanding that emerged as a manifestation of today's neoliberal system has taken on a different meaning. in the neoliberal municipality understanding, municipalities have become profit-oriented formations like companies, as in many public institutions. in this plane, municipalities have both maximised profits through their companies and, as a populist reflection of these policies, they have seen companies as "vote-gathering" tools. at this point, the "bread and circus" politics mentioned in the article also offers a conceptual set that makes it easier to understand these populist political forms of municipalities because it has been known since the past that the most accessible forms of controlling society have been sports and food. because although human beings are social creatures with complex structures, some of our primitive instincts make us more easily controllable. as we understand from public policy documents, municipalities have also used these extremely archaic techniques. they are using halk ekmek a.ş. both as a current policy tool and competing in a way that could harm local merchants. in this context, future academic studies can also focus on another municipal economic enterprise. because the framework of this study is limited to halk ekmek a.ş., municipalities have subsidiaries in different areas. if we give a current example, the “kent lokantaları” (city restaurants) that ekrem i̇mamoğlu opened in 2022 after becoming the mayor of istanbul metropolitan municipality can also be one of the different tools of municipalities in the face of deep poverty because it seems easier to create control mechanisms over the poor people, especially in periods of deep poverty. emre mete 183 references 1. akalın, g. (2003). belediyelerin ekmek piyasasına müdahalesi: halk ekmek, gıda pulu ve serbest piyasa alternatiflerinin tartışılması. güncel i̇ktisat(5), 41-53. 2. aydın, m. (2021). devletin ekmek piyasasındaki rolü: rekabet kurumu kararları. international social mentality and researcher thinkers journal, 7(49), 2157-2171. doi:http://dx.doi.org/10.31576/smryj.1039 3. bayramoğlu, s. (2015). toplumcu belediye nam-ı diğer belediye sosyalizmi. ankara: notabene yayınları. 4. clark, p. (2009). european cities and towns. new york: oxford university press. doi:https://doi.org/10.1093/oso/9780199562732.001.0001 5. deeppovertynetwork. (2024). who we are. retrieved october 20, 2024, from https://derinyoksullukagi.org/who-we-are 6. dove, l. (2024, jun 7). what does 'bread and circuses' mean? retrieved october 12, 2024, from howstuffworks: https://people.howstuffworks.com/bread-circuses.htm 7. esdaw. (2022). bread and circuses. mayıs 15, 2022 tarihinde https://www.esdaw.eu/bread-and-circuses.html adresinden alındı 8. gehrke, j. p. (2016). a radical endeavor: joseph chamberlain and the emergence of municipal socialism in. the american journal of economics and sociology, 75(1), 23-57. retrieved july 20, 2024, from http://www.jstor.org/stable/43818680 9. güler, m. (2009). toplumcu belediyeciliğin doğuş koşulları üzerine. i̇. kamalak, & h. gül (dü) içinde, yerel yönetimlerde sosyal demokrasi toplumcu belediyecilik teorik yaklaşımlar, türkiye uygulamaları (s. 125-158). i̇stanbul: kalkedon yayınları. 10. hugo, v. (2017). les misérables. (i. f. hapgood, trans.) london: arcturus. 11. i̇he. (2024). retrieved october 24, 2024, from üretim: https://www.ihe.istanbul/sayfalar/detay/16 12. i̇pek, s., & çıplak, b. (2016). türkiye’de sosyal belediyecilik ve sosyal bütçe uygulamaları: çanakkale belediyesi örneği. yönetim bilimleri dergisi, 14(27), 201-215. 13. juvenal, & persius. (2004). juvenal and persius. (m. b. susanna, trans.) massachusetts: loeb classical library. 14. karadağ, y., & şahin i̇pek, e. a. (2020). seçilmiş büyükşehir belediyelerinin sosyal harcamaların düzeyini etkileyen faktörler bağlamında değerlendirilmesi. vizyoner dergisi, 11(26), 182-202. doi:https://doi.org/10.21076/vizyoner.599177 15. karanfiloğlu, a. y. (2020). sayıştay. mayıs 10, 2022 tarihinde yerel yönetimlerin denetimi: https://sayistay.gov.tr/files/825_yerelyonetim_denetimi.pdf adresinden alındı 16. keleş, r. (2014). yerinden yönetim ve siyaset. i̇stanbul: cem yayınevi. 17. kurt, h. (2009). yerel yönetim reformları işığında yerel yönetimlerin hareket alanları: toplumcu belediyecilik mümkün mü? i̇. kamalak, & h. gül (dü) içinde, yerel yönetimlerde sosyal demokrasi: toplumcu belediyecilik teorik yaklaşımlar, türkiye uygulamaları (s. 269-294). i̇stanbul: kalkedon yayıncılık. 18. malbeleği, n. (2018). belediye i̇ktisadi teşebbüsleri üzerine bir i̇nceleme. i̇dare hukuku ve i̇limleri dergisi, 18(1), 31-60. doi:https://doi.org/10.26650/ihid.644396 19. martinez, e. (2023, december 3). the country that eats the most bread by a landslide. retrieved october 23, 2024, from food republic: https://www.foodrepublic.com/1458299/country-eats-most-bread-turkey/ 20. mevzuat. (2005, july 13). belediye kanunu. retrieved october 10, 2024, from https://www.mevzuat.gov.tr/mevzuat?mevzuatno=5393&mevzuattur=1&mevzuatterti p=5 21. ministry of trade. (2024, september 9). ekmek ve simit fiyat tarifeleri. retrieved ekim 24, 2024, from ticaret: https://www.ticaret.gov.tr/esnaf-sanatkarlar/sikca-sorulansorular/ekmek-fiyat-tarifeleri bread, power, and neoliberal municipalism: the halk ekmek a.ş. as a case of bread and circuses politics 184 22. oğuz, a., taşbaşı, a., & soykut sarıca, y. p. (2020). municipal economic enterprises vs. state economic enterprises: a new arena for employment patronage? çalışma ve toplum, 3, 1611 1632. 23. oktay, t. (2008). belediyenin tarihsel gelişimi. r. bozlağan, & y. demirkaya içinde, türkiye'de yerel yönetimler (s. 119-156). ankara: nobel basımevi. 24. özdemir, g. (2008). belediye i̇ktisadi teşebbüslerinin özelleştirilmesi. sayıştay dergisi(71), 41-74. 25. prest, j. (2011). liberty and locality: parliament, permissive legislation, and ratepayers' democracies in the nineteenth century. oxford: oxford academic. doi:https://doi.org/10.1093/acprof:oso/9780198201755.003.0017 26. rekabet kurulu. (2010, kasım 25). ankara halk ekmek ve un fabrikası a.ş., i̇stanbul halk ekmek fabrikaları a.ş. ve besaş bursa ekmek ve besin san. ve tic. a.ş. genel müdürlerinin bir araya gelerek halk ekmek fiyatlarına zam yapmama kararı aldıkları iddiası. mayıs 8, 2022 tarihinde https://www.rekabet.gov.tr/karar?kararid=83c212174ea6-40e2-8ad8-207389999d4b adresinden alındı 27. rekabet kurulu. (2010b, ağustos 26). ankara halk ekmek ve un fabrikası a.ş., i̇stanbul halk ekmek fabrikaları a.ş. ve besaş bursa ekmek ve besin san. ve tic. a.ş. genel müdürlerinin bir araya gelerek halk ekmek fiyatlarına zam yapmama kararı aldıkları iddiası. mayıs 5, 2022 tarihinde https://www.rekabet.gov.tr/karar?kararid=c516dba71ce4-4772-934c-93bd7b9b0022 adresinden alındı 28. sayıştay. (2016, ekim). i̇stanbul büyükşehir belediyesi halk ekmek a.ş. 2015 yılı sayıştay denetim raporu. mayıs 2, 2022 tarihinde https://www.sayistay.gov.tr/reports/download/2458-istanbul-buyuksehir-belediyesi-halkekme adresinden alındı 29. sayıştay. (2020, kasım). ankara halk ekmek ve un fabrikası anonim şirketi 2020 yılı sayıştay denetim raporu. mayıs 14, 2022 tarihinde https://www.sayistay.gov.tr/reports/download/3771-ankara-halk-ekmek-ve-un-fabrikasianonim adresinden alındı 30. şeker, m. (2011). yerel yönetimlerde sosyal bütçeyi i̇zleme raporu. i̇stanbul: tusev yayınları. mayıs 1, 2022 tarihinde https://www.tesev.org.tr/wpcontent/uploads/rapor_yerel_yonetimlerde_sosyal_butceyi_izleme_raporu.pdf adresinden alındı 31. tekelioğlu, i̇. (2012). cumhuriyet'in belediyecilik öyküsü (1923-1990). i̇stanbul: tarih vakfı yurt yayınları. 32. thompson, v. e. (2003). telling “spatial stories”: urban space and bourgeois identity in early nineteenth‐century paris. the journal of modern history, 75(3), 523-556. doi:https://doi.org/10.1086/380237 33. wilde, r. (2020, january 28). population growth and movement in the industrial revolution. retrieved october 20, 2024, from thoughtco: https://www.thoughtco.com/population-growth-and-movement-industrial-revolution1221640 34. yaman, a. (2022). kentin temel gıda maddesi olan ekmeğin üretim ve tüketim sürecinin ekonomi politiği. i̇deal kent, 13(35), 252-279. doi:https://doi.org/10.31198/idealkent.960174 35. yerasimos, m. (2019). evliyâ çelebi seyahatnâmesi’nde yemek kültürü yorumlar ve sistematik dizin. i̇stanbul: yapı kredi yayınları. agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 19, no. 1 (2025), pp. 357-370 357 impact of management accounting practices on the perceived financial performance of manufacturing companies in sri lanka n.i. yapa, n. rajakaruna, h. dissanayake navodani indunil yapa¹, niluka rajakaruna², hiranya dissanayake³ ¹ ² ³ department of accountancy, faculty of business studied and finance, wayamba university of sri lanka, sri lanka ¹ https://orcid.org/0009-0009-8148-0934, e-mail: navodani.yapa123@gmail.com ² https://orcid.org/0009-0003-7338-0817, e-mail: niluka@wyb.ac.lk ³ https://orcid.org/0000-0002-4963-5125, e-mail: hiranya@wyb.ac.lk abstract: in manufacturing companies, management accounting plays a vital role of the company. this research examines the role of management accounting practices in the financial performance of listed manufacturing companies in sri lanka. this study undertook a quantitative study of data collected using a structured questionnaire from 59 companies listed on the colombo stock exchange. the companies were selected using the census sampling technique. analytical tools used as descriptive statistics, correlation analysis, and the partial least squares structural equation modeling (pls-sem) method, were used to analyse the data. major findings suggest that a greater extent of budgeting systems and costing systems enhances financial performance. information for decision-making can occasionally lower an organization’s financial performance in the short term. performance evaluation systems increase the extent of improved financial performance of organizations, while the analysis of strategic management accounting has the most positive impact on financial performance, supporting its status as a key driver of financial performance in organizations. keywords: financial performance, costing system, budgeting system, strategic management accounting analysis system 1. introduction management accounting practices are crucial in cascading effects on operational improvements and market competition, especially in developing countries such as sri lanka, due to resource constraints or lack of infrastructure, among others. an essential part of management accounting for manufacturers is the system of concepts and methods that develops knowledge of how companies communicate economically, helping to dispose of what costs things have in actuality and therefore shaping how plans are best made for future operations (gichaaga, 2014). management accounting practices, such as cost management, budgeting, performance evaluation, and strategic analysis, are of particular importance to enterprises aiming to raise profits and respond effectively to competition. research questions of the study,  what is the impact of costing systems on the financial performance of listed companies in sri lanka?  is there an impact of budgeting systems on the financial performance of listed companies in sri lanka?  what is the impact of performance evaluation systems on the financial performance of listed companies in sri lanka?  what is the impact of strategic management accounting analysis systems on the financial performance of listed companies in sri lanka? https://orcid.org/0009-0009-8148-0934 mailto:navodani.yapa123@gmail.com https://orcid.org/0009-0003-7338-0817 mailto:niluka@wyb.ac.lk https://orcid.org/0000-0002-4963-5125 mailto:hiranya@wyb.ac.lk impact of management accounting practices on the perceived financial performance of manufacturing companies in sri lanka 358  is there an impact of information for decision-making on the financial performance of listed companies in sri lanka? according to horngren, (2008), companies that used the activity based costing (abc) system determined the increases in profitability and cost control. similarly, almatarneh et al., (2022) conclude that traditional costing systems, despite their lack of accuracy, continued to provide important data for improving operational effectiveness and cost-reduction processes. according to alleyne and weekes-marshall, (2011), budgeting is a helpful strategy for forecasting, controlling internal operations, and allocating resources to accomplish business objectives and goals and also there are two types of budgeting: activity-based budgeting (abb) is a technique for allocating funds to sources in line with the intended activities. the best technique for cost system optimization is the activity-based costing method, or abc, according to (richard et al., 2009). according to alleyne and weekes-marshall, (2011), performance evaluation systems that only focused on financial aspects, such as profit maximization and return on capital investment projects, were criticized. these standards do not account for workforce turnover or the cost of generating capital. the economic value added (eva) mechanism was developed by organizations in response to these limitations in performance evaluation and these eva mechanism looks at the company's cost of capital as well as the actual value that has been provided to the organization alleyne and weekesmarshall (2011). according to roslender and hart (2003), strategic management accounting is an external approach to accounting that focuses on how actions and cost structures made by competitors will affect the business's future operations. according to alleyne and weekesmarshall (2011), there is a lack of a robust theoretical framework in strategic management accounting. this point of view has been supported by numerous other academics who contend that because internal factors receive more attention than exterior factors, the external environment is typically ignored. according to nurullah and kengatharan (2015), states that the management accounting information systems is important to making timely and accurate information to managerial decision-making processes. previous studies indicate that the companies used strong management accounting information systems (mais) are more knowledgeable about investment prospects, inventory control, and production scheduling. richard et al. (2009), state that firm performance can be divided into simply three different types: these assessing results include market performance (such as sales, market share, etc.), shareholder return (total shareholder return, economic values-added, etc.), and financial performance (profits, rate of return of assets, rate of return of investment, etc.). we found that organizations at the business-function level that adopt such strategies related to product differentiation were better placed when they adopted higher levels of sophisticated management accounting techniques such as activity-based management, benchmarking and quality improvement activities(almatarneh et al., 2022). however, sri lankan businesses and others in developing countries face problems getting these into practice as efficiently because they lack the resources or infrastructure (kariyawasam, 2018). the present research attempts to contribute to filling this gap in the management accounting theory regarding its practical application in a sri lankan context by investigating how maps impact the financial performance of listed manufacturing companies in the country (hapuarachchi, 2019). this is a study “analyzing role of management accounting practices on the financial performance of the manufactured companies listed in the cse, sri lanka” which examines the positive effect of the practice of management accounting (maps) on the performance of the sri lankan manufacturing firms operating at the cse. navodani indunil yapa, niluka rajakaruna, hiranya dissanayake 359 current economic conditions, market competition, regulatory framework and corporate governance impact the financial performance of companies but this research study will focus on management accounting practices only. however, there are many companies that operate in the colombo stock exchange but this research has selected only manufacturing sector listed companies. on this premise, the study aims to identify the relationship that exists between those management accounting practices and the financial performance of such manufacturing companies, which are listed in sri lanka. in a highly competitive corporate world today, corporate entities are using cut throat strategies to maximize profits and attain competitive advantage and management accounting has been seen to be playing a central role in this process (gichaaga, 2014). the competitiveness of industries due to consumers’ demand, technology, and changes in the business environment exert pressure on companies to pay attention to activities that increase their sales volume and, at the same time, reduce costs of production (adu-gyamfi, 2020). current management accounting practices especially in manufacturing industries create a much-needed competitive advantage in the organization by enhancing profitability and controlling for waste (gichaaga, 2014). however, research on the link between map and fp in the manufacturing firms of sri lanka is scarce, although it is significant (perera, 2015; kariyawasam, 2018; mohomed, 2021). this study aims at filling this gap by assessing the effects of maps including costing, budgeting, performance evaluation, and strategic decision-making on the financial performance in terms of profitability, return on equity (roe) and return on asset (roa). 2. methodology 2.1 introduction the following study, identifies the relationship between management accounting practices and financial performance concerning sri lankan-listed manufacturing companies, based on a conceptual framework, hypothesis development, and operationalization of variables concerning key practices such as costing systems, budgeting systems, performance evaluation, strategic management accounting, and decision-making information. the target population of 59 listed companies in the colombo stock exchange presents a better representative sampling across various industries. in the mono-method research strategy, the quantitative data collection methodology will be a structured questionnaire survey. there is a basis for appropriate consideration of perception by senior managers and management accountants in the manufacturing industry through a positivist philosophy and a deductive approach. data collection and data analysis in this research go hand in glove. a selfadministered structured questionnaire on a 5-point likert scale was used to collect views from senior managers and management accountants of selected companies. afterward, the data from this will be analyzed rigorously with the help of spss and smart pls. the independent variable of costing system was measured using five questions (items) as “how often does your firm divide costs with a plant-wide overhead allocation?”; the budgeting systems was measured using another five items as “how frequently does your company use budgeting as a tool for planning future operations and activities?”; the performance evaluation system was measured from five questions as “what is the frequency with which your business uses financial standards to analyze overall performance and its financial health?”; strategic accounting analysis system measured from another five questions as “how frequently does your company utilize long-range forecasting to support strategic decision-making and planning?”; information for decision making also measured from five questions as “how often does your company use the discounted cash flow method to evaluate major capital investment projects?”; the dependent variable of perceived financial performance was measured from five items as “to what extent has the gross profit margin of your company improved due to the application of management accounting practices?” (gichaaga, 2014). impact of management accounting practices on the perceived financial performance of manufacturing companies in sri lanka 360 2.2 analytical method partial least squares structural equation modeling (pls-sem) is a variance-based approach to structural equation modeling that focuses on maximizing the explained variance of the dependent constructs. unlike covariance-based sem, which prioritizes model fit, plssem is more appropriate for exploratory research and predictive analysis. it is particularly well-suited for studies that involve complex models, small sample sizes, or non-normally distributed data. the decision to use pls-sem in this study was driven by several methodological considerations. this research investigates the relationships between management accounting practices and financial performance, an area where theory is still evolving. pls-sem is suitable for testing and refining such predictive models. secondly, the primary goal of the study is to predict the impact of management accounting practices (costing system, budgetary system, performance evaluation systems, strategic accounting information analysis systems and information for decision making) on firm performance. pls-sem prioritizes predictive accuracy over model fit, making it ideal for this objective. thirdly, preliminary analysis revealed that some variables deviate from normal distribution. pls-sem does not require strict normality assumptions, making it robust in handling real-world data. pls-sem provides reliable estimates even with a relatively small sample size, unlike covariance-based sem, which requires larger samples to achieve stable estimates. the following steps were undertaken in the pls-sem analysis:  model specification: the structural model was specified to include relationships among latent constructs based on theoretical foundations.  measurement model assessment: the reliability and validity of the constructs were assessed using cronbach’s alpha, composite reliability, and average variance extracted (ave).  structural model evaluation: path coefficients were estimated, and their significance was tested to examine the hypothesized relationships.  goodness-of-fit: explained variance (r²) were evaluated to determine the model’s predictive capability. the analysis was conducted using smartpls 4, a widely recognized software for plssem. smartpls offers user-friendly functionalities for estimating both measurement and structural models, ensuring rigorous assessment of reliability, validity, and hypothesized relationships. navodani indunil yapa, niluka rajakaruna, hiranya dissanayake 361 3. results – data analysis 3.1 descriptive statistics from table 1, demonstrated descriptive statistics include mean, standard deviation of both independency and dependent variables. table 1: descriptive statistic of independent and dependent variables dimension mean standard deviation skewness kurtosis decision cs_m 4.0000 .69835 -1.439 1.185 high level bs_m 3.7774 .79582 -.871 -.354 high level pes_m 3.8981 .74691 -1.355 .568 high level smaas_m 3.9283 .81815 -1.515 1.034 high level id_m 3.7019 .86079 -.702 -.419 high level fp_m 3.9585 .76093 -1.312 .690 high level (source: survey data, 2024) since the descriptive analysis result shown in table 1, the obtained mean value for the costing system was 4.00 and the sd was 0.69835. the analysis in the sd reveals that the individual responses is approximately 0.69 point away from the mean. these mean values are pins down into male interval of 3.5<x≤5. last of all, the researcher can assert that the costing system has supported a high level among the selected listed companies in sri lankan. the budgeting system was determined from the analysis result of the mean and standard deviation as indicated in table 1. testing on the budgeting system, the mean was 3.7774 and the standard deviation was 0.79582. thus, the analysis of variance indicates that, on average, individual responses deviate from the mean by 0.79 of a point. these mean values are between 3.5 of relative importance x and 5 of large relative importance. last of all, the researcher can state that the budgeting system has a high level among the selected and the listed companies in sri lanka. besides, based on the descriptive analysis of the above table 1, the mean and sd of the performance evaluation system were presented as follows. the mean value of the performance evaluation system was 3.8981 and sd was 0.74691. the sd assigns approximately a 0.74-point deviation to an individual response from the mean. these mean values are of the order, 3.5<x≤5. consequently, the researcher can conclude that the performance evaluation system is at a highly-rated level among the selected listed companies in sri lanka. descriptive analysis in finding the mean and sd of the smaas was presented. for the strategic management accounting analysis system, the mean value was 3.9283 with sd that was 0.81815. the sd reveals that the individual responses fluctuate about the mean points by 0.81 of a point. these mean values range within 3.5 <x ≤ 5. in conclusion, the researcher can conclude that the level of smaa system is high among select listed companies in sri lanka. based on the results of descriptive analysis of the above table 1, the indices of mean and sd in information for decision-making were presented. the overall am of information for decision-making was 3.7019, and the sd was 0.86079. looking at the individual responses, the sd proves that they vary by .86 points from the mean on average. these mean values range between 3.5<x≤5. last, the researcher can assert that the level of information for decision making among the selected listed companies in sri lanka is high. as indicated in table 1, descriptive results indicated mean and sd of the dependent variable of this study. the mean value of financial performance was 3.9585 and sd was 0.76093. it is also shown by the sd that on an average basis, each of the individual responses deviate 0.76 point from the mean response. these mean values are within range of 3.5 less than 5. last of all, the researcher can conclude that the level of financial performance is high among selected listed companies in sri lanka. impact of management accounting practices on the perceived financial performance of manufacturing companies in sri lanka 362 3.2 bivariate analysis pearson’s correlation analysis according to anderson (2014) pearson correlation coefficient reflects the direction of the strength together with the level of significance of the bivariate relationships among all the variables that were measured using interval level of measurement. as well as in the opinion of bolboaca and jantschi (2006) pearson correlation checks not only for the presence (indicated by the p-value) but also the direction (indicated by the coefficient r) and the magnitude (ranging between -1 and +1) between the two variables. correlation analysis between management accounting practices and financial performance table 2: pearson’s correlation analysis financial performance costing system pearson correlation .960** sig. (2-tailed) .000 n 53 budgeting system pearson correlation .843** sig. (2-tailed) .000 n 53 performance evaluation system pearson correlation .929** sig. (2-tailed) .000 n 53 strategic management accounting analysis system pearson correlation .956** sig. (2-tailed) .000 n 53 information for decisions making pearson correlation .778** sig. (2-tailed) .000 n 53 (source: survey data, 2024) the pearson correlation coefficients of this study (table 2) were 1.000 for the costing system construct and 0.960 for the financial performance construct, for the respondents. furthermore, the attained correlation coefficient lies in the coefficient range between 0.5 and 1. value of the p is 0.000 which is less than alpha value of 0.05. this provides evidence that there is a positive significant association between costing system and financial performance of those selected listed firms in sri lanka. the regression coefficient of budgeting system against financial performance was 0.843 among the respondents. furthermore, the value of the coefficient of correlation also lies in the coefficient interval of 0.5 to 1. the value of p is 0.000 and this is less that alpha value. they all affirm that there is a good positive correlation between budgeting system and financial performance of selected listed companies in sri lanka. with regards to performance evaluation system and financial performance the correlation coefficient (r) value obtained was 0.929. furthermore, the value of the correlation coefficient also belongs to a coefficient range of 0.5-1.0. once again p-value is equal to 0.000 and less than alpha value of 0.05. thus, the study finds a strong positive significant correlation exists between performance evaluation system and financial performance of the selected listed companies in sri lanka. navodani indunil yapa, niluka rajakaruna, hiranya dissanayake 363 from the analysis result of this study (table 2), the correlation coefficient (r) was 0.956 for strategic management accounting analysis system and financial performance among the respondents. furthermore, it means that the obtained value of the coefficient is in the range of a coefficient from 0.5 to 1. the p-value is equal to equal to 0.000 and less than the alpha value. this confirms that there is a positive correlation between the smma system and financial performance amongst selected listed companies in sri lanka. the respondents got an r-value of between information for decisions making and financial performance 0.778. also, the correlation coefficient value is within the coefficient range of 0.5-1.0 as shown in the figure above. here they show that p-value = 0.000 which is less than the alpha value. this proves that im also has a great positive interaction on fdir and financial performance among the selected listed companies in sri lanka. from these descriptions above, the result witnesses show that most of the management accounting practices have a positive significant correlation between ma practice and the financial performance of selected listed table 3: summary of correlation analysis result relationship strength cost system and financial performance strong positive relationship budgeting system and financial performance strong positive relationship performance evaluation and financial performance strong positive relationship strategic management accounting analysis system and financial performance strong positive relationship information for decision-making and financial performance strong positive relationship (source: survey data, 2024) structural equation modeling reliability analysis reliability refers to the consistency of a set of indicators used to measure a construct. in this study, reliability is assessed using cronbach's alpha and composite reliability (rho_c and rho_a). cronbach's alpha assesses the internal consistency of the constructs. values above 0.7 are generally acceptable, indicating that the indicators reliably measure their respective constructs. composite reliability (rho_a and rho_c) metrics provide an alternative to cronbach's alpha, particularly suited for confirmatory research. values greater than 0.7 are indicative of adequate reliability. table 4: summary of reliability analysis construct cronbach’s alpha composite reliability (rho_a) composite reliability (rho_c) bs 0.851 0.864 0.893 cs 0.903 0.908 0.928 fp 0.892 0.900 0.921 id 0.898 0.924 0.925 pes 0.890 0.899 0.921 smaas 0.895 0.901 0.923 (source: survey data, 2024) all constructs show high reliability, with cronbach's alpha and composite reliability exceeding the threshold of 0.7. convergent validity analysis convergent validity examines whether a set of indicators correlates well with their corresponding construct. it is assessed using the average variance extracted (ave). average variance extracted (ave measures the proportion of variance captured by the construct in impact of management accounting practices on the perceived financial performance of manufacturing companies in sri lanka 364 relation to the variance due to measurement error. ave values above 0.5 indicate adequate convergent validity. table 5: summary of convergent validity analysis construct ave bs 0.628 cs 0.720 fp 0.702 id 0.713 pes 0.702 smaas 0.708 (source: survey data, 2024) all constructs have ave values greater than 0.5, confirming adequate convergent validity. structural model analysis in partial least squares structural equation modeling (pls-sem), the structural model analysis involves evaluating the r-square (r²) values and the f-square (f²) effect sizes. the r² value assesses the explanatory power of the model, while the f² values assess the effect size of each predictor variable on the dependent construct, financial performance (fp), in this case. the r² value indicates the proportion of variance in the dependent variable (financial performance fp) explained by the independent variables. higher r² values suggest better explanatory power of the model. r² for fp is 0.957. this value indicates that approximately 95.7% of the variance in financial performance is explained by the independent constructs (bs, cs, id, pes, and smaas). an adjusted r² of 0.952 confirms the model’s stability when accounting for the number of predictors, indicating a strong predictive capability of the model. the f² value, or effect size, measures the change in r² when a specific independent variable is included or excluded from the model. according to cohen’s guidelines, an f² value of 0.02, 0.15, and 0.35 indicates small, medium, and large effect sizes, respectively. table 6: summary of structural model analysis path f-square (f²) effect size interpretation bs -> fp 0.108 small to medium effect cs -> fp 0.150 medium effect id -> fp 0.231 medium to large effect pes -> fp 0.142 small to medium effect smaas -> fp 0.354 large effect (source: survey data, 2024) budgeting systems (bs) has a small to medium effect on financial performance (fp), with a notable contribution to the variance in fp, supporting its importance in driving financial outcomes (f² = 0.108). costing systems (cs) have a medium effect on fp, emphasizing that costing systems contribute substantially to enhancing financial performance (f² = 0.150). information for decision-making (id) demonstrates a medium to large effect on fp, indicating that innovation has a strong influence on financial outcomes (f² = 0.231). performance evaluation systems (pes) show a small to medium effect on fp, underscoring those efficient processes are beneficial but may not be as influential as other constructs (f² = 0.142). strategic management accounting and analysis (smaas) has the largest effect on fp, with a large f² value. this result highlights the critical role of effective strategic management accounting systems in achieving financial performance (f² = 0.354). the r² and f² analyses reveal that the structural model has strong explanatory power, with all independent constructs contributing significantly to the explained variance in financial performance (fp). smaas has the most substantial impact on fp, followed by id, cs, pes, navodani indunil yapa, niluka rajakaruna, hiranya dissanayake 365 and bs. the findings confirm the model's robustness and highlight the importance of strategic, sustainable, and innovative practices in driving financial success. figure 1: summary of structural model analysis bootstrapping results analysis bootstrapping is a non-parametric resampling technique used in partial least squares structural equation modeling (pls-sem) to assess the statistical significance of path coefficients. in this study, 5,000 bootstrap samples were used to estimate the precision of the model's path coefficients and their associated t-statistics and p-values.  path coefficients and significance testing table 07 presents the bootstrapping results for the structural model, including the original sample estimates (o), sample means (m), standard deviations (stdev), t-statistics, and pvalues for each path: table 7: summary of path coefficients and significance testing original sample (o) sample mean (m) standard deviation (stdev) t statistics (|o/stdev|) p values bs -> fp 0.305 0.302 0.112 2.726 0.006 cs -> fp 0.338 0.332 0.134 2.512 0.012 id -> fp -0.379 -0.391 0.104 3.648 0.000 pes -> fp 0.287 0.279 0.127 2.261 0.024 smaas -> fp 0.418 0.446 0.145 2.880 0.004 (source: survey data, 2024) the results indicate the significance of the paths between independent constructs and financial performance (fp): the relationship between budgeting system (bs) and financial performance (fp) is positive and statistically significant at the 1% level, indicating that firms with stronger budgeting systems tend to exhibit better financial performance (β = 0.305, p = 0.006). impact of management accounting practices on the perceived financial performance of manufacturing companies in sri lanka 366 costing system (cs) positively influences financial performance (fp), significantly at the 5% level. this suggests that the costing system contributes to improved financial outcomes (β = 0.338, p = 0.012). information for decision making (id) shows a significant negative relationship with financial performance (fp) at the 1% level, indicating that under certain conditions, information for decision making may temporarily reduce financial performance, possibly due to initial decision-making provision costs (β = -0.379, p = 0.000). the relationship between performance evaluation systems (pes) and financial performance (fp) is positive and significant at the 5% level, highlighting the financial benefits of efficient and sustainable processes (β = 0.287, p = 0.024). strategic management accounting analysis (smaas) has the strongest positive impact on financial performance (fp), significant at the 1% level, underscoring the importance of robust strategic management accounting analysis systems in driving financial performance (β = 0.418, p = 0.004). the bootstrapping results confirm the statistical significance of all hypothesized relationships. these findings demonstrate that various aspects of corporate sustainability, innovation, and strategic management significantly influence financial performance, either positively or negatively, emphasizing the multifaceted nature of these interactions. 4. conclusions and recommandations the findings of the bootstrapping and structural model demonstrate how different management accounting techniques have a major impact on financial performance. strategic management accounting analysis has the biggest positive impact on financial performance, followed by information for decision-making, costing systems, performance assessment systems, and budgeting systems. this indicates that the model has good explanatory power. similar results were found in other studies (adu-gyamfi & chipwere, 2020; alleyne & weekes-marshall, 2011; mohomed, 2021; hapuarachchi, 2019), where all researchers have found a positive association between smaas and financial performance: that means the financial performance of companies has increased with the adoption of smaas. although the majority of the correlations are positive overall, the negative correlation between financial performance and decision-making information raises the possibility that performance may be momentarily hampered by the initial expenses of decision-making. other similar studies found positive findings between decision-making and financial performance (adu-gyamfi & chipwere, 2020; hapuarachchi, 2019), identifying companies which utilized idm have ended up with higher financial performances. the results highlight how crucial sound strategic, and long-term strategies are to achieving financial success. managerial accounting skills, streamline decision-making and guarantee that their budgeting, performance evaluation, and costing systems are effectively synchronized to maintain long-term profitability. these results help maximise the internal validity of this study so that the findings are reliable and valid. one of the notable findings of the studies covered in this research is that the use of management accounting practices, including sma, can increase the company’s financial performance and need to incorporate enhanced economic estimate approaches, budgeting and performance assessment tools for enhanced imagining and resource allocation. it also stresses a call for the management accountants to integrate with other organizational segments like the marketing, operations and human resource segments to enhance the overall imprint of the management accounting practices. in addition, the research has important implications for financial managers, management accountants, organisational leaders, academicians, and policymakers. it offers navodani indunil yapa, niluka rajakaruna, hiranya dissanayake 367 potential insights into the ways that managers of financial institutions can manage their institutions in accordance with generally accepted principles in management accounting in order to make sound strategic purposes in the establishments. it also postulates that there is a need for continuous professional development of management accountants to point towards effective practice concerning current trends and practices. through training and developing the personnel and promoting cooperation between departments, manufacturing organizations may increase financial results and make better decisions. it also underlines the importance of creating an organisational culture more supportive of the rational use of financial data within the context of the enterprise at various tiers. such an approach will assist firms in the strengthening of their capacity to adapt to the volatile business environments and in the subsequent facilitation of organisational efficiency. in addition, it advises that policy makers should formulate a legal environment in which companies practice sound management accounting based on accountability and corporate financial reporting. the research was conducted only on sri lankan listed manufacturing companies which restricts the study to some extent to the results of other industries or nonlisted companies. the analysis was based on the self-completion questionnaire data, which risks contain bias and the cross-sectional research method does not take into account the dynamic changes in the management accounting practices. in addition, the study mainly relied on a quantitative approach which might not capture the qualitative elements relating to the management accounting practices, which includes culture and leadership to name but a few. the several recommendations mentioned below are the results of the research, which should be implemented to improve management accounting practices and manufacturing companies' financial performance: the business needs to use technology by investing in modern accounting software and making use of data analytics. a culture of collaboration should be fostered by the organization through cross-functional teams and regular communication channels. performance evaluation should be appropriately prioritized by the organization through the use of clear performance metrics and regular performance reviews. the organization may improve training and development programs by implementing customized training initiatives and supporting professional certifications. the business has to create explicit policies and processes to improve its frameworks for management accounting. the business would have to use a balanced scorecard methodology, it is appropriate for the company to focus on ethical practices by establishing a code of ethics and offering ethics training. it is also appropriate for the company to engage stakeholders through regular communication and involve them in decision-making processes. the company is appropriately engaging in continuous improvement with regular assessments and fostering a culture of innovation. references 1. alleyne, p., & weekes-marshall, d. (2011). an exploratory study of management accounting practices in manufacturing companies in barbados. international journal of business and social science, 2(9), 49–58. http://ijbssnet.com/journal/index/361 2. almatarneh, z., jarah, b. a. f., & jarrah, m. a. al. (2022). the role of management accounting in the development of supply chain performance in logistics manufacturing companies. uncertain supply chain management, 10(1), 13–18. https://doi.org/10.5267/j.uscm.2021.10.015 3. gichaaga, p. m. (2014). effe 4. cts of management accounting practices on financial performance of manufacturing companies in kenya. 1–66. 5. horngren, c. t. (2008). instructor ’ s manual management and cost. 6. kariyawasam, : h. (2018). a study of cost and management accounting practices in sri impact of management accounting practices on the perceived financial performance of manufacturing companies in sri lanka 368 lanka’s manufacturing industry. international journal of recent advances in multidisciplinary research, 5(3), 3632–3634. 7. n. hapuarachchi, a. a. (2019). impact of management accounting practices on performance of hotel businesses in sri lanka. fourth interdisciplinary conference of management researchers. 8. nurullah, m., & kengatharan, l. (2015). capital budgeting practices: evidence from sri lanka. journal of advances in management research, 12(1), 55–82. https://doi.org/10.1108/jamr-01-2014-0004 9. richard, p. j., devinney, t. m., yip, g. s., & johnson, g. (2009). measuring organizational performance: towards methodological best practice. journal of management, 35(3), 718– 804. https://doi.org/10.1177/0149206308330560 10. roslender, r., & hart, s. j. (2003). in search of strategic management accounting: theoretical and field study perspectives. management accounting research, 14(3), 255– 279. https://doi.org/10.1016/s1044-5005(03)00048-9 appendix section a 01. name of the company. 02. what is the industrial sector of your company engaging in? 03. the number of years in operation. 04. what is your position in the company? 05. what is your age? 06. what is your gender? energy material capital goods automobiles & components commercial & professional services food, beverage & tobacco consumer durables & apparel healthcare equipment & services household & personal products utilities other 1 – 5 years 6 – 15 years 16 – 25 years above 25 years accountant account executive below 25 years 25 – 35 years 35 – 45 years 45 – 55 years prefer not to say male female navodani indunil yapa, niluka rajakaruna, hiranya dissanayake 369 07. what is your educational qualification? section b: management accounting practices how often does your company use the following management accounting practices? score using the key which ranges from 1 (never) to 5 (very frequently). 1 2 3 4 5 how often does your company use the following management accounting practices relating to costing systems (cs) cs1. how often does your company separate variable, incremental, and fixed costs in its financial reporting and production process? cs02. how frequently does your company apply a plant-wide overhead rate for cost allocation? cs3. how often does your company utilize department-specific or multiple plant-wide overhead rates for more accurate cost allocation? cs04. how frequently does your organization implement activity-based costing (abc) to enhance cost-accuracy? cs05. how often does your company set and review target costs for its products to ensure competitiveness? how often does your company use the following management accounting practices relating to budgeting systems (bs) bs1. how frequently does your company use budgeting as a tool for planning future operations and activities? bs2. how often does your company implement budgeting to monitor and control costs throughout the fiscal year? bs3. how frequently does your company utilize activity-based budgeting to allocate resources based on the activities that incur costs? bs4. how often does your company adopt a zero-based budgeting approach, where every expense must be justified for each new period? bs5. how frequently does your company engage in budgeting that aligns with long-term strategic planning goals? how often does your company use the following management accounting practices relating to performance evaluation systems (pes) pes1. how frequently does your company use financial measures to evaluate overall performance and financial health? pes2. how often does your company incorporate non-financial measures related to customer satisfaction and loyalty in performance evaluations? pes3. how frequently does your company utilize non-financial measures related to operational efficiency and innovation in its performance evaluations? pes4. how often does your company assess non-financial measures related to employee performance and engagement in its evaluation processes? pes5. how frequently does your company calculate and use economic value added (eva) or residual income as a part of its performance evaluation system? how often does your company use the following management accounting practices relating to strategic management accounting analysis systems (smaas) other a/l only bachelor degree master degree phd impact of management accounting practices on the perceived financial performance of manufacturing companies in sri lanka 370 smaas1. how frequently does your company utilize long-range forecasting to support strategic decision-making and planning? smaas12. how often does your company conduct industry analysis to inform its strategic management accounting practices? smaas3. how frequently does your company analyse its competitive position as part of its strategic management accounting efforts? smaas4. how often does your company perform value chain analysis to identify areas for improvement and competitive advantage? smaas5. how frequently does your company use product life cycle analysis to guide its strategic management decisions? how often does your company use the following management accounting practices relating to information for decision making (id) id1. how often does your company use the discounted cash flow method to evaluate major capital investment projects? id2. how frequently does your company assess major capital investments using the payback period and/or accounting rate of return? id3. to what extent does your company document and report nonfinancial aspects when evaluating major capital investments? id4. how often does your company evaluate the risk of major capital investment projects using profitability analysis or computer simulation techniques? id5. how frequently does your company perform sensitivity “what if” analysis when assessing major capital investment projects? section c: financial performance to what extent do management accounting practices affect the following aspects financial performance of your company? (fp) rate on a scale of 1 (no extent) to 5 (very great extent). fp1. to what extent has the gross profit margin of your company improved due to the application of management accounting practices? fp2. to what extent has the return on equity (roe) of your company increased as a result of implementing management accounting practices? fp3. to what extent has the return on assets (roa) of your company improved due to the use of management accounting practices? fp4. to what extent has financial leverage (measured as equity / total assets) of your company increased as a result of adopting management accounting practices? fp5. to what extent does the management accounting function in your company contribute to developing strategies that leverage financial innovations to create a sustainable competitive advantage? agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 19, no. 1 (2025), pp. 283-292 283 technological finance (fintech) and its performance in albania f. pjetri, l. boduri, r. dibra, i. cukaj fabian pjetri¹, leonard boduri², rezart dibra³, ilirjan cukaj⁴ ¹ metropolitan university of tirana, albania. email: fpjetri@umt.edu.al https://orcid.org/0009-0003-7518-1491 ² european university of tirana, albania. email: leonardboduri@gmail.com. ³ tirana business university college tbu, albania. email: rezart.dibra@tbu.edu.al. ⁴ university luarasi, albania. email: ilirjancukaj@luarasi.univ.edu.al. abstract: the main purpose of this paper presented by the authors has to do with the realization of an analysis on the progress and level of use of financial technology (fintech) with a focus on the banking sector in the state of albania. the notion of fintech is a dedicated term for financial technology in the digital age. the diversity of this technological solution brings with it the promise of faster, cheaper, safer and more transparent financial transactions via the internet. in the paper carried out by the authors, primary data obtained from the completion of more than 500 questionnaires by individuals located in tirana, elbasan and durres districts were used. also, in this paper, other secondary data were used, which were provided by the base data of the central bank of the albanian state, from the base data of the world bank and the international monetary fund. this this paper describes the implications of policies regarding the promotion of relevant institutional policies regarding the increase in the level of use of technological finance in the state of albania. the continued application of innovative technologies in finance and especially in the fintech sector is very important, this will serve as a tool to increase the level of financial economic development in albania (toska, 2021). the findings underscore the potential for fintech to foster financial inclusion and economic growth in albania, provided that regulatory frameworks and digital infrastructures are strengthened. the paper presented by the authors also discusses financial policy implications and recommends some important measures that should be considered by the albanian government and the central bank of albania. by further stimulating the adoption and development of technological finance in albania, and by implementing international protocols regarding cyber security. keywords: financial technology (fintech), digital payment, financial banking system, fintech and banking. 1. introduction the notion of fintech is the combination of the words finance and technology. in various papers presented by international authors, the term banctec is often used as a synonym for fintech (zavolokina, 2016). this term is essentially used to describe the application of new technologies that serve to improve and automate all processes related to various financial services. fintech is increasing its scale of expansion in the international economy and in the near future it is thought that it will rival the banking system, as the products offered by fintech are rapidly replacing the services offered by the banking system and beyond with innovative products and services (puschmann, 2017). the combination of continuous innovation with mailto:fpjetri@umt.edu.al https://orcid.org/0009-0003-7518-1491 mailto:leonardboduri@gmail.com mailto:rezart.dibra@tbu.edu.al mailto:ilirjancukaj@luarasi.univ.edu.al technological finance (fintech) and its performance in albania 284 digital technology of this spectrum, enabled the creation and development of several fintech models that are applied in businesses (giglio, 2021). as part of these innovations, we have a continuous increase in the convergence of the two industries, finance and information technology. in the context of the implementation of financial technologies in various subjects, it is observed that the cost of transactions is decreasing, the efficiency and pace of conducting transactions has also increased. technological finance also includes innovations in the field of financial education, in the field of investments, the banking sector and cryptocurrencies (gomber, 2018). 2. literature review the emergence of fintech has helped businesses reduce costs and increase profitability resulting in attracting investors and media (haddad, 2019). these investors are not only interested because of the profitability, but also because it is beneficial for society. to further elaborate, fintech has provided alternative opportunities for underserved societies where people, for example, do not have bank accounts. for example, people who don't get loans from traditional banks for home loans turn to shadow banks and fintech shadow banks, which tend to give them loans without any calculation and bank account requirements. however, on the other hand, these loans are characterized by higher interest rates, which in turn attracts a certain segment of investors (buchak, 2018). the reason for this is that fintech makes it easy and low-cost to do charity work, regardless of their income level. this emerging and innovative industry has also attracted media attention due to innovative and appealing solutions to the general public. fintech uses big data analytics to better understand consumer behaviors, needs and demands to find the best possible solutions, which was once done by big data companies and cloud technology companies (lee, 2018). increasingly, financial technology is becoming commonplace not only for consumers but also for the general public (haddad, 2019). innovation has its own issues such as stability, sustainability (leong, 2017) and the safety. technological finance should be an essential part of the overall policy solution to help identify and address the challenges in increasing finance (loukoianova, 2024). innovations in the industry, in which technological finances are a part, are making it possible to increase the degree and quality of cooperation between fintech companies and financial institutions, especially in the banking spectrum. also, these innovations are improving the quality of the realization of the whole of the transactions that develop between financial institutions and their customers (arner, 2020). experience gained during the period of covid-19 highlighted the importance of promoting digital spectrum services, especially for individuals and various economic entities. the financial sector of the economy, which includes the fintech sector, has been growing steadily, especially over the last years. during this period, it has been observed that universal banks are losing a comparative advantage that has come from more immediate access to information from entities seeking credit to expand their activity (stulz, 2019). fiscal policies that are applied in different countries should have a focus, more substantial investments, especially in the digital spectrum. however, innovation has the potential for consumer and reputational well-being of regulators, supervisors and the financial services industry (anagnostopoulos, 2018). fabian pjetri, leonard boduri, rezart dibra, ilirjan cukaj 285 3. methodology the paper presented by the authors is mainly based on primary data of both the qualitative and quantitative spectrum. also in this paper, secondary data provided by institutions at the national and international level have been used. the research model applied by the authors is based and structured around a questionnaire that aims and aims to assess the possibility of the growth of technological finance in the state of albania. looking at and studying this approach both from the point of view of consumer demand for fintech products and from the point of view of supply. data collection process by the authors. the totality of primary data collected through this questionnaire is presented as follows. the questionnaires were distributed both physically and electronically using the microsoft forms software program. the authors considered a total of 574 valid questionnaires to be part of this study. out of the total of 425 questionnaires that were distributed in hard copy format, only 260 questionnaires were fully completed and were considered valid. meanwhile, 314 questionnaires were completed by the interviewees electronically using the microsoft forms program. the entire process of distributing, completing and collecting all the questionnaires was spread over a period of eight months. more specifically, the filling process started in june 2024 until january 2025. all the individuals who took part in this survey are people who live in the district of tirana, in the district of elbasai and in the district of durrës. about 88% of the people who participated in this sampling are individuals who work in private economic entities, self-employed or students. while only 68 people or in other words 12% of the total sampling are individuals who are employed in public institutions. sampling technique. in this paper, a purposeful non-probability sampling technique was used, in relation to the persons who were selected and who have knowledge of banking services or fintech products. the selection aimed to capture a broad demographic range to provide comprehensive insights into consumer behavior and preferences. questionnaire structure. the survey instrument used by the authors in this paper is divided into four main sections:  socio-economic profile of respondents.  information and usage patterns related to traditional retail banking products.  interaction with and use of innovative banking products, including fintech solutions.  customer behavior and purchase patterns related to banking services. the first part of the questionnaire was adapted with questions regarding the socioeconomic profile of the respondents. the second section of this questionnaire, the information and use of retail banking products by the interviewees of this survey is included. the third section of this questionnaire includes information and the use of innovative banking products. the fourth section of this questionnaire includes the behavior and purchases of the bank's customers. the answers obtained from the data processing of the questionnaire were processed by the authors using the microsoft excel computer software. from the total of 574 completed questionnaires, looking at the gender perspective, it turns out that 330 of the respondents are women, or to say it differently, 57.49% of the total are women. while 244 questionnaires were completed by men, or in other words, 42.51% of the total number of respondents are male. the process of processing and analyzing the data of the respondents. all the data used in this paper was processed and analyzed by the authors using the microsoft excel software program. from the point of view of gender distribution, the summarized results show that 330 people surveyed technological finance (fintech) and its performance in albania 286 or otherwise 57.49 were female. while the other 244 people are male or otherwise the latter constituted 42.51 of all respondents. also, in this paper, other secondary data were used, which were provided by the base data of the central bank of the albanian state (bankofalbania, 2025), from the base data of the world bank (worldbank, 2025), from the base data of statista and the international monetary fund (imf, 2025). ethical aspect of the paper. all the individuals who participated in this survey, have completed the questionnaire with their full will and without being influenced, also all persons were informed about the purpose of this paper. confidentiality was maintained during the entire process of collection, processing and analysis of the data collected by the authors. 4. results 4.1 fintech users in usa and europe. especially during the last decade, the financial sector in which technological finance is a part has experienced a significant growth in different countries such as, the united states of america (usa), various countries that are part of the european union (eu) and the republic of canada. the industry in which technological finance is part of during the year 2024 has managed to generate a value that is in the limit of 226.76 billion dollars. based on projections calculated by different researchers, it is claimed that technological finance will reach the value of 917.17 billion dollars by the end of 2032, growing by a value of 16.8%. (marketdataforecast, 2024). based on data published by statista, it is said that, the number of economic entities of the fintech spectrum in the european continent reached 9200 units during the year 2024 (statistaresearchdepartment, 2025). at the same time, it is noted that fintech users are increasingly adapting to this technological innovation, especially the sector related to digital payments, where the european user base of this applied technology is expected to reach the expected level of 368 million users by the end of this year. based on the data obtained from statista in february 2025, it turns out that: the united kingdom is the country with the highest number of fin tech companies operating in europe. in the uk, it turns out that they extend their activity with a total of 3,300 companies in the financial technology spectrum. the country with the second highest number of companies that are part of the fin tech sector is germany. while the french state is in third place with a number of 522 economic entities that are part of fintech. in fourth place is the state of switzerland in which 497 fin tech companies operate. while in the state of spain, 463 companies in the financial technology spectrum operate during the month of february 2025 (statista, 2025). 4.2 fintech in albania. a new law on payment services has entered into force in albania. the law is based on the second european payments directive (psd 2). this law, applied in the european union countries, brought fundamental changes, especially in the payment markets, where open banking is at the core of the psd 2 directive. psd 2 directive is that of open banking. the importance of this law is not yet very tangible, mainly due to the lack of a developed sector of financial institutions. in terms of online bill payments, online purchases and account access via e-banking, albania ranks last in the region. in the study conducted and published during 2020, which was carried out by the world bank in collaboration with the university of cambridge, it is shown that only 28.8% of the total albanians have made transactions using bank cards in fabian pjetri, leonard boduri, rezart dibra, ilirjan cukaj 287 the time interval of one year. for other countries, this indicator starts from around 39% for kosovo, up to over 66% for serbia. in the eurozone, an average of 92.5% of households have used digital payments at least once in the last 12 months before the survey. the published study shows that, 7.7% of all albanians have used bank cards to make various payments. in other countries of the balkans, such as in the state of kosovo, it turns out that for this period of time 16.5% of the population used bank cards to make various payments, while this indicator in serbia is at the level of 39.4%. the above data shows why albania remains a difficult terrain for fintech businesses; but on the other hand, they also testify to great potential for the growth of the business of payments and financial services in the field of technology. based on data from the bank of albania, it results that the number of transactions through remote banking channels, through internet banking or mobile banking, for 2020 has increased by a value of 14% compared to 2019. the growth in the fintech market is influenced by several factors summarized below. firstly, we can say that the increasing adoption of latest generation smartphones and the internet has made digital solutions more accessible to consumers, leading to an increase in demand for fintech services. secondly, we can say that the covid-19 pandemic has accelerated and increased the level of digital payments and investments, as consumers have had to adapt to remote transactions. thirdly, we can say that regulatory changes have enabled fintech companies to compete with traditional financial institutions on a more level playing field. fourth, advances in technology, particularly in the field of artificial intelligence software and the evolution of blockchain-based systems, have opened up new options for innovation in the field of fintech. the financial market in which fintech is applied has a tendency to continue to grow at a rapid pace, fueled by continuous technological advances, changing consumer behavior and support for clearer laws and regulations. it is also worth noting that the digital payment system on the part of consumers is growing more and more, as the latter are increasingly preferring smat devices as a means of payment. digital investment platforms are also expected to grow in popularity as more individuals look to manage their finances online. after processing the data of the questionnaires by the authors through the computer program microsoft excel, the summarized findings and their interpretation are presented below. figure1. total number of people surveyed by age group. source: data processed by the authors with microsoft excel program (march 2025). 252 140 67 85 30 18-30 31-40 41-50 51-60 >60 total number of people surveyed by age group. technological finance (fintech) and its performance in albania 288 from the total of 574 individuals who participated in this survey, it resulted that: 252 individuals who completed the questionnaires belong to the age group between 18 and 30 years old, or in other words 44.7% of the respondents. it is noted that 140 individuals who completed the questionnaires belong to the age group between 31 and 40 years old, or in other words 24.3% of the respondents. it is noted that 67 people who completed the questionnaires belong to the age group between 41 and 50 years old, or in other words 11.67% of the respondents. it is noted that 85 people who completed the questionnaires belong to the age group between 51 and 60 years old, or in other words 10.1% of the respondents are part of this interval. and finally, 30 people who participated in the survey belong to the age group over 60, or in other words 5.2% of the total. figure 2. use of financial services by the interviewed persons. source: data processed by the authors with microsoft excel program (march 2025). in the above graph it is observed that: 213 individuals who are part of the age group 18 to 30 years old have a bank account. 189 individuals of this age group own a debit card and 130 of them own a credit card. in the above graph it is observed that: 134 individuals of the age group 31 to 40 years old have a bank account. 124 individuals of this age group own a debit card and 95 of them own a credit card. in the above graph it is observed that: 50 individuals of the age group 41 to 50 years old have a bank account. 48 individuals of this age group own a debit card and 41 of them own a credit card. in the above graph it is observed that: 43 individuals who are part of the age group 51 to 60 years old have a bank account. 35 people of this age group own a debit card and 35 of them own a credit card. in the above graph it is observed that: 17 people of the age group over 60 years old have a bank account. 17 individuals of this age group own a debit card and 2 of them own a credit card. figure 3. financial product ownership by education. source: data processed by the authors with microsoft excel program (march 2025). 213 134 50 43 17 189 124 48 43 17130 95 41 35 2 18-30 31-40 41-50 51-60 >60 use of financial services by the interviewed persons. account/deposit debit card credit card 41 233 183 457 38 215 168 421 28 155 120 303 high school bachelor's degree master's degree number of responses financial product ownership by education. account/deposit debit card credit card fabian pjetri, leonard boduri, rezart dibra, ilirjan cukaj 289 based on the data processed by the questionnaires, we find that: most of the interviewees who have a bank account or deposit number are people with a bachelor's degree, specifically we find that there are 233 individuals. while 183 individuals are persons with a master's degree and only 41 persons from all the respondents who have a bank account or deposit have a high school diploma. based on the graph above, we can say that the higher the level of education, the higher the claim of respondents to have a bank account or deposit, on the contrary, such a percentage is low among respondents with a high school diploma. figure 4. satisfaction with mobile banking and payments. source: data processed by the authors with microsoft excel program (march 2025). based on the answers received from 362 people regarding the level of dissatisfaction they have from using mobile bank during the last 12 months, it turns out that 152 people are very satisfied, 100 people are somewhat satisfied, 89 people are indifferent about this question, 13 people are somewhat dissatisfied and 8 people are very dissatisfied with this service.based on the answers received from 340 respondents, the latter claim that they have made a payment transaction via mobile phone during 12 months, it turns out that 126 people are very satisfied, 99 people are somewhat satisfied, 90 people are indifferent about this question, 24 people are somewhat dissatisfied and 1 person is very dissatisfied with this service. figure 5. online shopping behavior. source: data processed by the authors with microsoft excel program (march 2025). 152 100 89 13 8 362 126 99 90 24 1 340 very satisfactory somewhat satisfactory indifferent somewhat unsatisfactory very unsatisfactory total satisfaction with mobile banking and payments. mobile banking mobile payments 46.50% 32.30% 34.60% 82% 53.50% 67.70% 65.40% 18% have we used a smartphone to shop online? before making a purchase, you carefully check the prices online. before making a purchase, you check the previous comments of individuals online. have you ever used a qr barcode scanning application on your phone. online shopping behavior. yes no technological finance (fintech) and its performance in albania 290 the use of mobile phones to make online purchases is claimed by about 53.5% of the survey respondents. on the contrary, about 46.5% claim that they do not use online shopping. about 67.7% of respondents claim that they do online price comparisons when making large purchases, and about 65.4% of them look at online customer reviews. despite being relatively new to albania, around 18% of respondents claim to have used the qr barcode scanning application to compare prices to find the best deal. figure 6. the influence of promotions on the behavior of buyers. source: data processed by the authors with microsoft excel program (march 2025). the increased use of the internet and mobile phones has opened up new opportunities for retailers to advertise and reach potential customers at a limited cost. about 30.2% of respondents claim to have signed up to receive coupons or special offers via e-mail from retail stores in the past 12 months. about 31.6% of them claim to have made a purchase because of these coupons or special offers. additionally, about 40% of respondents signed up to receive coupons or offers from the website, and about 23.8% of them took advantage of these promotions. 5. discussions the market in which technological finance is a part, during these years, is expected to continue growing at an accelerated rate, influenced by continuous technological developments, consumer behavior and regulatory support (statista, 2025). the platforms in which digital investments are made are expanding during these years, with individuals and investors who are looking for potential options to make investments at low costs. the growth of digital assets such as cryptocurrencies and nfts has also created new opportunities for investors and traders. advances in technology, such as ai and blockchain, have opened up new opportunities for fintech innovation, driving further growth in the market. digital investment platforms are also expected to grow in popularity as more individuals seek to manage their finances online (statista, 2024). 69.80% 68.40% 60% 76.20% 30.20% 31.60% 40% 23.80% you have registered to receive coupons or offers by email from stores in the last 12 months. you have made purchases as a result of receiving coupons or special offers. you are registered to receive coupons or offers from various web pages. you have previously used a coupon from an internet site. the influence of promotions on the behavior of buyers. yes no fabian pjetri, leonard boduri, rezart dibra, ilirjan cukaj 291 the growth of digital assets and neobanking has a tendency to continue. in general, we can say that the market in which fintech is part, has a tendency to grow, influenced by technological developments. in albania, there is a need for a more complete regulation in relation to legal acts and the implementation of fintech, especially in the payments sector. in albania, there is a need for a more complete regulation regarding legal acts and the implementation and support of fintech especially in the payments sector. this development would contribute to reducing the informal economy and opening up new opportunities, especially for the economic subjects of the innovative spectrum. market participants can dedicate resources to improve financial education and financial inclusion and actively participate in ongoing engagements driven by national financial education policies. more investment is needed in consumer protection, information and transparency on the conditions involved in financial products and services. the information must be processed and delivered in such a way that it is easily understood by the general public. the banking system in albania, which comprises about 90% of the total financial system of our country, should play a bigger and more important role, especially in diversifying their portfolio by increasing investments, especially in the capital markets and more widely. the bank of albania in cooperation with the albanian state and the financial supervisory authority should have a higher level of focus, especially on the diversification of financial instruments present in the financial and capital markets. these interventions can attract a variety of potential investors at the international and national level who, through their investments, will affect the growth and expansion of the market. a similar situation is also presented in the work carried out by natia surmanidze regarding the state of georgia (surmanidze, 2023). all economic entities involved in or interested in the market in albania should focus particularly on comprehensive initiatives related to financial education. in the current reality of our country, the main fintech products are mainly offered by the banking sector. greater investments are needed in protecting consumer privacy, increasing the level of transparency for the public regarding the financial products offered. in conclusion, we can say that the industry in which financial technology (fintech) is part, has a great potential for sustainable growth both at the international level and at the national level. albania as a country of the western balkans that is trying to join the european union should establish and implement a supportive regulatory framework based on the best international practices in this field. references 1. anagnostopoulos, i. (2018). fintech and regtech: impact on regulators and banks. journal of economics and business, 7-25. 2. arner, d. w. (2020). fintech: the history and future of financial technology”. theiyerreport.com. 3. bankofalbania. (10. march 2025). bankofalbania.org. pridobljeno iz www.bankofalbania.org: https://www.bankofalbania.org/statistics/financial_account_statistics/ 4. buchak, g. m. (2018). fintech, regulatory arbitrage, and the rise of shadow banks. . journal of financial economics,, 453-483. technological finance (fintech) and its performance in albania 292 5. giglio, f. (2021). fintech: a literature review . european research studies journal, 600-627. 6. gomber, p. k. (2018). on the fintech revolution: interpreting the forces of innovation, disruption, and transformation in financial services. . gomber, p., kauffman, r. j., parker, c., & weber, b. w. (2018). on the fintech revolution: interpreting the forces of innovation, disruption, and transformation in financial services. journal of management information systems,, 220-265. 7. haddad. (2019). the emergence of the global fintech market: economic and technological determinants. small business economics,an entrepreneurship journal, 81–105. 8. haddad. (2019). the emergence of the global fintech market: economic and technological determinants. small business economics., 81–105. 9. imf. (24. march 2025). https:imf.org. pridobljeno iz https://data.imf.org: https://data.imf.org/en/data-explorer?dataseturn=imf.sta:wpcper(3.0.0) 10. lee, i. &. (2018). fintech: ecosystem, business models, investment decisions, and challenges. . business horizons., 35-46. 11. leong, c. t. (2017). nurturing a fintech ecosystem: the case of a youth microloan startup in china. international journal of information management., 92-97. 12. loukoianova, e. (2024). fintech applications for boosting climate finance. imf. 13. marketdataforecast. (june 2024). https://www.marketdataforecast.com. pridobljeno iz https://www.marketdataforecast.com: https://www.marketdataforecast.com/marketreports/fintech-market 14. puschmann, t. (. (2017). fintech. . business & information systems engineering, 69– 76. 15. statista. (december 2024). statista.com. pridobljeno iz https://www.statista.com/: https://www.statista.com/outlook/fmo/digital-payments/worldwide?currency=usd 16. statista. (13. feb 2025). statista. pridobljeno iz statista.com: https://www.statista.com/statistics/1553749/number-of-fintechs-europe-bycountry/#statisticcontainer 17. statista. (january 2025). statista. pridobljeno iz statista.com: https://www.statista.com/outlook/fmo/digital-payments/worldwide?currency=usd 18. statistaresearchdepartment. (27. feb 2025). statista. pridobljeno iz https://www.statista.com: https://www.statista.com/topics/3397/fintech-market-ineurope/#topicoverview 19. stulz, r. m. (2019). fintech, bigtech, and the future of banks. journal of applied corporate finance, https://doi.org/10.1111/jacf.12378. 20. surmanidze, m. b. (2023). empowering small businesses in georgia: access to finance, economic resilience, and sustainable growth. agora international journal of economical sciences., https://doi.org/10.15837/aijes.v17i2.6453. 21. toska, m. (2021). fintech for growth: the case of albania. international conference on humanities, social and education sciencesat: . new york, usa: istes organization. 22. worldbank. (10. march 2025). https://data.worldbank.org. pridobljeno iz data.worldbank.org/topic/financial-sector: https://data.worldbank.org/topic/financialsector 23. zavolokina, m. d. (2016). the fintech phenomenon: antecedents of financial innovation perceived by the popular press. financial innovation,. springeropen, https://doi.org/10.1186/s40854-016-0036-7. agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 18, no. 2 (2024), pp. 86-99 86 the role of entrepreneurial mindset in driving investment in self-development through online course s. demir, a. kilic serhat demir¹, ayse kilic² ¹ ² university of economics and human sciences in warsaw, poland ¹ https://orcid.org/0009-0006-0704-9618 e-mail: sdemir@kent.edu ² https://orcid.org/0009-0003-9991-6851 e-mail: aishakilic2020@gmail.com abstract: this study investigates the impact of the entrepreneurial mindset on purchasing behavior, specifically focusing on investing people for online self-development courses. using logistic regression analysis, the study examines how different entrepreneurial traits impact consumers' decisions to invest in self-development. key findings show a significant positive correlation between execution-oriented traits and the likelihood of purchasing self-development courses. these results offer valuable insights for marketers and entrepreneurs in the e-learning industry. keywords: entrepreneurial mindset, purchasing behavior, self-development courses, online education, self-investment introduction the entrepreneurial mindset is widely recognized as a critical factor in navigating the complexities of today’s dynamic market environment. defined as a set of cognitive processes that guide individuals in evaluating opportunities, alternatives, and outcomes under conditions of limited resources, ambiguity, and uncertainty (guerrero et al., 2015), this mindset has become essential in business and consumer domains alike. as markets become increasingly digital and competitive, understanding how the entrepreneurial mindset shapes consumer behavior offers valuable insights, particularly in sectors like online education, where selfdirected learning is paramount. in recent years, entrepreneurship research has evolved from a purely economic focus to a multidisciplinary perspective, encompassing behavioral, psychological, and sociological dimensions (zou, 2015). this shift reflects a broader understanding of entrepreneurship as a mindset that can influence individuals' choices across various contexts, including purchasing behavior. consequently, examining the entrepreneurial mindset in relation to consumer behavior—especially within the context of online self-development training—addresses a significant gap in current research. self-development products are growing in demand, and understanding the characteristics of consumers inclined to invest in these products can provide valuable insights for marketers, entrepreneurs, and educators. the primary research question of this study is: what is the impact of the entrepreneurial mindset on the purchasing behavior for online self-development training? this study hypothesizes that individuals with an entrepreneurial mindset, characterized by traits such as https://orcid.org/0009-0006-0704-9618 mailto:sdemir@kent.edu https://orcid.org/0009-0003-9991-6851 mailto:aishakilic2020@gmail.com serhat demir, ayse kilic 87 action orientation and execution skills, are more likely to invest in self-development, regardless of personal circumstances such as socio-economic status, family obligations, or current employment conditions. exploring this relationship contributes to existing literature on both entrepreneurship and consumer behavior, offering practical implications for marketing strategies in the digital learning sector. literature review the literature suggests that an entrepreneurial mindset encompasses various traits such as independence, risk acceptance, and passion. previous studies have demonstrated that individuals with an entrepreneurial mindset tend to engage in riskier and more innovative behaviors. this study builds on existing literature by linking entrepreneurial traits with purchasing behaviors for online courses. entrepreneurial mindset entrepreneurial activity can be broadly classified into two distinct types: venture entrepreneurship and innovation entrepreneurship. venture entrepreneurship is defined as activities that lead to the establishment of new businesses, such as creating new ventures, expanding existing enterprises, or pursuing self-employment (alvarez, 2003). this form of entrepreneurship is often associated with start-up businesses, where the emphasis is on creating new economic opportunities. innovation entrepreneurship, in contrast, involves enhancing existing organizations through novel processes or ideas. this approach includes infusing entrepreneurial thinking and practices into established entities, such as non-profits, governmental organizations, and educational institutions (mchenry, 2018). in this study, both categories are considered essential components of the entrepreneurial mindset, recognizing the distinct yet interrelated roles they play in fostering economic growth and societal advancement the entrepreneurial mindset is understood as a collection of cognitive processes that empower individuals to identify opportunities, assess alternatives, and pursue desired outcomes in uncertain and resource-constrained environments (guerrero et al., 2015). this mindset fosters adaptability and innovation, which are essential for navigating today’s competitive and rapidly evolving markets. scholars have approached entrepreneurship from diverse perspectives, including psychological, sociological, and behavioral dimensions, signifying a shift from its traditional economic roots to a more multidisciplinary approach (zou, 2015). the entrepreneurial mindset also encompasses a capacity for action-oriented behavior. researchers have defined it as the ability to “recognize opportunities in markets, identify new customers or products, and generate avenues for innovation,” essential attributes for individuals within dynamic industries like digital marketing and online education (ireland et al., 2003). this mindset is not only applicable to new business ventures but also fosters innovation within established organizations and various sectors, including education and government, through novel solutions and approaches (mchenry, 2018). the literature distinguishes between two main categories of entrepreneurial activity: venture entrepreneurship and innovation entrepreneurship. venture entrepreneurship involves creating or expanding a new business, typically exemplified by startups and self-employment. in contrast, innovation entrepreneurship focuses on transforming current organizational frameworks by integrating entrepreneurial thinking, which may involve activities within nonthe role of entrepreneurial mindset in driving investment in selfdevelopment through online course 88 profits or educational institutions (alvarez, 2003; tang & koveos, 2004). both categories, despite their differences, play an essential role in the development of an entrepreneurial mindset. measurement of entrepreneurial mindset and characteristics the entrepreneurial mindset can be analyzed through specific personality traits and competencies, assessed using various psychological models. the big five personality model, also known as the ocean model, categorizes personality into five dimensions—openness, conscientiousness, extraversion, agreeableness, and neuroticism—helping to gauge an individual’s entrepreneurial potential through traits such as creativity, reliability, sociability, and emotional resilience (john & srivastava, 1999). an advanced tool for evaluating entrepreneurial traits is the entrepreneurial mindset profile (emp). developed by the leadership development institute at eckerd college, the emp assesses entrepreneurial skills and traits across 14 dimensions. these dimensions are divided into entrepreneurial skills—such as future focus, idea generation, execution, selfconfidence, optimism, persistence, and interpersonal sensitivity—and entrepreneurial traits, which include independence, a preference for limited structure, non-conformity, risk acceptance, action orientation, passion, and a need to achieve (davis et al., 2016). entrepreneurial traits 1. independence: the desire to work autonomously, with minimal reliance on external support or approval. 2. preference for limited structure: a comfort with ambiguous or unstructured tasks and an ability to navigate undefined roles. 3. non-conformity: a tendency to think and act uniquely, often challenging conventional approaches and norms. 4. risk acceptance: willingness to pursue goals despite uncertain outcomes, emphasizing potential rewards over risks. 5. action orientation: a drive to initiate projects and make decisions swiftly, valuing rapid results over prolonged planning. 6. passion: a strong enthusiasm and engagement in work, perceiving it as fulfilling and enjoyable rather than burdensome. 7. need to achieve: an inner motivation to accomplish goals and a desire for high levels of performance. entrepreneurial skills 1. future focus: the ability to plan and strategize long-term, considering future implications and setting visionary goals. 2. idea generation: creativity in developing multiple solutions and approaches for achieving objectives. 3. execution: skill in transforming ideas into actionable steps, focusing on practical implementation and follow-through. 4. self-confidence: a belief in one’s abilities and potential, enabling resilience and goal commitment. serhat demir, ayse kilic 89 5. optimism: a generally positive outlook on personal and external circumstances, aiding persistence in the face of challenges. 6. persistence: the ability to endure setbacks and obstacles, maintaining determination toward long-term objectives. 7. interpersonal sensitivity: awareness of others’ needs and emotions, fostering supportive and empathetic relationships. this profile provides a comprehensive view of an individual’s readiness for entrepreneurial activities, thus informing strategic planning for personal development in fields like digital marketing and e-commerce. relevance of entrepreneurial mindset in modern market dynamics the entrepreneurial mindset not only drives business success but also influences consumer behavior. within the scope of this study, individuals with a strong entrepreneurial orientation are more inclined to invest in self-development, including digital products and online courses, as they actively seek knowledge and resources to maintain competitive advantages. understanding how entrepreneurial traits correlate with purchasing behavior, particularly in digital self-development sectors, contributes to both academic research and practical applications in marketing and consumer engagement. consumer behavior in online contexts consumer behavior encompasses the psychological processes individuals or groups go through when selecting, purchasing, using, or disposing of products or services to satisfy their needs and desires (solomon & panda, 2004). in particular, online consumer behavior includes unique factors like web experience, which heavily influences decision-making. the adoption of online platforms has led to the emergence of new determinants such as convenience, trust, and pricing sensitivity (fuciu et al., 2015). the decision-making process for online purchases is comprised of five stages: need recognition, information search, evaluation of alternatives, purchase decision, and postpurchase behavior (kotler & armstrong, 2012). these stages remain consistent across online and offline contexts, but digital environments emphasize ease of access, security concerns, and the immediacy of information, impacting consumer trust and choices. to understand how the entrepreneurial mindset might influence purchasing decisions in digital environments, this study examines how individuals driven by traits like risk acceptance and action orientation engage with online self-development products. the analysis focuses on whether entrepreneurial attributes correlate with higher investment in self-improvement, particularly in e-learning platforms. theoretical background the entrepreneurial mindset is characterized by a dynamic approach to opportunityseeking, creativity, and calculated risk-taking, embodying what betta et al. (2010) describe as creative destruction. this mindset not only prepares individuals for innovation but also promotes personal growth by fostering independence, nonconformity, and a readiness for change. such characteristics enable entrepreneurs to leverage resources creatively, even outside traditional business contexts (betta et al., 2010). the role of entrepreneurial mindset in driving investment in selfdevelopment through online course 90 in measuring this mindset, tools like the entrepreneurial mindset profile (emp) emphasize traits such as risk acceptance, action orientation, and execution capabilities. these metrics align with foundational theories of entrepreneurship, such as those by drucker, who defines entrepreneurs as agents of change, continually seeking and capitalizing on new opportunities (davis et al., 2016; drucker in tang & koveos, 2004). the emp’s dimensions underscore the intersection of entrepreneurial traits and consumer behaviors, particularly within digital and e-learning environments where entrepreneurial-minded individuals actively pursue self-development opportunities. with the rise of digital education platforms like coursera and udemy, consumers— especially those with entrepreneurial traits—are increasingly investing in personal development. online self-development courses have thus become an ideal market for studying the entrepreneurial mindset’s impact on purchasing behaviors, as they allow consumers to pursue continuous improvement and adaptability in competitive digital landscapes. personal development courses: structure and design in this study, personal development courses are organized according to a progressive framework that enhances the depth and complexity of content in a tiered structure. based on the “value ladder” concept from russell brunson’s sales methodologies and adapted from sam ovens’ consulting models, the course structure targets different stages of entrepreneurial development, offering increasingly advanced content aligned with the participants’ evolving needs and experience levels. 1. consultancy challenge training this introductory course, priced at $29, spans 21 days and provides daily videos accompanied by supporting work files. it covers the basics of the consulting business model, including mindset fundamentals and introductory social media advertising strategies. as an accessible entry point, this course appeals to entrepreneurial-minded individuals seeking an affordable way to begin their self-development journey. 2. consultancy academy training following completion of the introductory course, this intermediate program is marketed through a webinar and targets individuals committed to further developing their skills in digital marketing consulting. priced at $250, it provides in-depth tools and training, particularly for social media advertising, catering to those seeking to advance their expertise in digital consulting. 3. millionaire project training positioned as the most advanced level in the course framework, this training is designed for experienced digital marketers aspiring to establish their own agency or monetize online training. with a price point of $500, it focuses on advanced sales and marketing automation techniques, equipping participants with comprehensive skills to achieve significant entrepreneurial growth. the tiered approach to course offerings allows for the examination of how different levels of entrepreneurial orientation affect purchasing behavior across varied price points and complexities. this design aligns with the study’s aim to assess the impact of entrepreneurial traits, such as risk acceptance and achievement orientation, on self-development investment decisions. serhat demir, ayse kilic 91 by understanding how these factors influence the decision to engage in personal development, this study provides insights valuable for both educators and marketers within the e-learning sector. methodology research design and approach this study adopts a quantitative research approach to explore the relationship between entrepreneurial mindset and purchasing behavior in the context of online self-development courses. a survey-based data collection method was employed to enable the structured gathering of quantitative data aligned with the study’s objectives. sample and data collection the sample consists of individuals interested in self-development and online learning. a convenience sampling method was utilized, targeting customers of an online training company specializing in personal development, business management, and consultancy services. the company shared its customer database with the author, allowing survey invitations to be distributed via personalized email correspondence. the survey remained open on google forms for a two-week period, after which it was closed, resulting in a total of 220 completed responses. survey design and distribution the questionnaire was organized into three sections: ● section a: captured demographic information of respondents. ● section b: assessed respondents’ entrepreneurial traits and skills based on the entrepreneurial mindset profile (emp). ● section c: focused on online purchasing behavior, specifically for self-development courses. respondents were encouraged to complete the survey, which took approximately one hour. the structured design facilitated the collection of comprehensive data on entrepreneurial characteristics and purchasing behaviors. measures and variables 1. dependent variable ● purchasing behavior: the dependent variable in this study is the likelihood of purchasing online self-development courses. this variable was measured as a binary outcome, where participants indicated whether they had purchased any selfdevelopment course in the past 12 months (1 = yes, 0 = no). by using logistic regression, we analyze how this outcome is affected by various entrepreneurial traits, allowing us to assess the influence of an entrepreneurial mindset on purchasing behavior. 2. independent variables (entrepreneurial mindset) ● the entrepreneurial mindset was evaluated using the entrepreneurial mindset profile (emp), which measures dimensions including action orientation, risk acceptance, and passion. each dimension was recorded on a 5-point likert scale (1 = strongly the role of entrepreneurial mindset in driving investment in selfdevelopment through online course 92 disagree to 5 = strongly agree), reflecting participants’ self-perceived alignment with these entrepreneurial characteristics. this measurement approach allows for precise assessment of how specific entrepreneurial traits might influence purchasing behavior in the self-development course market. 3. control variables ● demographics: several demographic characteristics, including age, educational attainment, and employment status, were controlled for to ensure the analysis focused on the effects of entrepreneurial traits rather than demographic influences. these control variables help to isolate the unique contributions of entrepreneurial traits to purchasing behavior. 4. reliability and validity reliability was assessed by calculating cronbach’s alpha coefficients for each construct, with values above 0.70 indicating acceptable internal consistency. additionally, confirmatory factor analysis in spss was performed to establish construct validity, examining both convergent and discriminant validity of the measured constructs. table 1 shows the entrepreneurial traits items and the cronbach’s alpha scores for the sub-dimensions. table 1: list of items and reliability scores for entrepreneurial traits entrepreneurial traits independence i am not happy taking direction/instructions from other people. i do not feel comfortable working under someone else’s direction. i am not comfortable being a team player. i am uncomfortable when expected to follow other’s rules. i do not like to consult with others on important decisions. cronbach’s alpha score: .752 limited structure i find that too much structure stifles my creativity. i find it boring to work on clearly structured tasks. i perform best when i do not have to follow a step-by-step process. i do not like solving problems by following step-by-step solutions. i do not prefer tasks that are clearly structured. cronbach’s alpha score: .718 non-conformity i pride myself on doing things differently than the crowd. people would describe me as a nonconformist (unique minded). i like to stand out from the crowd. i will argue for my beliefs even when everyone else disagrees. i do not feel comfortable when i fit in with the crowd. i don’t tend to go along with what other people think is right. cronbach’s alpha score: .787 risk acceptance i am willing to take some risks if the payoff is big enough. i don’t prefer to play it safe in most things. i’m willing to take a certain amount of risk to achieve real success. serhat demir, ayse kilic 93 if at all possible, i do not avoid taking risks. i like to take chances. cronbach’s alpha score: .771 action orientation my decision-making style is not slow and deliberate. while others are still talking, i’m doing. my friends would describe me as someone who makes things happen. others would describe me as quick to take action. if i have a choice, l’ d rather take action than wait. i tend to make decisions quickly. cronbach’s alpha score: .791 passion my interest in my work is constant and ongoing. working long hours on a project is exciting for me. i am excited by the work that i do. i’m passionate about the work that i do. i don’t mind working long hours on an interesting project. cronbach’s alpha score: .826 need to achieve i try to excel at whatever i do. it is important to me that i achieve at a high level. it is important to me to be the best. i try to be the best at whatever i do. i’m driven by a desire to achieve significant goals. cronbach’s alpha score: .900 table 2: list of items and reliability scores for entrepreneurial skills entrepreneurial skills future focus it’s more satisfying for me to spend time thinking strategically about the future, than to see quick results. i’m focused on the long term. i care less about immediate results and more about long-term success. i usually think more about what i have to accomplish this year than this week. i’m more focused on the long-term than the here-and-now. cronbach’s alpha score: .843 idea generation brainstorming is a particular strength of mine. i do not have difficulty generating creative ideas. i rarely run out of new ideas. sometimes the ideas just flow endlessly out of me. i don’t have much trouble coming up with new ideas. cronbach’s alpha score: .849 execution i’m good at taking a strategy and translating it into tactical action steps. often when i come up with a great idea, it’s not too hard to know how to make it a reality. the role of entrepreneurial mindset in driving investment in selfdevelopment through online course 94 i have a reputation for being able to take an idea and make it work. i’m good at turning others’ ideas into reality. cronbach’s alpha score: .884 self confidence i hardly worry that i won’t be able to reach my goals. i do not have significant doubts regarding my abilities. i feel good about my skills and abilities. i am a self-confident person. i rarely doubt myself. cronbach’s alpha score: .823 optimism others might describe me as a positive person. even when things aren’t going well, i look on the bright side. my friends would describe me as an optimistic person. i can usually see the bright side of most challenges. i rarely think that there’s more bad in the world than good. cronbach’s alpha score: .827 persistence i am persistent when pursuing a goal. when faced with a problem, i keep working toward a solution. i do not give up easily. i do not get discouraged easily. when i encounter obstacles along my path, i find a way to overcome them. cronbach’s alpha score: .907 interpersonal sensitivity i try not to be a difficult person to work with. others will not describe me as abrasive (harsh). i try not to rub people the wrong way. i’m sensitive to others’ feelings. people describe me as easy to work with. cronbach’s alpha score: .768 5. logistic regression analysis ● logistic regression analysis was chosen due to the binary nature of the primary purchasing decision (purchase = 1, no purchase = 0), assessing how various entrepreneurial traits impact the likelihood of making a purchase. this method enabled the study to estimate the influence of individual traits while controlling for other factors, providing insights into which specific entrepreneurial characteristics significantly predict purchasing behavior. 6. logistic regression assumptions ● binary dependent variable: purchasing behavior was defined as a binary variable, coded as 1 for respondents who had made a purchase and 0 for those who had not. ● multicollinearity: variance inflation factors (vif) were checked to confirm that no multicollinearity issues existed among predictor variables, ensuring the reliability of regression results. serhat demir, ayse kilic 95 ● sample size: with a sample size of 220 respondents, the study meets the minimum requirements for logistic regression, ensuring robust and generalizable findings. data analysis and results the logistic regression analysis revealed that individuals with higher scores in execution-oriented traits were significantly more likely to purchase online self-development courses. the following entrepreneurial traits showed significant effects: action orientation: positively correlated with a higher likelihood of purchasing. risk acceptance: showed a marginal effect but was not statistically significant. the descriptive statistics indicated that individuals with a background in digital marketing or consultancy were more likely to invest in higher-priced self-development courses such as the millionaire project training. table 3: logistic regression results challenge academy millionaire explanatory variables coefficient coefficient coefficient gender: male=1(1) -0.093 (0.703) 0.247 (0.348) -0.195 (0.651) age of participant -0.148* (0.061) 0.004 (0.034) 0.010 (0.058) educational attainment(1) 18.265 (18140.736) 2.125 (1.829) 2.223 (26763.383) educational attainment(2) 2.482 (1.745) 1.885 (1.309) 20.266 (19360.220) educational attainment(3) 2.345 (1.714) 1.522 (1.327) 21.339 (19360.220) educational attainment(4) 0.790 (1.484) 1.320 (1.257) 20.695 (19360.220) educational attainment(5) 3.024 (1.944) 1.544 (1.315) 19.888 (19360.220) marital status(1) -0.357 (0.736) -0.210 (0.389) -1.017 (0.694) work experience 0.137* (0.060) -0.018 (0.033) -0.029 (0.056) work status(1) 0.292 (1.606) 0.479 (0.793) -0.337 (1.546) work hours -0.966 (0.726) 0.205 (0.391) 0.324 (0.680) income levels(1) 5.133* (2.078) -2.476 (1.434) 18.736 (18310.255) income levels(2) 5.694* (2.174) -1.639 (1.401) 19.702 (18310.255) income levels(3) 3.819* (1.643) -1.159 (1.316) 18.610 (18310.255) income levels(4) 4.240* (1.591) -1.060 (1.326) 18.636 (18310.255) the role of entrepreneurial mindset in driving investment in selfdevelopment through online course 96 income levels(5) 22.883 (9039.859) -0.048 (1.391) 18.900 (18310.255) income levels(6) 2.455 (1.638) -0.040 (1.469) 18.452 (18310.255) income levels(7) 2.775 (1.997) -0.201 (1.561) 19.076 (18310.255) income levels(8) 1.132 (1.759) -0.890 (1.552) 18.855 (18310.255) entrepreneurial traits: independence -0.054 (0.115) 0.056 (0.053) -0.089 (0.090) entrepreneurial traits: limited structure -0.050 (0.097) -0.051 (0.048) 0.097 (0.077) entrepreneurial traits: non conformity -0.042 (0.108) 0.013 (0.051) 0.085 (0.088) entrepreneurial traits: risk acceptance -0.184 (0.126) 0.067 (0.063) 0.142 (0.129) entrepreneurial traits: action orientation 0.080 (0.103) -0.039 (0.048) -0.049 (0.087) entrepreneurial traits: passion -0.050 (0.115) 0.156* (0.057) 0.160 (0.111) entrepreneurial traits: need to achieve 0.141 (0.115) 0.033 (0.059) 0.113 (0.130) entrepreneurial skills: future focus 0.160 (0.105) -0.016 (0.053) -0.064 (0.109) entrepreneurial skills: idea generation 0.097 (0.109) 0.012 (0.052) -0.091 (0.102) entrepreneurial skills: execution -0.293* (0.150) -0.094 (0.066) 0.405* (0.155) entrepreneurial skills: self confidence 0.096 (0.124) -0.040 (0.060) -0.182 (0.112) entrepreneurial skills: optimism -0.047 (0.113) 0.024 (0.059) 0.155 (0.146) entrepreneurial skills: persistence 0.098 (0.160) 0.005 (0.076) -0.170 (0.177) entrepreneurial skills: interpersonal sensitivity 0.045 (0.108) -0.064 (0.057) 0.067 (0.099) constant 0.347 (3.787) -2.000 (2.566) -49.368 (26647.397) χ2 93.13 .116 91.73 standard errors are given in parenthesis. * signifies p < .05 discussion the findings of this study reveal that specific entrepreneurial traits—particularly action orientation and risk acceptance—significantly influence the likelihood of purchasing selfdevelopment courses. this supports prior research linking entrepreneurial mindset traits with proactive behaviors in uncertain environments, such as the decision to invest in personal growth through online education (guerrero et al., 2015). serhat demir, ayse kilic 97 1. interpretation of key findings action orientation: the positive correlation between action orientation and purchasing behavior underscores the role of immediate decision-making in personal investments. individuals with a high action orientation may feel more inclined to pursue self-development opportunities swiftly, seeing these courses as actionable steps toward achieving personal or professional goals. this aligns with findings from ireland et al. (2003), who highlighted that an entrepreneurial mindset encourages swift responses to opportunities. risk acceptance: although risk acceptance showed a weaker significance, its correlation with purchasing behavior supports the notion that entrepreneurial-minded individuals may view self-development as a calculated risk with potential rewards. this mirrors the concept that entrepreneurs are generally more comfortable with uncertainty, making them more likely to invest in self-improvement despite financial or time-related risks (alvarez, 2003). 2. practical implications for e-learning and marketing these insights offer practical applications for marketers in the e-learning and online education sectors. by tailoring marketing messages to highlight actionable benefits and career advancements, providers can more effectively appeal to action-oriented individuals. for example, messaging that emphasizes immediate application of skills or visible, short-term achievements could resonate strongly with this audience segment. additionally, course providers might consider introducing “tiered” course structures with low-risk entry points (e.g., introductory or affordable courses), allowing risk-tolerant individuals to try courses without substantial initial commitment. this approach may lower the perceived risk of entry, encouraging entrepreneurial-minded individuals to begin their selfdevelopment journey with less hesitation. 3. other key observations the analysis reveals several notable correlations between entrepreneurial traits and demographic factors, offering insights into how these variables interact within the context of purchasing behavior for self-development courses. 1. education level and action orientation: a moderate positive correlation (r = 0.28) was observed between education level and action orientation. this suggests that higher educational attainment may encourage a more proactive mindset, potentially enhancing decision-making confidence. this relationship aligns with previous findings that education can foster an entrepreneurial mindset. 2. execution and persistence: a positive correlation (r = 0.25) between execution and persistence highlights the complementary nature of these traits within an entrepreneurial mindset. individuals who score high on execution also tend to exhibit strong persistence, a combination likely conducive to achieving long-term goals and commitments. 3. income level and risk acceptance: the correlation between income level and risk acceptance (r = 0.11) indicates that individuals with higher income may be more inclined toward risk-taking, potentially due to the financial buffer that higher income provides. this trend aligns with the understanding that financial security can facilitate comfort with calculated risks. the role of entrepreneurial mindset in driving investment in selfdevelopment through online course 98 4. age and action orientation: a mild positive correlation (r = 0.19) between age and action orientation suggests that as individuals grow older, they may develop a greater tendency for proactive decision-making. this could reflect the impact of accumulated experience on confidence and readiness to act. 5. unexpected findings: contrary to initial expectations, no significant negative correlation was found between income level and passion, suggesting that passion alone may not drive low-income individuals to invest in self-development courses. this finding could indicate that while passion is important, income level remains a critical factor in self-investment decisions. 4. theoretical contributions this study extends the literature on entrepreneurial traits by confirming that aspects of the entrepreneurial mindset, such as action orientation and risk acceptance, have direct applications beyond business ventures, influencing consumer behavior in digital learning environments. the connection between entrepreneurial characteristics and self-directed learning decisions suggests that entrepreneurial mindset theories can enrich consumer behavior models, particularly within digital and self-improvement markets. 5. limitations and future research directions while this study sheds light on the purchasing behavior of entrepreneurial-minded consumers, there are limitations. the reliance on self-reported data may introduce biases related to self-perception and social desirability, potentially affecting the accuracy of reported traits. future research could benefit from longitudinal designs, examining how entrepreneurial traits evolve over time and impact long-term learning investments. conclusions this study provides valuable insights into the relationship between entrepreneurial traits and purchasing behavior within the self-development course market. the results reveal that specific traits, notably action orientation and risk acceptance, significantly predict the likelihood of engaging in self-development investments. this finding supports the notion that an entrepreneurial mindset extends beyond business contexts, influencing personal growth and self-directed learning behaviors. the analysis also highlights interesting correlations between demographic factors and entrepreneurial traits. for instance, higher education levels correlate with a stronger action orientation, suggesting that formal education may reinforce proactive tendencies. additionally, a positive relationship between income level and risk acceptance indicates that financial security can facilitate greater comfort with risk, a finding that underscores income's role in selfinvestment decisions. contrary to expectations, passion alone did not predict course purchases for lower-income individuals, emphasizing the importance of economic resources in selfdevelopment investments. these findings have practical implications for e-learning providers and marketers. by emphasizing quick, actionable outcomes in course offerings and designing accessible, low-risk entry points, providers can better engage entrepreneurial-minded individuals across income serhat demir, ayse kilic 99 levels. moreover, this study contributes to the broader understanding of consumer behavior, illustrating how entrepreneurial characteristics influence decisions in the digital learning space. in conclusion, this research underscores the importance of entrepreneurial traits in shaping purchasing behaviors in self-development contexts. future studies could expand upon these findings by examining additional traits and demographic variables longitudinally, offering a more comprehensive view of how entrepreneurial mindsets evolve and impact learning investments over time. references 1. alvarez, s. a. (2003). entrepreneurial ventures and risk-taking: understanding the impact of individual traits on decision-making processes. journal of business venturing, 18(2), 101–112. 2. brunson, r. (2015). dotcom secrets: the underground playbook for growing your company online. click funnels publishing. 3. davis, m. h., hall, j. a., & mayer, p. s. (2016). developing a measure of an entrepreneurial mindset: reliability in a classroom context. international journal of entrepreneurial behavior & research, 22(4), 439–466. 4. fuciu, m., & dumitrescu, l. (2015). the influence of online marketing on consumer behavior. procedia economics and finance, 23, 1339–1344. 5. guerrero, m., cunningham, j. a., & urbano, d. (2015). economic impact of entrepreneurial universities’ activities: an exploratory study of the united kingdom. research policy, 44(3), 748–764. 6. ireland, r. d., hitt, m. a., & sirmon, d. g. (2003). a model of strategic entrepreneurship: the construct and its dimensions. journal of management, 29(6), 963–989. 7. john, o. p., & srivastava, s. (1999). the big five trait taxonomy: history, measurement, and theoretical perspectives. in l. a. pervin & o. p. john (eds.), handbook of personality: theory and research (2nd ed., pp. 102–138). guilford press. 8. kotler, p., & armstrong, g. (2012). principles of marketing (14th ed.). pearson education. 9. mchenry, j. e. (2018). exploring innovation in non-profit and public sector organizations through entrepreneurial thinking. nonprofit management and leadership, 29(1), 21–36. 10. solomon, m. r., & panda, t. k. (2004). consumer behavior: buying, having, and being. pearson education. 11. tang, j., & koveos, p. e. (2004). venture entrepreneurship, innovation entrepreneurship, and economic growth. journal of developmental entrepreneurship, 9(2), 161–171. 12. zou, y. (2015). the integration of behavioral and psychological perspectives into entrepreneurial research. journal of business psychology, 30(3), 521–532. agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 19, no. 1 (2025), pp. 46-55 46 scenario forecasting revenue management strategy for ukrainian hotels m. boiko, m. bosovska, m. kulyk, n. vedmid margaryta boiko¹, myroslava bosovska², mariia kulyk³, nadiia vedmid⁴ state university of trade and economics, kyiv, ukraine ¹ https://orcid.org/0000-0003-0249-1432 e-mail: m.boyko@knute.edu.ua ² https://orcid.org/0000-0002-6021-5228 e-mail: m.bosovskaya@knute.edu.ua ³ https://orcid.org/0000-0001-8732-7441 e-mail: m.kulyk@knute.edu.ua ⁴ https://orcid.org/0000-0002-5010-6394 e-mail: n.vedmid@knute.edu.ua abstract: an organizational mechanism for revenue management implementing is proposed: monitoring and analytics of metrics for efficient adaptation; dynamic pricing and market segmentation; partnerships and staff motivation. pessimistic, realistic, and optimistic scenarios have been developed to ensure the long-term effectiveness of revenue management. the pessimistic scenario as a preventive indicator of a crisis situation is proposed to prevent cost dissipation in the face of rate changes, ensuring the preservation of resource potential and maintaining consumer interest in the hotel product. the realistic scenario which reflects situationally possible deviations in revenue dynamics and likely fluctuations in demand focuses on strategizing preventive marketing measures to influence demand depending on external conditions and resource potential. the optimistic scenario, representing a favorable forecast involves the use of a portfolio of strategies, the variability of which provides conditions for maximizing income and helps to determine the priority areas of investment in the revenue management subsystems. keywords: revenue management, scenario, strategy, hotels, dynamic pricing, digitalization. introduction the significant impact of a turbulent external environment and fluctuating market conditions has led to a decrease in the potential for implementing revenue management by hotel companies, especially small and independent facilities, due to limited economic and investment opportunities, deteriorating competitiveness and revenue shortfalls. the adaptation of ukrainian hotels to the challenges associated with the war has demonstrated the importance of flexibility and the ability of businesses to respond quickly to external challenges, including those related to improving revenue management (mazaraki et al, 2024). therefore, attention should be paid to research related to the generalization of the evolutionary prerequisites and features of the implementation of the revenue management of various types of hotel enterprises and the identification of proposals on this basis for the formation of their strategic priorities in the context of the transformation of challenges and threats. https://orcid.org/0000-0003-0249-1432 mailto:m.boyko@knute.edu.ua https://orcid.org/0000-0002-6021-5228 mailto:m.bosovskaya@knute.edu.ua https://orcid.org/0000-0001-8732-7441 mailto:m.kulyk@knute.edu.ua https://orcid.org/0000-0002-5010-6394 mailto:n.vedmid@knute.edu.ua margaryta boiko, myroslava bosovska, mariia kulyk, nadiia vedmid 47 therefore, the modern model of revenue management of hotel industry enterprises should be aimed at forming a balanced strategy with appropriate constraints and development vectors. accordingly, this strategy involves not only the most efficient use of the available resource potential and ensuring sustainable growth of performance metrics that characterize the synchronization of growth opportunities, but also the establishment of partnerships to prevent cost dissipation. in other words, sustainable development and a collaborative model of the economy should be important principles in the new paradigm. strategic priorities for the implementation of the revenue management of hotel enterprises are aimed at achieving a balance of tactical and strategic goals, which will allow to reasonably allocate resource potential, determine descriptors of increasing revenues and adapting business processes to unfavorable external conditions (kulyk et al, 2024). in the context of setting strategic priorities, the following should be considered. the difference in the use of revenue management (rm) tools between hotels of different categories determines the choice of performance indicators and becomes a key element in the choice of a strategic priority, which serves as the basis for choosing a strategy. given the diversity of tools used in hotels for revenue management, let's consider all possible variations. 1. big data, risk analysis, controlling. big data tests large amounts of analytics used to justify decisions, analyze consumer behavior and adapt pricing strategies, which ensures the flexibility of operational business processes and optimization of the value chain, leading to revenue maximization using a decision-making algorithmization model that structures the stages of management decision-making and automates business processes using integrated digital platforms, google analytics tools and global data analysis platforms. this toolkit covers the following performance indicators: key performance indicators (kpis), occupancy rate, average daily rate (adr), revenue per available room (revpar), average length of stay (alos), cost revenue per available room (cpar). 2. benchmarking. the process of analyzing the performance of competing hotel companies in order to improve business efficiency, optimize the current state of affairs and implement the positive experience of competitors. benchmarking is an effective method of strategic and crisis management, which is a mechanism for comparative analysis of performance indicators and technologies of companies to identify and implement best practices. this toolkit covers the following performance indicators: revenue generation index (rgi), average rate index (ari), market penetration index (mpi), net promoter score (nps), life time value (ltv). 3. business modeling. some businesses use demand forecasting models and technologies based on historical booking data, which allows hotels to adjust their strategies using a technology platform that improves operational efficiency and customer service through real-time booking and management systems. this toolkit covers the following performance indicators: adr, revpar, cpar. thus, the definition of strategic priorities is based on the tools used and is the quintessence of the performance indicators monitored by the hotel. the basis for the formation of the external core of the effectiveness of the revenue management is the strategic guidelines that determine the meaningful idea and serve as a theoretical basis for determining the directions that ensure the effectiveness of the choice of strategies for practical application, scenario forecasting revenue management strategy for ukrainian hotels 48 revenue management focuses on optimizing revenues through the implementation of environmental principles, which allows attracting investors focused on sustainable development. implementation of digital tools in rm is a determinant of long-term efficiency of rm. theoretical background the multivariable characteristics of factors influencing the choice of strategic priorities of revenue management of a hotel enterprise, in particular in a turbulent environment, creates the basis for determining how to achieve a balance of tactical goals of the internal core of the revenue management efficiency as a key goal. the choice of strategic priorities and the combination of interests of stakeholders is determined by determining the cause-and-effect relationships between threats and opportunities and expected results in the system of evaluating tactics and further strategizing of the revenue management. scenario forecasting of the revenue management strategy as an alternative to singlevariant forecasts is aimed at considering many factors. modeling of possible scenarios depending on changes in internal and external factors is the result of scenario forecasting, which involves the analysis of possible development alternatives under the same initial conditions and allows to formulate optimal revenue management strategies adapted to market conditions (chiang et al, 2007; möller et al, 2004; petropoulos et al, 2022). in the context of choosing revenue management strategies, scenarios are forecasting of hypothetical development options based on the method of multiple regression using an artificial intelligence system, based on fuzzy sets and methods of fuzzy logical inference, presented in the form of an action plan. the main advantage of scenario forecasting is the identification of factors that influence risk-based decision-making and determine priorities in the use of development opportunities (homem-de-mello & bayraksan, 2014; rahimian & mehrotra, 2022; strauss et al, 2018). the heterogeneity of initial conditions in terms of seasonal fluctuations, the level of income of hotel enterprises and market factors of individual destinations causes a contradiction in determining the role and accuracy of the forecasted indicators in the revenue management. explaining the essence of this thesis, especially in times of crisis, it is appropriate to note that the fundamental content of scenario forecasting is budget planning and strategic management, but is associated with significant challenges from the market business environment, and at the level of the hotel industry enterprise the availability of resource potential and the balance of subsystems of revenue management as functionalities of its organizational mechanism. however, it is worth noting that the accuracy and relevance of forecasts depends on large amounts of data, as well as analytical skills and the ability to analyze the results obtained, which necessitates the use of machine learning and artificial intelligence technologies, which, in turn, leads to the expansion of data collection and accumulation capabilities, the introduction of new methods in the process of their analysis and processing. the problem lies in the fact that the resource capabilities of hotel enterprises for the implementation of revenue management are different in relation to the available potential, even if the enterprises belong to the same category, are located in the same climatic conditions, and are focused on a similar target consumer segment. the variability of the initial conditions of margaryta boiko, myroslava bosovska, mariia kulyk, nadiia vedmid 49 hotel enterprises determines not only heterogeneous requirements for the development of strategies, but also affects the possibility of their implementation, which depends on the correlation of factors influencing the effectiveness of revenue management. by the combination of external and internal environment factors in determining the potential of a hotel enterprise in terms of the effectiveness of revenue management, we understand the technology for assessing the level of occupancy rate (demand for hotel services) and the level of revenue per available room (revpar). the methodology of scenario forecasting includes the analysis of historical data, identification of key drivers of influence, construction of alternative scenarios and assessment of their probability. the mechanisms of scenario forecasting are described in detail by determining the correlation dependence of various parameters, among which the most common are indicators that characterize the relationship between two random variables (paired indicators): correlation moment, correlation coefficient. in addition, other statistical indicators can be mentioned: mathematical expectation value, variance, and mean-square estimate. thus, pairwise regression analysis involves the consideration of one independent variable and allows us to define a pairwise linear regression as a causal model of a statistical linear relationship between two quantitative variables (klein et al, 2020) the scenario of variability of substrategies of revenue management in the hotel business may include several key aspects that help to adapt to changing market conditions and increase the effectiveness of revenue management. it is the multivariate development of events and the turbulence of the external environment that determines the use of the scenario method in order to predict possible strategic priorities and select the optimal substrategies of revenue management. this method is used to evaluate and analyze alternative development options for hotel enterprises operating in the same market conditions. in the context of choosing revenue management substrategies depending on the trends in demand fluctuations and revenue growth rates, the scenarios are predictive development alternatives presented in the form of tactical goals and objectives. the main elements of the scenario method are the analysis of market conditions, in particular market data, including competitors, demand for services, seasonality and economic conditions and trend identification, which is to identify current and future trends in consumer behavior, such as changes in preferences for the type of accommodation or services. having identified the areas of scenario forecasting, the management of the hotel management company has established the main directions of development and the consequences of the planned changes: flexibility in pricing using algorithms to automatically adjust prices depending on supply and demand; development of promotions and discounts for different customer segments, such as families, business travelers or groups; market segmentation based on demographic, psychographic and behavioral characteristics of consumers; development of personalized service offers. method і.1. sample and population the survey was conducted from april to july 2023 and focused on the period from february 24 to the end of 2022 in hotels in poland and ukraine using the cawi method scenario forecasting revenue management strategy for ukrainian hotels 50 (computer-assisted web interview). hotel managers from ukraine and poland (top managers and/or heads of structural units sales, marketing, and reservation departments) were invited to participate in the survey. i.2. data collection process and methods the final mailing list included 306 hotels in poland and 312 hotels in ukraine, of which 100 hotels in poland and 98 hotels in ukraine responded to the survey. it should be noted that some of the hotels participating in the survey were reluctant to provide information, so some responses were found to be missing, incomplete, which reduced the number of questionnaires from poland by six (n1 = 94) and from ukraine by five (n2 = 93). in accordance with the entire population of certified hotels in ukraine and poland, the sample can be considered representative of the hotel market in ukraine and poland. hotels from every voivodeship in poland and every region of ukraine, except for the temporarily occupied ones, took part in the survey. most often, the survey involved twoand three-star hotels with an average capacity of 45 rooms in poland and 49 in ukraine. the quantitative empirical study was conducted in late 2022 and early 2023, i.e., during the period of martial law in ukraine. the questionnaire was developed in accordance with the specifics of hotel operations under martial law, considering the peculiarities of different categories of hotels and the use of the revenue management system to improve performance. i.3. methodology for the mathematical identification of scenarios of variability of revenue management (si) substrategies, three strategic structural components (areas of choice) are defined: s1 analysis of historical data; s2 identification of key drivers of influence; s3 assessment of the probability of the scenario's realization. the methodology for identifying scenarios of variability of substrategies can be represented in the form of a matrix: si = (s1; s2; s3). (1) strategic priorities are identified by c, such as: c1 anti-crisis; c2 supporting; c3 cluster. the types of actions aimed at continuous transformation of the scenario selection processes are presented in the form of a column matrix: 𝐶𝑗 = ( 𝐶1 𝐶2 𝐶3 ) (2) multiplying the selected matrices results in a rectangular matrix: рij= si cj , (3) where the elements of the matrix pij are goals that determine the qualitative improvement of scenarios of variability of revenue management substrategies, i.e. strategic goals. the resulting matrices can reflect the scenario, pij: рij=( 𝑆1𝐶1 𝑆2𝐶1 𝑆3𝐶1 𝑆1𝐶2 𝑆2𝐶2 𝑆3𝐶2 𝑆1𝐶3 𝑆2𝐶3 𝑆3𝐶3 )= ( 𝑃11 𝑃12 𝑃13 𝑃21 𝑃22 𝑃23 𝑃31 𝑃32 𝑃33 ) (4) margaryta boiko, myroslava bosovska, mariia kulyk, nadiia vedmid 51 the obtained forecasts have a high degree of approximation accuracy and can be used in the system of tactics evaluation and further revenue management strategy (kimes, 2003; lentz et al, 2021; lin & huang, 2015; matsuoka, 2022). results considering the directions of development and the consequences of the planned changes, we have developed scenarios for the variability of revenue management substrategies in the hotel business, which provide for constant market monitoring, flexibility in pricing, personalization of services and the use of modern technologies. in practice, the use of scenario forecasting of the revenue management strategy makes it possible to make an informed choice among the relevant fluctuations in the market conditions of the substrategy/s to achieve the tactical and strategic goals of the revenue management. in the crisis and post-crisis (post-war) period, for example, investing in the hotel business can be a profitable source for business diversification and as the main source of income (bosovska et al, 2023). given the impact of certain environmental factors (level of demand), strategic priorities, and revenue potential (internal environment), we propose specific scenarios for the development of strategic behavioral models and the creation of competitive advantages for hotel enterprises. such modeling of scenarios will allow to identify potential opportunities for the development of hotel enterprises (table 1). table 1: matrix for implementing revenue management substrategies scenario of variability of substrategies (v) anti-crisis (с1) supporting (с2) cluster (с3) analysis of historical data (s1) adaptability related diversification cooperation identification of key drivers of influence (s2) product diversification development of new products and markets product modification assessment of the probability of scenario realization(s3) simulation strategy traditional strategy innovative strategy source: (bakker et al, 2020; gibbs et al, 2018; pereira & cerqueira, 2022; xiao et al, 2024). the matrix of implementation of the revenue management substrategies shown in the table contains a horizontal combination of elements that determine the competitiveness and efficiency of choosing the directions of modeling revenue management scenarios. it should be noted that the optimistic scenario provides a starting point for the level of efficiency of the revenue management for the hotel industry enterprise, with a high coefficient of synchronization in statics and dynamics. in turn, the baseline scenarios involve the use of a limited range of strategies that require investment. the pessimistic scenario assumes the use of scenario forecasting revenue management strategy for ukrainian hotels 52 limited functionality of the revenue management, when only the dynamic pricing strategy can be used. the proposed scenarios are focused on the choice of revenue management substrategies, when it is important to determine the determinants of revenue management efficiency, risks, features of resource potential, as well as costs of the hotel enterprise (dana, 2008; demirciftci et al, 2020; sundaram et al, 2020; talluri & van ryzin, 2004; webb, 2016; yang et al, 2014). based on the modeling results, scenarios have been identified that make it possible to choose the revenue management substrategy(s) depending on the trends in demand fluctuations and revenue growth rates. the pessimistic scenario is a preventive indicator of a crisis situation in an unfavorable market environment. to stabilize revenue, the article proposes a dynamic pricing substrategy that prevents cost dissipation in the situation of tariff changes, ensuring the preservation of resource potential and maintaining consumer interest in the hotel product. the optimistic scenario, representing a favorable forecast of market conditions, involves the use of a portfolio of substrategies, the variability of which provides conditions for maximizing revenues and efficient use of resource potential, and helps to determine the priority areas of investment in the subsystems of the revenue management. discussions/conclusions in practice, the use of scenario forecasting of the revenue management strategy makes it possible to make an informed choice among the relevant fluctuations in the market situation of the substrategy/s to achieve the tactical and strategic goals of the management. in times of crisis, it is important to use a scenario approach, since, taking into account the factors of internal and external influence, it is the miscalculation of possible scenarios that is an indicator of trends in the hotel services market. in times of market turbulence, an important process is to monitor the financial, resource, human resources, marketing, environmental and digital capabilities of a hotel company for timely adaptation to new consumer needs. the proposed scenarios take into account the level of efficiency of the management of hotel industry enterprises, which is determined by the synchronization coefficient. in order to ensure the reliability of data analysis, the following areas of scenario selection have been identified: analysis of historical data; identification of key drivers of influence; assessment of the probability of scenario implementation. a systematic approach was used to evaluate the strategic priority of the hotel industry enterprise, which allows to effectively analyze the factors of influence for making management decisions. the strategic priorities for revenue management implementing are aimed at achieving a balance of tactical and strategic goals in the frame of the external core of revenue management efficiency. the use of the instrumentarium proposed in the article allowed to allocate three basic strategic priorities for the implementation of revenue management: anti-crisis (outsourcing strategy), supporting (segmental), cluster (consolidated), the choice of which depends on the assessment of the performance indicators of operating activities (chiang et al, 2007). the economic effect is calculated and the risks of implementing strategies within the framework of strategic priorities are identified. implementation of the outsourcing strategy for delegation of non-core and supplementary business functions of the operating activities margaryta boiko, myroslava bosovska, mariia kulyk, nadiia vedmid 53 reduced the burden on internal resources and influenced the annual revenue growth in the range of 0.5--2.7%. the segment strategy focused on differentiating distribution channels to increase consumer demand, maintaining loyalty, and promptly adjusting the tariff policy has helped to identify sources of profitability that lead to an annual increase in operating income of 3 to 5% (mazaraki et al, 2024). it has been proved that the strategic priority in the format of the consolidated strategy is aimed at ensuring long-term revenue growth with an annual increase of (up to 10%). scenario forecasting of the variability of the revenue management strategies is aimed at achieving a balance of tactical goals of the internal core of revenue management efficiency. a correlation analysis was carried out to assess how changes in demand can affect the level of income. based on the results obtained, two types of correlations were identified: positive and negative (petropoulos et al, 2022). . these results made it possible to accurately determine the relationship between demand and income, which is the basis for creating adaptive scenarios for choosing revenue management strategies. in particular, they helped to develop substrategies to optimize pricing policy, distribution channels, and to introduce new technologies and tools for revenue management. based on the results of the scenario forecasting, four scenarios were modeled to determine the likely strategy of revenue management. for the pessimistic scenario, as a preventive indicator of a crisis situation, the dynamic pricing substrategy is likely to be used; for the basic ones, the distribution, differentiation of the hotel product, and personalization substrategies are defined; for the optimistic scenario, a portfolio of substrategies is proposed, the variability of which ensures the conditions for maximizing revenues. it is proved that the choice of a probable revenue management strategy allows to respond proactively to potential external threats and to substantiate adaptive measures depending on future changes in the external environment. references 1. bakker, h., dunke, f., & nickel, s. (2020). a structuring review on multi-stage optimization under uncertainty: aligning concepts from theory and practice. omega, 96, 102080. https://doi.org/10.1016/j.omega.2019.06.006 2. bosovska, m., boiko, m., bovsh, l., okhrimenko, a., & vedmid, n. (2023). foresight (prevision) of development of the tourist system in ukraine. problems and perspectives in management, 21(4), 696– 712. https://doi.org/10.21511/ppm.21(4).2023.52 3. chiang, w. c., chen, j. c. h., & xu, x. (2007). an overview of research on revenue management: current issues and future research. international journal of revenue management, 1(1), 97. https://doi.org/10.1504/ijrm.2007.011196 4. dana, j. d. (2008). new directions in revenue management research. production and operations management, 17(4), 399–401. https://doi.org/10.3401/poms.1080.0040 5. demirciftci, t., chen, c., & erdem, m. (2020). a tabulation of information technology and consumer behavior in hospitality revenue management https://doi.org/10.1016/j.omega.2019.06.006 https://doi.org/10.21511/ppm.21(4).2023.52 https://doi.org/10.3401/poms.1080.0040 scenario forecasting revenue management strategy for ukrainian hotels 54 research. journal of hospitality and tourism technology, 11(3), 575– 587. https://doi.org/10.1108/jhtt-02-2019-0018 6. gibbs, c., guttentag, d., gretzel, u., yao, l., & morton, j. (2018). use of dynamic pricing strategies by airbnb hosts. international journal of contemporary hospitality management, 30(1), 2–20. https://doi.org/10.1108/ijchm-09-2016-0540 7. homem-de-mello, t., & bayraksan, g. (2014). monte carlo sampling-based methods for stochastic optimization. surveys in operations research and management science, 19(1), 56–85. https://doi.org/10.1016/j.sorms.2014.05.001 8. kimes, s. e. (2003). revenue management: a retrospective. cornell hotel and restaurant administration quarterly, 44(5-6), 131-138. 9. klein, r., koch, s., steinhardt, c., & strauss, a. k. (2020). a review of revenue management: recent generalizations and advances in industry applications. european journal of operational research, 284(2), 397– 412. https://doi.org/10.1016/j.ejor.2019.06.034 10. kulyk, m., boiko, m., bosovska, m., & okhrimenko, a. (2023). strategy of sales and communication of hotel services during the war. agora international journal of economical sciences, 17(1), 48–55. https://doi.org/10.15837/aijes.v17i1.5762 11. lentz, m., berezan, o., & raab, c. (2021). uncovering the relationship between revenue management and hotel loyalty programs. journal of revenue and pricing management. https://doi.org/10.1057/s41272-021-00331-0 12. lin, y. h., & huang, k. (2014). customer loyalty under the influence of revenue management: the case of taiwanese hotel customers. asia pacific journal of tourism research, 20(12), 1374–1388. https://doi.org/10.1080/10941665.2014.981556 13. matsuoka, k. (2022). effects of revenue management on perceived value, customer satisfaction, and customer loyalty. journal of business research, 148, 131– 148. https://doi.org/10.1016/j.jbusres.2022.04.052 14. mazaraki, a., kulyk, m., boiko, m., bosovska, m., & vedmid, n. (2024). implementation of hotel revenue management strategies during a martial law. agora international journal of economical sciences, 18(1), 124–131. https://doi.org/10.15837/aijes.v18i1.6716 15. möller, a., römisch, w., & weber, k. (2004). a new approach to o&d revenue management based on scenario trees. journal of revenue and pricing management, 3(3), 265–276. https://doi.org/10.1057/palgrave.rpm.5170113 16. pereira, l. n., & cerqueira, v. (2021). forecasting hotel demand for revenue management using machine learning regression methods. current issues in tourism, 1–18. https://doi.org/10.1080/13683500.2021.1999397 17. petropoulos, f., apiletti, d., assimakopoulos, v., babai, m. z., barrow, d. k., taieb, s. b., & ziel, f. (2022). forecasting: theory and practice. international journal of forecasting, 38(3), 705-871. 18. rahimian, h., & mehrotra, s. (2022). frameworks and results in distributionally robust optimization. open journal of mathematical optimization, 3, 1– 85. https://doi.org/10.5802/ojmo.15 https://doi.org/10.1108/jhtt-02-2019-0018 https://doi.org/10.1108/ijchm-09-2016-0540 https://doi.org/10.1016/j.ejor.2019.06.034 https://doi.org/10.1080/10941665.2014.981556 https://doi.org/10.1016/j.jbusres.2022.04.052 https://doi.org/10.15837/aijes.v18i1.6716 https://doi.org/10.1057/palgrave.rpm.5170113 https://doi.org/10.1080/13683500.2021.1999397 https://doi.org/10.5802/ojmo.15 margaryta boiko, myroslava bosovska, mariia kulyk, nadiia vedmid 55 19. strauss, a. k., klein, r., & steinhardt, c. (2018). a review of choice-based revenue management: theory and methods. european journal of operational research, 271(2), 375–387. https://doi.org/10.1016/j.ejor.2018.01.011 20. sundaram, r., sharma, d. r., & shakya, d. a. (2020). digital transformation of business models: a systematic review of impact on revenue and supply chain. international journal of management, 11(5). https://ssrn.com/abstract=3628963 21. talluri, k., & van ryzin, g. (2004). revenue management under a general discrete choice model of consumer behavior. management science, 50(1), 15-33. https://doi.org/10.1287/mnsc.1030.0147 22. webb, t. (2016). from travel agents to otas: how the evolution of consumer booking behavior has affected revenue management. journal of revenue and pricing management, 15(3-4), 276–282. https://doi.org/10.1057/rpm.2016.16 23. xiao, w., zhang, s., huang, z., & yu, y. (2024, may). multi-scenario pricing for hotel revenue management. in proceedings of the acm web conference 2024(www '24). association for computing machinery, new york, ny, usa, 3986–3994. https://doi.org/10.1145/3589334.3645350 24. yang, y., pan, b., & song, h. (2013). predicting hotel demand using destination marketing organization’s web traffic data. journal of travel research, 53(4), 433–447. https://doi.org/10.1177/0047287513500391 https://doi.org/10.1016/j.ejor.2018.01.011 https://ssrn.com/abstract=3628963 https://doi.org/10.1016/j.ejor.2018.01.011 https://doi.org/10.1057/rpm.2016.16 https://doi.org/10.1145/3589334.3645350 кwilinski alex agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 19, no. 1 (2025), pp. 101-113 101 developing sustainable gambling tourism in adjara: strategic marketing insights a. elizarova ana elizarova caucasus university, georgia https://orcid.org/0009-0006-5956-5366 e-mail: anelizarova@cu.edu.ge abstract. this research investigates the gambling landscape in georgia, focusing on strategic marketing approaches to developing sustainable gambling tourism, particularly in the adjara region. georgia's gambling industry, encompassing both traditional land-based venues and an emerging online sector, has become a significant contributor to the national economy. over the past decade, the gambling sector has grown substantially, playing a vital role in georgia's financial well-being. this study delves into the importance of land-based gambling establishments, such as casinos, in driving tourism, with adjara emerging as a key destination. amidst the covid-19 pandemic, understanding the strategic marketing strategies employed by these establishments to attract gambling tourists and contribute to sustainable regional development is crucial. qualitative research methods, including in-depth interviews and data analysis, were employed to examine the marketing strategies utilized by leading landbased casinos in georgia. the findings reveal a focus on customer satisfaction, promotional campaigns, and collaborations with “junket” operators. additionally, challenges such as regulatory constraints and geopolitical instability are identified, along with opportunities like targeting tourists from alternative countries and improving infrastructure. statistical data further highlight the significant contribution of the gaming sector to the economy of the adjara region, underlining its pivotal role in driving sustainable economic development and growth. keywords: sustainable gambling tourism, marketing strategies, gambling marketing, recreational gambling. 1. introduction the multifaceted landscape of gambling in georgia is the focus of comprehensive scrutiny in this research, with a particular emphasis on strategic marketing approaches aimed at fostering tourism within this thriving sector. georgia's gambling scene encompasses a dynamic mix of traditional land-based venues and an evolving online gambling industry, which has solidified the country's standing as a prominent tourism gambling destination. the surge in online users, particularly during the computer and internet era, has presented significant opportunities for online gambling companies, further enhancing georgia's position in the global gambling market. over the past decade, georgia has witnessed remarkable growth in its gaming turnover, making a substantial contribution to the country's financial well-being. revenues generated from gambling constitute a significant share of the national economy, with the presence of numerous casinos, gaming machine salons, and sports betting salons underlining the sector's pivotal role in contributing to budget revenues and fostering employment opportunities. https://orcid.org/0009-0006-5956-5366 mailto:anelizarova@cu.edu.ge developing sustainable gambling tourism in adjara: strategic marketing insights 102 according to data from the revenue service (2023), georgia is home to 17 casinos, 89 gaming machine salons, and 23 sports betting salons, further emphasizing the sector's significance in the national economy. these establishments collectively contribute to the country's financial wellbeing and provide employment opportunities for many. the tourism sector, with a specific focus on gambling tourism, emerges as a vital component of georgia's economy. positioned strategically to attract visitors primarily from neighboring countries such as turkey, israel, russia, ukraine, and azerbaijan, georgia enjoys a competitive advantage due to restrictions on gambling in these nations. the economic inflow from tourism significantly contributes to the local economy, making gambling a strategically important field in georgia, particularly in regions like adjara. the adjara region, recognized as an autonomous republic within the framework of the constitution of georgia, accommodates a population of 361.411 inhabitants (national statistics office in georgia, 2024). renowned for its capital city, batumi, the region serves as a prominent focal point for tourism within georgia. adjacent to the black sea coast, adjara has risen as the second most-visited destination in georgia, following tbilisi. the region's well-established tourism infrastructure, including resorts and recreational areas, has played a crucial role in attracting a growing number of visitors. notably, in the first three quarters of 2023, adjara experienced a significant influx of international visitors, with a considerable portion specifically drawn to the region for recreational purposes. according to the national statistics office in georgia (2024), adjara received over 1.6 million international visitors during this period, with 867.1 thousand visitors specifically attracted to the region for recreational purposes. tourism holds a pivotal role in the economy of adjara autonomous republic, positioning it as a priority sector. the region strategically markets itself as a prominent tourist destination, leveraging its coastal beauty, mountainous terrains, and cultural offerings to draw visitors. in the same period, adjara secured its position as the second most visited destination in georgia, accounting for 723.6 thousand out of the total foreign visitors, according to the national statistics office in georgia (2024). the adjara region, renowned for its land-based gambling offerings, attracts a significant number of tourists. georgia's gambling industry has seen substantial growth, with traditional venues like casinos and betting salons playing a pivotal role in the country's economy. this study focuses on land-based gambling in georgia, exploring how strategic marketing efforts drive tourism in this sector. amidst the covid-19 pandemic, understanding how these establishments utilize marketing strategies to draw tourists and contribute to regional development is crucial. while state policies play a crucial role in addressing social challenges like gambling addiction, adult involvement, and financial issues, it's equally imperative to ensure that regulations are adjusted in a manner that doesn't impede the sector's potential as georgia emerges as a gambling hub. legal frameworks governing gambling in georgia encompass laws regulating lotteries, gambling, and winning games. recent modifications, including amendments to advertising laws, seek to strike a balance between addressing societal concerns and supporting the growth of the gambling industry. this delicate balance is essential for harnessing georgia's potential as a prominent gambling destination while safeguarding against negative social impacts. this research aims to analyze marketing strategies oriented towards ana elizarova 103 increasing tourism gambling, with the goal of understanding the industry's potential and investigating specific steps to enhance the flow of gambling tourists. 2. gambling destination casinos are often seen as effective tools for drawing tourists to destinations, offering various forms of entertainment like shopping, dining, and leisure activities (yeskel, 2006; wong & rosenbaum, 2012). the ambience of a well-designed casino, characterized by comfort and elegance, plays a crucial role in enhancing tourist satisfaction and fostering loyalty (johnson et al., 2012; lee, chung, & bernhard, 2014). in response to changing consumer preferences, casino resorts are evolving to resemble vacation venues, aiming to better cater to customer needs (richard, 1997). however, the competitive landscape among gaming destinations has compelled operators to prioritize customer satisfaction and loyalty. richard (1997) identified several factors influencing consumers’ decision to revisit a casino, including its location, hospitality, and gaming offerings. petrillose and brewer (2012) highlighted the significance of price and value in influencing customers’ return visits. additionally, traditional quality standards such as security, cleanliness, and friendliness also play crucial roles in shaping revisits. many casinos implement loyalty programs to foster repeat patronage. while some studies affirm the effectiveness of these programs (barsky & tzolov, 2010; o’brien & jones, 1995), others suggest that their impact on behavior is limited (sharp & sharp, 1997; uncles et al., 2003). furthermore, barsky and tzolov (2010) argued that loyalty programs are particularly beneficial for specific market segments, such as the elite elder group, while their effectiveness for the majority of customers, termed the unmoved members, depends on activation and long-term engagement. 3. methods 3.1. research methodology this study employs a qualitative research approach to comprehensively investigate the multifaceted marketing strategies employed by leading representatives of land-based casinos in georgia and their implications for tourism development, particularly in the adjara region. 3.2. sampling method in selecting participants for this study, a snowball sampling technique was meticulously employed. recognizing the specialized nature of the target population – key representatives of major land-based casinos – snowball sampling proved instrumental in facilitating access to individuals with in-depth expertise and insights within the industry. through initial contacts and referrals from within the industry, a diverse and representative sample of potential participants was identified. out of the initial pool of 12 potential participants, 5 prominent landbased casinos (casino peace batumi, casino international batumi, leo grand, princess casino batumi, x palace batumi) graciously consented to participate in the interviews, thereby offering a robust and comprehensive sample for the study. after conducting 5 in-depth interviews, it was observed that there was a notable similarity in the responses obtained, indicating saturation of data. recognizing this, the decision was made to halt the interviewing process as further interviews were unlikely to yield significantly new insights. developing sustainable gambling tourism in adjara: strategic marketing insights 104 in recognition of the need for a comprehensive understanding of the industry, additional efforts were made to enhance the depth of insight obtained. specifically, the president of the “ajarian casino's association” (aca) was contacted and engaged in discussions to summarize the findings of the interviews. given their comprehensive insight and expertise within the field, the president of the association provided valuable perspectives and statistical data that further enriched the study's findings. 3.3. data collection the data collection process for this study was meticulously planned to capture a nuanced and comprehensive understanding of the marketing strategies employed by land-based casinos in georgia. structured in-depth interviews were meticulously conducted to explore various dimensions of the casinos' marketing efforts. these dimensions encompassed audience targeting, promotional activities, collaboration with tourism stakeholders, and challenges encountered in their marketing endeavors. to accommodate the geographical dispersion of participants and ensure inclusivity in participation, 5 of the interviews were conducted online using the zoom platform. this mode of interview delivery was carefully chosen to facilitate participation and minimize logistical barriers while maintaining the integrity and rigor of the data collection process. each interview was conducted with a standardized protocol to ensure consistency and reliability across all interactions. participants were encouraged to share their insights and experiences candidly, fostering an environment conducive to rich and meaningful dialogue. the interviews were audio-recorded with the participants' consent to capture their responses accurately and comprehensively. following the completion of the interviews, the recorded conversations were transcribed verbatim, ensuring meticulous documentation of the data collected. 3.4. data analysis in this study, the qualitative data obtained from the in-depth interviews were meticulously analyzed using nvivo 14, a powerful software tool designed for qualitative data analysis. nvivo 14 facilitated a structured and systematic approach to analyzing the rich interview content, allowing for efficient organization, coding, and interpretation of the data. using nvivo 14, the textual data were systematically coded to identify themes, patterns, and recurring concepts within the interviews. researchers applied descriptive codes to segments of text that were relevant to the research questions and objectives. these codes were created iteratively based on the emerging themes and patterns identified within the data. nvivo 14 provided tools for visually exploring and analyzing the coded data. researchers could generate visual representations of the coded data, such as word clouds, charts, and diagrams, to gain insights into the frequency and distribution of codes across the interview transcripts. these visualizations helped researchers identify prominent themes and patterns within the data, facilitating deeper analysis and interpretation. 3.5. ethical considerations ethical considerations were paramount throughout the research process to uphold the rights, dignity, and confidentiality of the participants. prior to commencing the interviews, ana elizarova 105 informed consent was diligently obtained from all participants, clearly articulating the purpose of the study and the voluntary nature of participation. participants were assured of their anonymity, and stringent measures were implemented to safeguard their privacy and confidentiality. additionally, any potentially sensitive information shared during the interviews was handled with the utmost discretion and sensitivity, reinforcing the ethical integrity of the research endeavor. in summary, the research methodology employed in this study is meticulously designed to provide a robust and comprehensive examination of the marketing strategies employed by land-based casinos in georgia and their implications for tourism development. by adopting a qualitative approach and adhering to rigorous ethical standards, this study endeavors to generate valuable insights that contribute significantly to our understanding of the complex interplay between the gambling industry and tourism in the region. 4. results this data interpretation stems from an investigation into the marketing strategies employed by gambling companies in georgia, specifically focusing on attracting tourists to gamble and contribute to the development of the adjara region. the analysis delves into various challenges, collaboration opportunities, marketing strategies, and potential avenues for growth identified through thematic coding of qualitative interview data. the data interpretation underscores the substantial impact of the gaming business sector on batumi's tourist season. over time, there has been a notable extension in the duration and significance of this sector, transitioning from a brief period of one and a half to two months to a year-round operation. this evolution highlights the pivotal role played by the gaming industry, particularly during the extended low season lasting approximately 8-9 months in the ajara region. such findings underscore the enduring significance of the gaming sector in driving tourism activity and economic sustainability throughout the year, especially during periods of reduced tourist visitation. during this period, the task of attracting tourists to the region primarily falls upon businesses within the gaming sector. this factor holds significant importance as it not only sustains the gaming industry but also influences other sectors such as local hotels, food establishments, and transportation. the interdependence among these sectors is crucial for ensuring their continued operation with a positive financial balance, particularly during the low season. hence, the gaming business sector plays a pivotal role in the economy of the adjara region, especially during the tourist season, where its significance is paramount for the financial sustainability of local operators. the in-depth interviews with the field experts provide the following insights about sector. 4.1. marketing strategies in light of the data collected, it is evident that the gaming business sector in the adjara region significantly impacts various aspects, including customer experience, decision-making, and loyalty programs. the sector demonstrates a commitment to providing exceptional customer experiences tailored to the preferences and needs of gambling tourists. this customization extends from specialized services such as separate restaurants with bespoke menus and accommodations for specific dietary requirements to amenities like spa procedures, developing sustainable gambling tourism in adjara: strategic marketing insights 106 guided tours, and personal manager services focused on client needs. furthermore, the sector's swift decision-making process facilitates timely responses to guest inquiries and requests, contributing to a seamless guest experience. despite the absence of a dedicated marketing department, the sector effectively utilizes word-of-mouth marketing strategies to disseminate information and attract visitors to the region. additionally, the integration of specialized loyalty programs across all casinos underscores the sector's dedication to fostering customer loyalty and satisfaction. these findings underscore the multifaceted role of the gaming sector in shaping tourism dynamics and highlight the importance of customer-centric approaches for sustainable growth and development. 4.2. promotional campaigns and events contests, pr events, shows: innovative promotional campaigns and events such as contests, pr events, and shows offer avenues for increasing visibility and attracting tourists to adjara. engaging and immersive experiences, such as interactive contests and high-profile entertainment events create buzz and excitement around gambling tourism in the region, driving interest and participation among potential tourists. such type of information is speeded by special apps, contact persons and direct call. roi: respondents mentioned that measuring the return on investment (roi) of promotional campaigns is essential for evaluating effectiveness and optimizing resource allocation. 4.3. online and digital marketing none of the enrolled casinos currently operate online gambling platforms. the prevailing sentiment among these establishments is that digital platforms are perceived as ineffective due to the absence of mass-produced products and lack of prior experience in promoting their casinos through international media channels. instead, their marketing efforts primarily revolved around outdoor advertising through banners, a strategy that was employed until it was prohibited. 4.4. collaboration and partnership junkets, typically individuals or agencies with access to databases of potential clients, primarily comprise former gambling industry personnel or casino managers who retain connections with a network of gamblers. they offer diverse tour packages, including familystyle recreation, across different countries. collaborating with junkets presents an opportunity to augment the visibility and allure of gambling offerings in adjara. by leveraging established networks, casinos can attract high-value customers. partnering with junket operators facilitates access to affluent clientele, enabling casinos to provide exclusive perks and privileges, thereby enhancing revenue streams and solidifying the region's status as a premier gambling destination. previously, casinos in the adjara region had engaged with traditional tour agencies/operators in an attempt to attract and retain customers. however, this approach was found to be ineffective in achieving desired outcomes. despite efforts to leverage the services of these entities, the casinos experienced challenges in effectively attracting and retaining customers. as a result, the reliance on traditional tour agencies/operators as partners in customer acquisition and retention proved to be suboptimal. ana elizarova 107 4.5. segmentation following the pandemic period, changes in the economic and political landscape have led to a shift in the segment of tourist gamblers visiting the adjara region. currently, the majority of gamblers originate from israel, followed closely by tourists from turkey, with others comprising a smaller proportion. demographic characteristics vary significantly between these two primary segments. tourists from israel primarily consist of elderly individuals with higher disposable incomes. they perceive georgia as a desirable gambling destination and opt for leisurely holidays with their families. this segment prioritizes spending quality time and indulging in pleasurable experiences during their stay in the region. in contrast, the segment comprising tourists from turkey tends to be younger, typically ranging from 25 to 50 years old, and generally possess lower levels of disposable income compared to their israeli counterparts. these individuals are attracted to the gambling offerings in adjara but may have budgetary constraints that influence their spending habits and preferences during their visit. the remaining portion of the tourist gambling segment is characterized by a mix of various demographics and preferences, contributing to the diverse visitor profile observed in the region. 4.6. opportunities direct flights and airport infrastructure: increased availability of direct flights presents an opportunity to enhance accessibility and attract tourists from a wider geographic area. improving air connectivity to adjara can facilitate easier travel arrangements for potential tourists, reducing travel time and logistical barriers, and expanding the reach of gambling tourism marketing efforts to new markets. alternative countries: targeting tourists from gulf countries represents an untapped opportunity, leveraging their high disposable income and interest in luxury tourism experiences. gulf countries, known for their affluent population and penchant for luxury travel, present a lucrative market segment for gambling tourism in adjara, offering the potential for significant revenue generation and market growth. business consideration: an opportunity for the advancement of gambling tourism in adjara lies in the consideration of policy development and stakeholder engagement. in this context, stakeholders within the gambling sector possess the capacity to articulate their perspectives, express positions, and substantiate arguments during decision-making processes. this participatory approach fosters transparency and inclusivity, enabling the sector to contribute constructively to policy formulation and implementation. furthermore, ensuring that decisions affecting the sector are communicated in advance is paramount. by providing timely information regarding preparation and implementation plans, particularly those with financial implications, stakeholders can adequately prepare and adapt to forthcoming changes. this proactive approach not only facilitates effective sectoral response but also cultivates an environment conducive to sustainable growth and development within the gambling tourism industry in adjara. regulations: a less frequent escalation of taxes within the gambling tourism sector has the potential to cultivate a more stable investment environment. this stability engenders developing sustainable gambling tourism in adjara: strategic marketing insights 108 predictability and reduces perceived risk, thereby fostering investor confidence and facilitating long-term planning. moreover, by providing operators with greater financial predictability, infrequent tax adjustments enable more efficient resource allocation and promote business expansion. the resultant perception of government commitment to sectoral growth further enhances the sector's attractiveness to potential investors, potentially stimulating increased investment and sectoral expansion in georgia. 4.7. challenges airport infrastructure: the adequacy and efficiency of airport infrastructure emerged as a significant challenge, potentially hindering the influx of tourists interested in gambling tourism in adjara. limited capacity and outdated facilities may impede the seamless arrival and departure of visitors, impacting the overall travel experience and deterring potential tourists. competitors in cyprus: the presence of competitors in nearby destinations like cyprus poses a competitive challenge, requiring strategic differentiation and positioning to attract tourists to adjara. cyprus, with its established gambling industry and robust tourism infrastructure, presents a formidable competitor for adjara, necessitating innovative marketing strategies to carve out a distinct market niche. direct flights: limited availability of direct flights to adjara presents a barrier to accessibility for potential tourists, impacting the ease of travel to the region. the absence of direct air routes may deter travelers seeking convenience and efficiency in their journey, leading them to opt for alternative destinations with better flight connectivity. regulations: regulatory constraints and frequent changes in tax policies create a turbulent environment for gambling companies, necessitating adaptability and compliance. uncertainty surrounding regulatory frameworks and taxation policies can impede investment and expansion efforts, posing challenges for sustainable growth and development in the industry. in the past, there have been instances where the government unexpectedly raised or imposed taxes on the gaming sector without prior notice or consultation with industry stakeholders. two recent cases serve as examples of such occurrences. on december 30, 2022, the batumi city council passed a resolution to increase local feesimposed on businesses, including the gaming sector, by approximately 40%. this decision, which came into effect just two days later on january 1, 2023, was communicated to the public through mass media channels. the sudden and disproportionate nature of this fee hike has placed significant pressure on the gaming sector, leading to a range of challenges and difficulties that stakeholders are still grappling with. tax changes were adopted on december 13, 2023, through amendments to the tax code, which came into effect on january 1, 2024. these changes introduced several new taxes affecting the business sector, including the gaming industry. however, stakeholders in the gaming sector were not adequately informed about the proposed changes, as they learned about the existence of the bill only during the parliamentary hearing stage. this lack of prior notification prevented stakeholders from presenting their opinions and defending their interests effectively during the legislative process. as a result, the gaming sector, represented by casinos, found itself in a particularly challenging position following the ana elizarova 109 implementation of the new tax regime. in response to the increased tax pressure, businesses in the gaming sector have been forced to take measures such as reducing employee numbers and cutting costs. despite these efforts, navigating the new tax landscape remains a significant challenge for stakeholders in the gaming industry. war in neighbor countries: political instability and conflicts in neighboring countries pose geopolitical challenges, potentially affecting tourist arrivals to the region. turbulence and unrest in neighboring nations may disrupt regional travel patterns and deter tourists from visiting adjara, impacting the overall demand for gambling tourism in the region. weather: weather conditions influence tourist preferences and travel patterns, impacting the appeal of adjara as a gambling tourism destination. unfavorable weather, such as inclement conditions or seasonal variations, may deter tourists from engaging in outdoor activities and exploring the region, limiting the overall tourist influx and revenue generation potential. the assertion outlined above is unequivocally supported by statistical evidence obtained from a comprehensive dataset comprising information from ten casinos in the adjara region, as provided by the adjara casino's association. analysis of the collected data for the years 20222023 reveals the following trends: by the land-based casinos operating in the adjara region during the year 2022, revenue generated from services such as hotels, transportation companies, and local food and beverage service establishments amounted to approximately 82,300,000 (eighty-two million three hundred thousand) gel. according to the data from the first three quarters of 2023, expenditures made by landbased casinos in the adjara region on services provided by hotels, transportation companies, and local food and beverage establishments amounted to approximately 69,100,000 (sixty-nine million one hundred thousand) gel. furthermore, concerning the tourism sector in the adjara region, the influx of foreign visitors is notable. specifically, in the year 2022, the total number of foreign visitors amounted to 1,126,086 individuals, with 88.3% originating from foreign countries. according to data from the third quarter of 2023, the number of visitors to the adjara region amounted to 1,047,988 individuals. notably, 91.1% of these visitors were foreign citizens. the gaming business sector also represents a significant source of local employment within the adjara region. it is imperative to acknowledge that the salaries offered within this sector are among the highest compared to other industries operating within the country. in 2022, the gaming business sector in the adjara region disbursed approximately 80,800,000 (eighty million eight hundred thousand) gel as the salary fund for its employees. by the third quarter of 2023, this figure increased to approximately 105,600,000 (one hundred five million six hundred thousand gel). additionally, the average salary of employees within this sector experienced growth over the specified period. for instance, the average salary of a secretary amounted to 2,392 gel in 2022, and by the third quarter of 2023, it increased to 2,520 gel. the gaming business sector also holds a significant position as one of the largest contributors to the tax revenue across the country. the total tax paid or generated by the gaming sector, referred to as land-based casino, is directly correlated to the budget of the developing sustainable gambling tourism in adjara: strategic marketing insights 110 adjara region. specifically, in 2022, the taxes paid directly by the gaming sector amounted to 57,500 (fourty seven million five hundred thousand) gel, constituting 14.9% of the region's budget for that year. indirectly generated as a consequence of the operations of the gaming sector in 2022, the total tax revenue amounted to 36,200,000 (thirty-six million two hundred thousand) gel. this figure represents approximately 9.3% of the region's budget for the same year. consequently, the combined direct and indirect tax contributions from the gaming sector in 2022 amounted to 25.2% of the region's budget. in 2023, the direct taxes paid by the gaming sector amounted to 91,860,000 (ninety-one million eight hundred sixty thousand) gel. this figure represents 19.2% of the region's budget for the year 2023. in 2023, the indirect tax revenue generated as a consequence of the operations of the gaming sector amounted to 55,700,000 (fifty-five million seven hundred thousand) gel. this figure represents approximately 11.4% of the region's budget for the same year. consequently, when combined with the direct tax contributions, the total tax revenue generated by the gaming sector in 2023 amounted to 30.2% of the region's budget. the figures presented above unequivocally underscore the significant contribution of the gaming sector, represented by casino, to the economy of the adjara region. they highlight the pivotal role played by both the gaming and tourism sectors in driving economic development and growth across the region. 5. conclusions in conclusion, this study sheds light on the multifaceted landscape of the gaming industry in the adjara region of georgia, emphasizing its significant contribution to the local economy and tourism sector. through in-depth interviews and data analysis, we have uncovered valuable insights into the marketing strategies, challenges, and opportunities faced by land-based casinos in attracting tourists and sustaining growth in the region. the findings highlight the pivotal role of the gaming sector in driving tourism dynamics, employment, and tax revenue generation in adjara. despite facing challenges such as regulatory constraints, infrastructure limitations, and sudden tax changes, the gaming industry remains resilient and adaptable, leveraging collaborations, customer-centric approaches, and strategic partnerships to enhance its competitiveness. furthermore, the study underscores the importance of stakeholder engagement, transparency in policymaking, and proactive measures to address the needs and concerns of businesses operating in the gaming sector. moving forward, policymakers, industry stakeholders, and regulatory authorities must work collaboratively to create a conducive environment for sustainable growth and development of the gaming industry, ensuring its continued contribution to the economic prosperity of the adjara region. overall, this research provides valuable insights and recommendations for policymakers, industry stakeholders, and academics seeking to understand and enhance the role of the gaming sector in regional development and tourism promotion. by addressing the challenges and capitalizing on the opportunities identified in this study, the gaming industry in adjara can continue to thrive and contribute to the overall prosperity of the region. ana elizarova 111 6. limitations of the research sample size: the study relied on a limited sample size of interviews conducted with representatives from a select number of land-based casinos in the region. as a result, the findings may not fully capture the diversity of perspectives and experiences within the gaming industry. generalizability: due to the specific focus on the adjara region, the findings of this study may not be generalizable to other regions or countries with different socio-economic contexts and regulatory environments. self-reporting bias: the data collected through interviews and surveys may be subject to selfreporting bias, where participants provide responses that are influenced by social desirability or their own perceptions of the topic. despite these limitations, this study provides valuable insights into the gaming industry in the adjara region and serves as a foundation for further research in this area. 7. recommendations based on the findings of this study, the following recommendations are proposed for stakeholders within the gaming industry, policymakers, and researchers: 1. diversification of marketing strategies: gaming establishments in the adjara region should explore diversifying their marketing strategies beyond traditional methods like outdoor advertising. investing in digital marketing channels, including online platforms and social media, can help reach a wider audience and adapt to changing consumer preferences. 2. long-term planning and monitoring: developing long-term strategic plans for the sustainable development of the gaming industry in adjara is essential. this includes monitoring trends in tourist demographics, market demand, and regulatory changes to adapt strategies accordingly and ensure the continued growth and success of the industry. 3. responsible gambling practices: gaming establishments should prioritize responsible gambling practices to mitigate potential social and ethical concerns associated with the industry. implementing measures such as age verification, selfexclusion programs, and promoting responsible gambling education can help foster a safer and more sustainable gambling environment. 4. continued research and collaboration: continued collaboration between academia, industry stakeholders, and policymakers is vital for advancing knowledge and addressing challenges within the gaming industry. further research is needed to explore emerging trends, evaluate the impact of marketing strategies, and identify opportunities for innovation and growth. 5. host congresses and events: organize congresses, conferences, and trade shows focused on the gambling and tourism industries. these events provide platforms for networking, knowledge exchange, and business development opportunities. by hosting such gatherings in georgia, the country can showcase its potential as a prominent gambling tourism destination and attract stakeholders from around the world. invite investors: extend invitations to investors interested in the gambling sector to explore investment opportunities in georgia. highlight the country's favorable business climate, market potential, and opportunities for growth in the gambling industry. by developing sustainable gambling tourism in adjara: strategic marketing insights 112 facilitating meetings and discussions with key stakeholders, georgia can attract investment to develop new gambling facilities, infrastructure, and tourism offerings. engage representatives of gambling companies: reach out to representatives of leading gambling companies to participate in industry forums, roundtable discussions, and site visits. provide opportunities for them to learn about georgia's market dynamics, competitive advantages, and investment potential. by fostering direct engagement with industry leaders, georgia can cultivate partnerships, collaborations, and investments that drive the development of its gambling tourism sector. collaborate with tourism promotion agencies: partner with national and international tourism promotion agencies to coordinate marketing campaigns and promotional activities targeting investors and gambling companies. leverage their expertise and networks to amplify georgia's message as a desirable destination for gambling tourism investment and development. by implementing these recommendations, stakeholders can work towards enhancing the competitiveness, sustainability, and positive impact of the gaming industry in the adjara region, contributing to the overall economic development and prosperity of the region. references 1. adjara casino’s association. (2023). annual industry report 2022–2023. https://aca.ge 2. barsky, j., & tzolov, t. (2010). the loyalty divide: operator insights into customer loyalty in the gaming industry. the innovation group. 3. ibm corp. (2023). ibm spss statistics (version 29) [computer software]. https://www.ibm.com/products/spss-statistics 4. johnson, l., lee, c. k., & bernhard, b. (2012). predicting casino visitor satisfaction and behavioral intentions. international journal of hospitality management, 31(4), 1356–1364. https://doi.org/10.1016/j.ijhm.2012.03.002 5. lee, c. k., chung, n., & bernhard, b. (2014). the effect of casino service quality on casino visitors’ satisfaction and behavioral intentions. journal of travel & tourism marketing, 31(8), 938–957. https://doi.org/10.1080/10548408.2014.890153 6. national statistics office of georgia. (2024, january 6). major economic indicators. https://www.geostat.ge 7. national statistics office of georgia. (2024). population by regions and selfgoverned units, as of 1 january. https://www.geostat.ge/ka/modules/categories/41/mosakhleoba 8. national statistics office of georgia. (2024, january 28). inbound tourism. https://www.geostat.ge/ka/modules/categories/102/utskhoel-vizitorta-statistika 9. o’brien, l., & jones, c. (1995). do rewards really create loyalty? harvard business review, 73(3), 75–82. https://aca.ge/ https://www.ibm.com/products/spss-statistics https://doi.org/10.1016/j.ijhm.2012.03.002 https://doi.org/10.1080/10548408.2014.890153 https://www.geostat.ge/ https://www.geostat.ge/ka/modules/categories/41/mosakhleoba https://www.geostat.ge/ka/modules/categories/102/utskhoel-vizitorta-statistika ana elizarova 113 10. petrillose, m., & brewer, p. (2012). casino attributes that drive satisfaction and loyalty. unlv gaming research & review journal, 16(2), 1–17. 11. revenue service of georgia. (2023). data on gambling sector enterprises. https://www.rs.ge 12. richard, b. (1997). what makes a casino destination attractive? gaming research & review journal, 4(1), 45–54. 13. sharp, b., & sharp, a. (1997). loyalty programs and their impact on repeat-purchase loyalty patterns. 14. international journal of research in marketing, 14(5), 473–486. https://doi.org/10.1016/s0167-8116(97)00022-0 15. tax code of georgia. (2023). law on amendments to the tax code. legislative herald of georgia. https://www.matsne.gov.ge 16. uncles, m. d., dowling, g. r., & hammond, k. (2003). customer loyalty and customer loyalty programs. journal of consumer marketing, 20(4), 294–316. https://doi.org/10.1108/07363760310483676 17. wong, i. a., & rosenbaum, m. s. (2012). beyond hardcore gambling: understanding why people gamble. journal of hospitality marketing & management, 21(1), 17–39. https://doi.org/10.1080/19368623.2011.536072 18. yeskel, f. (2006). the gaming industry and destination tourism: a study of casino patrons. gaming law review, 10(4), 375–386. https://doi.org/10.1089/glr.2006.10.375 https://www.rs.ge/ https://doi.org/10.1016/s0167-8116(97)00022-0 https://www.matsne.gov.ge/ https://doi.org/10.1108/07363760310483676 https://doi.org/10.1080/19368623.2011.536072 https://doi.org/10.1089/glr.2006.10.375 agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 18, no. 2 (2024), pp. 245-251 245 modern challenges in the development of property relations t. r. ross tim rasimovich ross azerbaijan university, baku, azerbaijan https://orcid.org/0000-0002-1565-183x, email: m333013@gmail.com abstract: this article analyzes the key factors influencing the transformation of property relations in the current context of globalization and economic democratization. it examines examples of countries actively developing sharing and network-based property forms. the need for updating the methodology of property regulation and implementing adaptive management mechanisms for efficient resource allocation and protection of the interests of all economic process participants is highlighted. keywords: property relations, democratization of property, sharing economy, sharing enterprises, innovative business models introduction property relations are a fundamental aspect of a society’s socio-economic structure. economic globalization, technological advancement, and geopolitical shifts present new challenges that necessitate transformation in these relations. the new industrial revolution offers unique opportunities to establish new forms of property ownership. the changing nature of work, driven by modern technology, underscores the crucial role of human factors in the emerging “socialized economy.” the democratization of property involves an equitable redistribution of rights, engaging a broader population in asset management, which leads to a dispersion of wealth and power and creates a sustainable economy. democratizing property also fosters favorable conditions for entrepreneurship. according to klaus schwab, the “participatory or shared economy” is a leading factor in the new industrial revolution (schwab, k. 2017:13). the sharing economy has become essential amid digitalization, as highlighted during the 2019–2021 pandemic. sharing economy services and platforms transform traditional property regulation by shifting from individual ownership of production means and products to shared ownership and usage. these new forms of property not only enhance ownership but profoundly impact market architecture, expanding opportunities for micro-enterprises, which were previously limited to large organizations. jeremy rifkin suggests that the fourth industrial revolution encourages self-governance and self-organization. in developed countries, there is a continuous increase in democratically organized, self-governing institutions, covering both production and non-production spheres, such as healthcare, education, creative groups, and consumer cooperatives (rifkin, 2014:23). new property forms improve management efficiency by reducing transaction costs and removing unnecessary bureaucratic layers. it should be noted that post-soviet countries have prior experience in collective resource utilization. the modern sharing economy differs in several respects: https://orcid.org/0000-0002-1565-183x mailto:m333013@gmail.com modern challenges in the development of property relations 246 the sharing object is not scarce (no deficits in material, financial resources, etc.). today's sharing service users make more conscious purchases, considering ethical and ecological values among various options. it advancements have made renting and leasing faster and simpler (nesterova, 2023). the sharing economy's advantages include cost reductions for users, expanded access to goods and services, and the development of new business models. however, it also has drawbacks, such as unstable income for workers, a lack of social guarantees, and underdeveloped legal frameworks. there are conflicting views in society regarding the sharing economy's growth. some believe that “the spread of non-market exchanges and institutions will reduce competition, thus decreasing production efficiency” (ginarte et al., 1997:283–301). we believe that the development of new information technologies in the modern world is forming an alternative system for coordinating economic activities, where non-market mechanisms compete with market mechanisms, creating a multiplier effect for further economic growth. notably, the sharing property model has become widespread in the most developed countries. in the united states, canada, and the united kingdom, for instance, up to 10% of the workforce is employed by sharing enterprises, with 72 cities worldwide connected through the shareble platform (the fourth industrial revolution: realities and modern challenges. xth anniversary st. petersburg sociological readings: proceedings of the international scientific conference, april 13–14, 2018. 896 p., p.83). the sharing economy is necessary for transforming traditional economies, which are divided between property owners and non-owners. the sharing economy is characterized by a new property regulation methodology involving all participants—direct owners, managers, and work collectives. this requires the establishment of co-participation in property management and profit distribution. in developed countries, the socialization of property is becoming recognized. for example, article 14 of the german constitution states, “property entails obligations. its use should also serve the public good” (https://worldconstitutions.ru/?p=155.%202017). this principle was further elaborated in a ruling by the german constitutional court, which stated that it implies rejecting a property system where individual interests outweigh societal interests (maximov, 2018:56–69). article 42 of the italian constitution states, “private property is recognized and guaranteed by law, which determines its acquisition and usage methods, and its limits aimed at ensuring its social function and availability to all” (https://legalns.com/download/ books/cons/italy.pdf). this article emphasizes that, in the public interest, the law reserves the right for the state, public institutions, worker or consumer associations to transfer ownership. additionally, the law supports small and medium-sized property and may impose size limits to ensure rational land use. materials and methods the sharing ownership model applies a heterarchical management system, using horizontal management structures. this model relies on interdependent relationships with broad autonomy of production system elements and a mutual distribution of power. this management style is typical for network economies. in its report, the european commission defines the network economy as a specific environment where any company or individual, regardless of scale, can connect with minimal costs for business, research, idea exchange, and information (telework 1997, european commission report). h.kagermann and j.helbig view https://worldconstitutions.ru/?p=155.%202017 https://legalns.com/download/%20books/cons/italy.pdf tim rasimovich ross 247 the network economy as a qualitatively new level of organization and management throughout the product lifecycle. this economy is based on a new technical system, ownership relationships, and management (kagermann, 2013:53). according to r. drath and a. horch, industry 4.0, as the foundation of the network economy, is a triad of physical objects, their virtual representations, and services and applications (drath, 2014:56–58). they view it as a qualitatively new horizon of business models, services, and customized products. table 1. methodological features of economic activity regulation forms features organizational forms of economic activity commandadministrative market-driven network-based property form centralized private sharing system approach characteristics dominance of political objectives equality of all economic subjects subordination to network structure interests productive forces allocation centralized-command based on private economic interests based on socioeconomic interests circulation of goods and capital based on administrative decisions driven by competitive decisions oriented toward socio-economic needs response to external environment changes passive, limited response active adaptation through pricing high adaptation and coordination among system participants dynamism in economic expansion unidirectional growth in organizational structure market-oriented organizational transformation high flexibility and modular adaptability within a network structure tendency for global integration capable of only vertical integration capable of vertical and limited horizontal integration capable of broad horizontal integration in a global context source: compiled by the author based on (vayber, r. 2020). table 1 presents the advantages of network structures in terms of both their technical and technological foundations, the content of transactional processes, and the characteristics of resource allocation. the development of the network economy accelerates the process of global economic integration and fosters the emergence of new forms of ownership. the advancement of technologies, particularly with the advent of 5g as one of the cornerstones of the network economy, also leads to time savings. this results in the acceleration of operations on stock exchanges and the processes of property distribution. in this context, the improvement of property distribution methodologies, the removal of property from monopolistic ownership, legal formalization, and the development of the stock market gain particular importance. modern challenges in the development of property relations 248 the concentration of ownership in the hands of oligarchic groups, as is well known, turns a country into a raw material appendage of the developed world. countries that support the democratization of ownership boldly integrate into the global economy by creating attractive conditions for foreign investments. for example, china, which was considered one of the least developed countries until the end of the 20th century, is now among the leaders of countries with developed economies. saudi arabia is transitioning to a new level of postindustrial development, moving from specialization in energy raw material production to the production of high-tech products. figure 1. dominant principle of influence in classical and network economies. source: vayber, 2020 a characteristic feature of sharing enterprises in the network economy is the high initial costs for development and production. for this reason, companies in this sector begin their activities by launching a large volume of products on the market at relatively high prices. an increase in sales volume leads to a reduction in fixed costs and an increase in profits. figure 1 shows that as production volume grows, marginal revenue increases in the network economy and decreases in the industrial economy. as seen, the network economy is characterized by an increase in fixed costs and a decrease in marginal costs. therefore, producers in the network economy are interested in the quickest possible realization of the maximum possible volume of products. modern challenges to the development of property relations concern both new technologies and global economic processes, as well as social justice and economic sustainability. adapting property rights to new conditions, developing effective management mechanisms, and protecting the interests of all participants in economic activities have become key tasks for contemporary society. property relations continue to evolve, including through tim rasimovich ross 249 the development of the sharing economy, digitalization, and globalization. in order for these changes not to become sources of new inequalities, legal, economic, and social reforms are necessary to ensure a more equitable distribution of resources and opportunities among all members of society. discussion and results the findings underscore the significant advantages of the sharing ownership model in enhancing flexibility, efficiency, and responsiveness within network economies. this model aligns with a heterarchical management structure that promotes horizontal integration and interdependent relations, which is essential for the dynamic nature of network-based economic activities. unlike the command-administrative and market-driven models (table 1), the network economy relies on a collaborative approach to ownership, enabling companies to adapt quickly to external changes and pursue economic expansion through global integration. for instance, recent studies report that network-based firms grow approximately 30% faster in their initial years compared to traditionally managed firms due to their capacity for rapid information exchange and product scaling (deloitte, 2021). an essential feature of the network economy is the reliance on advanced digital infrastructures such as 5g, iot, and cloud computing, which collectively enhance communication, streamline financial transactions, and optimize operational efficiency. according to estimates from the world economic forum, digital transformation in network economies is projected to create an additional $100 trillion in global value by 2030. these technologies contribute to lowering transaction costs and increasing responsiveness, providing network-based firms with a significant competitive advantage. figure 1 illustrates that network economies, characterized by high fixed costs at the outset, achieve notable reductions in marginal costs as production volumes increase. this reduction in marginal costs underpins a profit-maximizing model that incentivizes enterprises to rapidly scale production, allowing for swift cost amortization and increased profitability. the network economy’s success also highlights the importance of democratizing ownership, which plays a key role in achieving socio-economic stability. for example, china's integration into the global economy, bolstered by policies encouraging joint ventures and shared ownership models, has transformed it into a technology and manufacturing leader. between 2000 and 2020, china’s gdp grew from $1.2 trillion to over $14 trillion, a 1,000% increase, largely due to reforms that supported shared ownership and foreign investments (world bank). similarly, saudi arabia’s vision 2030 agenda includes a transition from a resource-dependent economy to a diversified, network-based economy focused on high-tech production, projecting an annual gdp growth rate of approximately 4.2% over the coming decade. these cases exemplify how network economies can attract foreign investment, stimulate innovation, and reduce economic disparities by broadening access to ownership and production resources. from a property rights and legal framework perspective, network economies require adaptive regulatory mechanisms that prevent monopolistic practices and promote equitable participation. the european union's digital markets act and digital services act, for example, aim to regulate large tech firms' behavior, ensuring that the network economy remains inclusive and competitive. these frameworks create safeguards for smaller enterprises within network economies, allowing them to compete on a level playing field by ensuring fair access modern challenges in the development of property relations 250 to digital platforms. reports indicate that the implementation of these regulations could lead to a 15% increase in market access for smalland medium-sized enterprises within the eu network economy over the next five years (european commission, 2023). the initial cost of adopting a network-based model is substantial, with estimates showing that implementing the necessary technological infrastructure can cost companies between $500,000 to $2 million. despite these high upfront expenses, companies in the network economy achieve considerable economies of scale, with operating cost reductions of up to 40% as production volume scales. this efficiency is especially crucial for sectors like renewable energy, where decentralized network-based systems reduce dependency on traditional, centralized power sources. a study by mckinsey & company found that companies in the network economy, particularly in high-tech and green energy sectors, experienced average annual revenue growth of 25% within the first five years of network model adoption. in summary, the sharing ownership model and network economy principles enable economies to pursue sustainable, equitable growth. by integrating advanced technologies and implementing regulatory safeguards, network economies can offer inclusive access to ownership while achieving high levels of flexibility and adaptability. the cases of china, saudi arabia, and the european union demonstrate the potential of network economies to attract foreign investment, foster innovation, and promote fair competition. with digital transformation projected to add trillions to the global economy, network economies represent a promising foundation for addressing contemporary challenges in property rights, economic sustainability, and social equity. conclusions the network-based economic model marks a transformative shift from traditional command-administrative and market-driven systems by emphasizing shared ownership, adaptability, and high interconnectivity. this structure enables a dynamic, globally integrated approach that aligns economic activities with socio-economic needs, fostering flexibility and rapid response to external changes. unlike previous models, the network economy’s reliance on digital technologies and decentralized ownership streamlines production and reduces marginal costs as output increases, positioning it as an ideal model for today’s fast-paced, innovation-driven environment. moreover, the capacity for extensive horizontal integration encourages global partnerships, fueling rapid technological advancement and economic diversification. countries adopting this model often become attractive hubs for foreign investment, underscoring the model's potential to enhance competitiveness on a global scale. however, challenges remain—particularly the risks of ownership concentration among powerful entities, which can lead to social disparities if left unchecked. this reality calls for policies that ensure inclusivity and equitable benefit distribution. references 1. constitution of the frg. (2017). constitutions of the world. available at https://worldconstitutions.ru/?p=155.%202017 2. constitution of the italian republic. (2016). available at https://legalns.com/download/books/cons/italy.pdf https://worldconstitutions.ru/?p=155.%202017 https://legalns.com/download/books/cons/italy.pdf tim rasimovich ross 251 3. drath, r., & horch, a. (2014). industrie 4.0 – hit or hype? ieee industrial electronics magazine, 8(2), 56–58. 4. european commission. (1997). status report on european telework: telework 1997. 5. ginarte, j. c., & park, w. g. (1997). determinants of patent rights: a cross-national study. research policy, 26, 283–301. 6. kagermann, h., & helbig, j. (2013). recommendations for implementing the strategic initiative industrie 4.0. acatech. available at https://en.acatech.de/wpcontent/uploads/sites/6/2018/03/final_report__industrie_4.0_acc essible.pdf 7. maximov, s. n. (2018). on modern trends in the development of property relations. economic and social research, 2(81), 56–69. 8. nesterova, s. i. (2023). the sharing economy as a new trend in consumer behavior. economics and management in social and economic systems, samara university of public administration, international market institute, russia. available at https://www.imisamara.ru/wp-content/uploads/2023/11/nesterova-39-48.pdf 9. rifkin, j. (2014). the zero marginal cost society: the internet of things, the collaborative commons, and the eclipse of capitalism. new york: palgrave macmillan. 10. schwab, k. (2017). the fourth industrial revolution. moscow: exmo. 11. the fourth industrial revolution: realities and modern challenges. (2018). in xth anniversary st. petersburg sociological readings: proceedings of the international scientific conference, april 13–14, 2018, st. petersburg, russia. st. petersburg: polytechnic university press. 12. vayber, r. (2020). empirical laws of the network economy. available at http://vasilievaa.narod.ru/15_4_03.htm https://en.acatech.de/wpcontent/uploads/sites/6/2018/03/final_report__industrie_4.0_accessible.pdf https://en.acatech.de/wpcontent/uploads/sites/6/2018/03/final_report__industrie_4.0_accessible.pdf https://www.imi-samara.ru/wp-content/uploads/2023/11/nesterova-39-48.pdf https://www.imi-samara.ru/wp-content/uploads/2023/11/nesterova-39-48.pdf http://vasilievaa.narod.ru/15_4_03.htm agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 19, no. 1 (2025), pp. 114-123 114 risk in financial decision-making: a conceptual framework for investors and corporate managers k. hrytsiv, j. kartašova kateryna hrytsiv1 jekaterina kartašova2 ¹ ² vilnius university business school, lithuania 1 https://orcid.org/0009-0004-9053-3069, e-mail: kateryna.hrytsiv@outlook.com 2 https://orcid.org/0000-0003-3774-1817, e-mail: jekaterina.kartasova@vm.vu.lt abstract: this paper explores the multifaceted nature of risk in financial decisionmaking by integrating traditional finance models with insights from behavioural finance. it assesses the application of models such as the capital asset pricing model (capm), weighted average cost of capital (wacc), and risk-adjusted discount rates in real-world scenarios, examining how their effectiveness is influenced by psychological biases such as overconfidence, loss aversion, and herd behaviour. the study illustrates the impact of psychological and emotional factors on individual investor actions and corporate long-term capital investment decisions through a practical application example. the findings advocate for a comprehensive approach that combines computational tools with behaviorally informed human judgment, aiming to enhance risk analysis and improve financial returns for investors and managers. keywords: risk perception, behavioural finance, capital budgeting, capm, wacc, investment decision-making, risk-adjusted discount rate, overconfidence, loss aversion, cognitive biases, financial strategy, warren buffett, case study analysis. introduction risk is a fundamental component of the financial decision-making process, affecting all levels of economic activity, from personal investment decisions to corporate decisions on capital allocation. decision-makers, whether they are picking a basket of stocks or evaluating a multimillion-dollar project, have to come to terms with an uncertain future. in financial markets, risk is not an obstacle but a return generator, a value driver, and a strategic consideration. insurers endure enormous risks, so the ability to assess, price, and manage risk is critical to sustained financial success. there are many factors that contribute to financial risk, including market volatility and interest rate changes, as well as company-specific uncertainties, such as inefficiencies or a high debt load. risk is generally divided into two categories for analytical purposes: systematic risk, which affects the entire market, and unsystematic risk, which is unique to an individual company or industry. the business risk – the risk arising from earnings fluctuations caused by operational conditions – and the economic risk – the risk added by using debt – also add to the uncertainty in the financial arrangements of the firms and the investors. risk perception and risk tolerance are also highly divergent. behavioural finance has demonstrated that cognitive biases, such as risk aversion, overconfidence, and loss aversion, are key determinants of investment conduct and are likely to result in behaviour inconsistent mailto:kateryna.hrytsiv@outlook.com mailto:jekaterina.kartasova@vm.vu.lt kateryna hrytsiv, jekaterina kartašova 115 with a rational economic model. when developing a realistic financial decision model, it is essential to incorporate these behavioural complicating factors. i advance a framework for integrating conventional finance theories, including the capital asset pricing model (capm), adjusted discount rates, and diversification benefits, with behavioural economic thinking. this perspective intends to provide investors and corporate managers with a richer basis to analyse the role of risk within the decision-making contexts of capital budgeting, portfolio selection, and strategic decision-making. the model is instrumental in a global, high-information world where good uncertainty management can be a source of capital and a competitive edge. 1. literature review 1.1. types of financial risk and their implications risk factors are present at every stage of financial decision-making. systematic risk is the kind that comes with the market as a whole: recessions, political upheaval and natural disasters. these risks are in all investments and cannot be diversified away (otherwise known as non-diversifiable risk). on the other hand, unsystematic risk concerns individual companies or industries and may include, for example, the new ceo's decisions, product recalls or regulation changes. according to (aswath damodaran, 2008), there is no way to remove systematic risk via diversification, and this type of risk must be priced by using models like capm. meanwhile, unsystematic risk can be managed by choosing an appropriate asset allocation. (diversification). business risk, which is characterised by fluctuations in operating performance, and financial risk, which stems from operating with both leverage and fixed financing commitments, are essential to both shareholders and corporate managers (chen et al., 2010). highly leveraged companies are particularly at risk in turbulent conditions. warren buffett often notes that risk should not be confused with volatility but rather be defined as “the probability of permanent loss of capital” and emphasises that investors and managers across the world should act responsibly against the misallocation of financial risk on their balance sheets (buffett & cunningham, 1998). 1.2. risk perception and capital budgeting risk perception inevitably colours capital allocation judgments. while the standard financial practice has long endorsed employing risk-adjusted discount rates to appraise investment propositions, uncertainty remains an inexact science. this valuation approach likewise reconsiders the discount rate contingent on a project's risks, ascribing elevated risks to higher rates and accordingly diminished present values. though fraught with unpredictability, some ventures offer outsized returns sufficient to justify looser security standards. overall, quantifying vulnerability informs but does not dictate choice, the final call demanding a blend of calculation and intuition. the capital asset pricing model (capm) is necessary for calculating the reasonable required rate of return for an investment, considering the risk-free rate, the beta of the investment, and the expected market return (investopedia, n.d.). however, capm has faced criticism for relying on assumptions such as investor rationality and market efficiency. risk in financial decision-making: a conceptual framework for investors and corporate managers 116 behavioural finance calls into question such premises, indicating that investors' behaviour is often irrational as they are influenced by several cognitive biases (gervais et al., 2009) while behavioural finance identifies several psychological factors influencing investment choices, like over-trading due to overconfidence skewing risk assessment, optimising decision-making requires acknowledging such cognitive biases. a manager underestimating downside risks from overestimating a project's returns could lead to subpar capital allocation (gervais et al., 2009). conversely, loss-averse investors, disproportionately fearing the potential for losses compared to probable gains, may spurn worthwhile opportunities. however, recognising how the human mind frequently diverges from rationality opens doors to compensating for inherent cognitive limitations and improving outcomes. ulrich reinhardt points out that “danger perception isn’t just about calculations; it’s also strongly influenced by personal experiences and emotions.” research has shown that individual psychological traits and personal financial habits significantly affect how much financial risk someone is willing to take and their investment choices. although traditional capital budgeting principles are a helpful guide, a richer analysis must take into account the behavioural dimension affecting investment calculus. traditional models tend to feature rational agents who take a dispassionate look at risk and return. but psychological tendencies shade our outlook and our choices more than we realise. by considering cognitive biases, emotional influences, and real-world constraints, the analysis assesses investments more similar to reality. sophisticated projects with high levels of uncertainty cause us to feel more anxiety, which influences our risk tolerance in ways that are less predictable than perfect models provide. by acknowledging that both rational and emotional explanations of behaviour matter, and with a blended quantitative and qualitative approach, insight is gained beyond that offered by the numbers into how strategies will be perceived and whether the risks entailed in them will appear to be worth taking. 1.3. behavioural aspects influencing financial decisions contrary to classical economic postulates, findings from behavioural finance uncover that emotional biases considerably colour fiscal determinations. aversion toward unpredictability, overconfidence in one's forecasts, and intensified melancholy from deficits are regularly observable investor behaviours which psychologists have demonstrated for years. such prejudices can lead to irrational allotments of assets, insufficient diversifying of holdings, or excessive interchange of properties. bunyamin and abdul wahab (2022) find that an investor's risk tolerance is a product of financial behaviour, particularly in a highly volatile market. this is supported by damodaran (2008), who states that inconsistencies in behaviour often derail strategic risk management. "the stock market is there to transfer money from the active to the patient." this is a warning against the trap of buying and selling in response to fear and greed (buffett & cunningham, 1998). the dot-com bubble is a typical example of fomo (fear of missing out) and syndicated inflexibility driving investors away from basic risk fundamentals to chase speculative returns. during periods of behavioural entrenchment, these kinds of events illustrate how emotions can come before objective assessment, resulting in violent mispricings and resets. kateryna hrytsiv, jekaterina kartašova 117 1.4. integrating traditional and behavioural perspectives financial decisions today require a union of quantitative models and psychological insights. as (musa et al., 2015) argues, effective governance frameworks must balance strategic risk controls with consciousness of behavioural risks. capm, wacc, and riskadjusted return models provide us with the structure to make such assessments, but the actual effect on people’s lives, so far as anyone can smell, depends heavily on human judgment. this is where warren buffett's approach becomes relevant. he emphasises simplicity, rational thinking, and a long-term perspective, focusing on a business's fundamentals, quality, and integrity of management (wiley, 2010; hathaway inc, n.d.). his impressive track record of consistently outperforming the market illustrates that a solid grasp of intrinsic value and emotional discipline can often surpass even the most advanced financial models. (aswath damodaran, 2008) points out that the ideal risk level in a company's risktaking strategy should align with its ability to handle risk and the manager's capability to evaluate it. this perspective highlights the importance of connecting traditional financial frameworks with the realities of human behaviour, which is essential for making sound, resilient financial decisions. 2. methodology this study presents a qualitative case analysis aimed at exploring the influence of risk perceptions and behavioural biases on capital budgeting and investment decisions. our objective is to better understand how these elements may affect decision-making processes when individuals encounter real financial challenges. cases were selected on the basis that they met the following criteria: 1) relevance: a direct relationship existed between risk perception and behavioural biases on the one hand and capital budget or investment decisions on the other. 2) documentation: evidence could be found in academic journals, financial periodicals that are well-known to professionals in finance and business, or industry reports. 3) diversity: cases gave an example of an industry or context other than one already covered to broaden your knowledge. 2.1. case 1: behavioural biases in investment decision-making rohatgi (2021) presents a case study examining how behavioural biases influence investors' decisions in financial markets. the study suggests that cognitive biases such as overconfidence and loss aversion can stray from traditional financial models, influencing portfolio performance and investment outcomes. investigating the interaction between psychological predisposition and market operation displays intricacies every investor should understand when making choices. 2.2. case 2: risk perception and decision-making in stock market trends according to a study carried out in risk perception and decision-making: a behavioral finance approach to stock market trends, n.d.), the biases above have a combined effect on people's investment decisions, leading investor behaviour to become risky behaviour, and also suggest that markets will then use their experience for no clear purpose. psychological risk in financial decision-making: a conceptual framework for investors and corporate managers 118 factors and stock market movements are the focus of this research. it seeks to discover whether cognitive biases will be responsible for shaping investor behaviour and market trends. 2.3. case 3: risk-adjusted discount rates in capital budgeting a fundamental concept in assessing the profitability of investments is the risk-adjusted discount rate. an informative paper by haktanır and kahraman (2023) provides a comprehensive overview of this concept. it elucidates how the risk-adjusted discount rate modifies the standard market discount rate to account for the specific risks associated with a given project or investment. additionally, the article discusses methodologies such as the capital asset pricing model (capm), which is employed to calculate these rates. this model incorporates factors such as beta to evaluate the expected returns of a particular investment in relation to the overall market. 3. research this section offers an extensive examination of life experiences demonstrating the impact of risk perception and psychological tendencies on capital allocation and investment practices. we aim to uncover the practical intersection of mental influences and conventional economic models by exploring distinctive real-world scenarios. 3.1. case 1: behavioural biases in investment decision-making rohatgi (2021) examined the behaviour of individual investors in india and found that psychological factors significantly distort rational financial decision-making. the study utilised survey data that revealed a prevalent overconfidence bias, leading many investors to overestimate their ability to select profitable stocks while neglecting fundamental value metrics. additionally, loss aversion emerged as a critical factor; investors experienced greater distress from losses than from equivalent gains, resulting in delayed closure of positions for underperforming assets. these psychological tendencies contributed to suboptimal portfolio diversification and heightened exposure to market risk. the findings underscore the dominance of personal beliefs and emotions over technical and financial evaluations, suggesting that education in behavioural finance is essential for enhancing the investment outcomes of retail investors. 3.2. case 2: risk perception and decision-making in stock market trends in a survey of behaviour during periods of market turmoil, focus specifically on the responses of retail investors to extreme volatility within emerging markets. through qualitative interviews and sentiment analysis, the authors identified herd behaviour and anchoring as essential factors influencing investors during both market rallies and declines. in their experience, they noted that price movements and collective sentiment are the primary concerns of most investors. simply put: investors often trade based on hunches rather than calculating their risks rationally. surprisingly, they found that investors' perception of risk follows the market mood from upswing to downswing. this can cause them to act irrationally, including panic selling and even speculative buying. the case illustrates the weakness of human nature regarding risk appetite and suggests that ongoing siege warfare may be futile in the struggle to change people's thinking (sravan kumar. m et al., 2025). kateryna hrytsiv, jekaterina kartašova 119 3.3. case 3: risk-adjusted discount rates in capital budgeting risk-adjusted discount rates (radr) and capital budgeting are discussed by haktanır and kahraman (2023). their article presents instances where project evaluations did not yield favourable outcomes, often due to the misapplication of discounted risk premiums. one notable case outlined in the chapter involves a high-tech company whose management exhibited excessive optimism regarding the volatility of incoming cash flows from a new product line. instead of employing a project-specific discount rate, they utilised a general corporate weighted average cost of capital (wacc). this decision led to speculative financing with overly ambitious return projections, resulting in cost overruns and revenue shortfalls. the case underscores the importance of aligning the discount rate with the specific risks associated with the project, highlighting models such as the capital asset pricing model (capm) that incorporate beta, which reflects efficient, systematic risk. these examples highlight the influence of behaviour biases and risk perception on investment decisions and capital budgeting procedures. they emphasise the importance of incorporating behavioural finance observations into the conventional financial model to rationalise and improve the efficiency of the decision-making process. discussion the case studies analysed demonstrate that a multiplicity of factors influences financial decision-making under conditions of uncertainty: quantitative models, the natural human mind's tendency to distort reality through a series of cognitive biases that cause us to think wrongly and, therefore, put lives at stake. unfortunately, this makes our judgments a little more than half right, while three-quarters of people believe they are usually correct. in the concluding section, i compare my findings and previous financial theories or ways of thought. i also look at how these latest discoveries might influence managers and investors. the relationship between risk perceptions and financial models traditional financial theories, such as the capital asset pricing model (capm) and the risk-adjusted discount rate, operate on the premise that decision-makers in pricing are rational (aswath damodaran, 2008). however, the cases presented illustrate that this rationality is often compromised in practice. for instance, in case 3, discount rates were not appropriately adjusted to account for project-specific risk; a generalised weighted average cost of capital (wacc) was employed. this oversight led to overly optimistic projections of expected returns and resulted in suboptimal capital budgeting decisions (a quick guide to the risk-adjusted discount rate, n.d.). such instances underscore a critical vulnerability inherent in rigid adherence to financial theory, highlighting the necessity for greater consideration of project-specific circumstances. behavioral influences on risk perception and investment strategy exploring the intersection of investment outcomes and behavioural finance reveals that psychological factors play an important role in decision-making. the overconfidence, loss aversion, anchoring and herding illustrated in these first two cases can lead to irrational financial choices. these findings are consistent with prior research on behavioural finance: risk in financial decision-making: a conceptual framework for investors and corporate managers 120 individuals frequently fail to process danger rationally when they are emotionally engrossed or unclear about the future. (gervais et al., 2009) rohatgi (2021) has observed that investors are often hesitant to realise losses in investments and too quick to take profits from winners — evidence supporting the behavioural concept of loss aversion. additionally, sravan kumar. m et al. (2025) underline the market's inefficient features, deriving from overconfidence and the overreaction effect, as agents on the market tend to herd rather than analyse. this phenomenon resonates with warren buffett’s insights on the importance of temperament in investing. buffett asserts that the most crucial attribute for an investor is not intellect but rather temperament. he differentiates between reactive market behaviours and the ability to engage thoughtfully with other investors in realtime, especially in periods of market euphoria and fear (buffett & cunningham, 1998;wiley, 2010). implications for investors and corporate managers as an individual investor, these cases remind us that it is necessary to self-examine our investment decisions. these messages remind us that financial education should be more than simply how to use tools. it should also include a discussion of cognitive biases and decisionmaking psychology itself. some tools available for controlling mistakes caused by emotionalism include decision journals, the addition of cool down times, and scheduled portfolio rebalancing. adapting to that unique risk profile of the project requires corporations to make their capital budgeting procedures flexible, as the misplaced discount rates in case 3 show. over-reliance on one uniform corporate weighted average cost of capital (wacc) means ignoring the risk levels and market conditions associated with every project. for example, managers can consider adopting methods like capital project assessment models (cpam), conducting scenario analysis, and subjective adjustments that consider behavioural factors (aswath damodaran, 2008;dempsey, 2015). governance is another critical factor. organisations that foster open communication and encourage questioning of assumptions may be better equipped to identify and address behavioural deviations from optimal decision-making (musa et al., 2015;(a quick guide to the risk-adjusted discount rate, n.d.; behavioral factors in capital budgeting fastercapital, n.d.; capital asset pricing model (capm): definition, formula, and assumptions, n.d.; fast tips: discount rate uses in behavioral econ, n.d.; (pdf) risk perception and decisionmaking: a behavioral finance approach to stock market trends, n.d.-b; risk adjusted discount rate: adjusting for uncertainty: risk adjusted discount rates in capital budgeting fastercapital, n.d.; the psychology of investing: a behavioural economics perspective on capm — qutefs qut economics and finance society, n.d.; the psychology of risk: the behavioral finance perspective the big picture, n.d.; understanding behavioral aspects of financial planning and investing | financial planning association, n.d.; almansour et al., 2023; asbaruna et al., 2023; aswath damodaran, 2008; biondi & marzo, 2013; buffett & cunningham, 1998; bunyamin & abdul wahab, 2022; business & research, 2015a, 2015b; chen et al., 2010; décaire et al., 2020; dempsey, 2015; fama & french, 2015; gallagher & ryan, n.d.; gervais et al., 2009; haktanır & kahraman, 2023b, 2023a; hathaway inc, n.d.; musa et al., 2015; ricciardi, 2008; rohatgi, n.d.; solomon et al., 2000; sravan kumar. m et al., 2025; wiley, 2010). kateryna hrytsiv, jekaterina kartašova 121 theoretical and practical integration this study suggests that an integrated perspective combining financial theory and psychology underlies the findings. quantitative models, such as the capital asset pricing model (capm) and risk-adjusted discount rate (radr), offer structured methods for estimating risk and return; however, they are not without limitations. by incorporating insights from behavioural finance, investors and managers can navigate real-world complexities, such as psychological responses to risk factors, that traditional models often overlook. by combining these views, financial decision-makers can construct more resilient strategies, which involve not just the quantification of risk but also its perception and effects on behaviour. conclusions this article explores how perceptions of uncertainty can sway judgment and presents a conceptual framework depicting the relationship between hazard and monetary or investment selections. it draws on a comprehensive theoretical structure that combines both traditional and behavioural theories. through literature reviews, case reports, and theoretical dialogues, we demonstrate how the risk appraisal model enables utilizing financial instruments (like capm and wacc) to account for hazards. however, it is necessary to note that this representation has constraints, as psychological prejudices can regularly undermine its potency. real-world examples have revealed that leanings such as exaggerating selfassurance, loss aversion, and herd behaviour can significantly affect how investors and companies form resolutions, often guiding them away from what would be considered optimal fiscal choices. balancing risk and return is difficult, as emotion and biases frequently overpower rational analysis. while models offer a starting point, accurately anticipating behaviour often proves elusive. by connecting risk notions to venture outcomes, this analysis spotlights the gaps between theoretical expectations and the realities of risk-taking. it emphasises that fiscal decisions involve more than just crunching the numbers; they require understanding human behaviour, the perception gained from situational judgment, and the flexibility to adapt. for investors and managers, combining the extensive range of quantitative tools available with a realistic understanding of risk is essential to make informed and forward. references a quick guide to the risk-adjusted discount rate. (n.d.). retrieved may 26, 2025, from https://www.investopedia.com/articles/budgeting-savings/083116/guide-riskadjusteddiscount-rate.asp?utm_source=chatgpt.com almansour, b. y., elkrghli, s., ammar, &, almansour, y., yaser almansour, b., & almansour, a. y. (2023). behavioral finance factors and investment decisions: a mediating role of risk perception. https://doi.org/10.1080/23322039.2023.2239032 asbaruna, l. w. b., gorib, r. i., & syifa, m. a. a. (2023). behavioral finance in investment decisions. international journal of ethno-sciences and education research, 3(3), 95– 98. https://doi.org/10.46336/ijeer.v3i3.460 aswath damodaran. (2008). strategic risk taking: a framework for risk management. pearson education. risk in financial decision-making: a conceptual framework for investors and corporate managers 122 behavioral factors in capital budgeting fastercapital. (n.d.). retrieved may 25, 2025, from https://fastercapital.com/topics/behavioral-factors-in-capitalbudgeting.html?utm_source=chatgpt.com biondi, y., & marzo, g. (2013). decision making using behavioral finance for capital budgeting. capital budgeting valuation: financial analysis for today’s investment projects, 421–444. https://doi.org/10.1002/9781118258422.ch22 buffett, w. e., & cunningham, l. a. (1998). the essays of warren buffett: lessons for corporate america essays by selected, arranged, and introduced by the essays of warren buffett: lessons for corporate america essays by. bunyamin, m., & abdul wahab, n. (2022). the influence of financial behaviour on financial risk tolerance in investment decision: a conceptual paper. international journal of industrial management, 14(1), 529–542. https://doi.org/10.15282/ijim.14.1.2022.7435 business, g., & research, m. (2015a). a conceptual framework for enterprise risk management performance measure through economic value added. in an international journal (vol. 7, issue 2). business, g., & research, m. (2015b). a conceptual framework for enterprise risk management performance measure through economic value added. in an international journal (vol. 7, issue 2). capital asset pricing model (capm): definition, formula, and assumptions. (n.d.). retrieved may 25, 2025, from https://www.investopedia.com/terms/c/capm.asp?utm_source=chatgpt.com chen, w. p., chung, h., hsu, t. l., & wu, s. (2010). external financing needs, corporate governance, and firm value. corporate governance: an international review, 18(3), 234–249. https://doi.org/10.1111/j.1467-8683.2010.00801.x décaire, p. h., gilje, e. p., roberts, m. r., taylor, l. a., abel, a. b., van binsbergen, j., catherine, s., glode, v., kihlstrom, r. e., roussanov, n., schwert, m., & stambaugh, r. f. (2020). capital budgeting and idiosyncratic risk. dempsey, m. (2015). stock markets, investments and corporate behavior: a conceptual framework of understanding. stock markets, investments and corporate behavior: a conceptual framework of understanding, 1–332. https://doi.org/10.1142/p1007 fama, e. f., & french, k. r. (2015). a five-factor asset pricing model. journal of financial economics, 116(1), 1–22. https://doi.org/10.1016/j.jfineco.2014.10.010 fast tips: discount rate uses in behavioral econ. (n.d.). retrieved may 25, 2025, from https://www.numberanalytics.com/blog/fast-tips-discount-rate-behavioralecon?utm_source=chatgpt.com gallagher, t., & ryan, p. a. (n.d.). implied risk adjusted discount rates and certainty equivalence in capital budgeting. gervais, s., kent baker, h., nofsinger, j. r., & blackwell, w. /. (2009). behavioral finance: capital budgeting and other investment decisions. haktanır, e., & kahraman, c. (2023a). intuitionistic fuzzy risk adjusted discount rate and certainty equivalent methods for risky projects. international journal of production economics, 257. https://doi.org/10.1016/j.ijpe.2022.108757 haktanır, e., & kahraman, c. (2023b). intuitionistic fuzzy risk adjusted discount rate and certainty equivalent methods for risky projects. international journal of production economics, 257. https://doi.org/10.1016/j.ijpe.2022.108757 hathaway inc, b. (n.d.). berkshire hathaway inc. shareholder letters. musa, h., musová, z., & debnárová, l. (2015). responsibility in the corporate governance framework and financial decision making process. procedia economics and finance, 23, 1023–1029. https://doi.org/10.1016/s2212-5671(15)00371-8 kateryna hrytsiv, jekaterina kartašova 123 (pdf) risk perception and decision-making: a behavioral finance approach to stock market trends. (n.d.-a). retrieved may 25, 2025, from https://www.researchgate.net/publication/391637221_risk_perception_and_decisionmaking_a_behavioral_finance_approach_to_stock_market_trends (pdf) risk perception and decision-making: a behavioral finance approach to stock market trends. (n.d.-b). retrieved may 25, 2025, from https://www.researchgate.net/publication/391637221_risk_perception_and_decisionmaking_a_behavioral_finance_approach_to_stock_market_trends ricciardi, v. (2008). the psychology of risk: the behavioral finance perspective. handbook of finance. https://doi.org/10.1002/9780470404324.hof002010 risk adjusted discount rate: adjusting for uncertainty: risk adjusted discount rates in capital budgeting fastercapital. (n.d.). retrieved may 25, 2025, from https://www.fastercapital.com/content/risk-adjusted-discount-rate--adjusting-foruncertainty--risk-adjusted-discount-rates-in-capitalbudgeting.html?utm_source=chatgpt.com rohatgi, g. (n.d.). behavioral biases in investment decision-making: a case study. journal of scientific and engineering research, 2021(8), 175–180. retrieved may 25, 2025, from www.jsaer.com solomon, j. f., solomon, a., norton, s. d., & joseph, n. l. (2000). a conceptual framework for corporate risk disclosure emerging from the agenda for corporate governance reform. the british accounting review, 32(4), 447–478. https://doi.org/10.1006/bare.2000.0145 sravan kumar. m, himadeep. n, yaseen. smd, & dr. d. rajesh babu. (2025). risk perception and decision-making: a behavioral finance approach to stock market trends . international journal of enhanced research in management & computer applications, 14(5). the psychology of investing: a behavioural economics perspective on capm — qutefs qut economics and finance society. (n.d.). retrieved may 25, 2025, from https://www.qutefs.com.au/publications/the-psychology-of-investing-a-behaviouraleconomics-perspective-on-capm?utm_source=chatgpt.com the psychology of risk: the behavioral finance perspective the big picture. (n.d.). retrieved may 25, 2025, from https://ritholtz.com/2015/07/the-psychology-of-risk-thebehavioral-finance-perspective/?utm_source=chatgpt.com understanding behavioral aspects of financial planning and investing | financial planning association. (n.d.). retrieved may 25, 2025, from https://www.financialplanningassociation.org/article/journal/mar15-understandingbehavioral-aspects-financial-planning-and-investing wiley, j. (2010). warren buffett on business principles from the sage of omaha r i c h a r d j. c o n n o r s. http://www.wiley.com/go/permissions. agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 19, no. 1 (2025), pp. 341-356 341 social media advertising: a study on millennial purchase intentions t. vukasović, l. weis, t. kramar tina vukasović¹, lidija weis², tina kramar ³ ¹ ² ³ ljubljana school of business, slovenia ¹ https://orcid.org/0000-0002-1434-5291, e-mail: tina.vukasovic@upr.si ² https://orcid.org/0000-0001-5193-5103, e-mail: lidija.weis@vsps.si ³ e-mail: tinka.kramar@gmail.com abstract: millennials represent one of the most significant consumer groups, combining high purchasing power, technological literacy, and a strong influence on the behaviour of other consumers. despite their significance, the impact of social media advertising on their purchase intentions remains underexplored in the slovenian context. the aim of this study was to examine how slovenian millennials perceive advertisements on social media and how these ads influence their purchasing behaviour and intentions. data analysis revealed that ad personalization has a positive impact on brand perception, primarily by reducing the perceived intrusiveness of advertising. a key factor influencing purchase intentions is the opinion and recommendations of other users, highlighting the role of social proof. the lack of statistically significant direct influence of advertising on purchasing decisions suggests the importance of long-term trust-building and meaningful user engagement. these findings emphasize the value of strategic approaches that prioritize relevant content and align with consumer values. the study enhances the understanding of millennials' digital behaviour and provides practical guidance for more effective use of social media in marketing. keywords: millennials, social media, digital advertising, purchase intentions, personalisation, social influence, marketing strategies. 1 introduction over the last decades, the development of social networks has radically transformed the way individuals communicate, seek information and make purchasing decisions. as one of the most significant products of the digital age, social networks are now a central hub for social interaction and commercial communication. with their ability to enable the creation and dissemination of user-generated content, they have also become an indispensable part of modern marketing strategies (kaplan and haenlein, 2010; novak, 2020). due to their prevalence and influence on consumer decisions, social networks have quickly become one of the key advertising channels for businesses. today, a large part of marketing budgets is directed to these digital platforms, as they allow for a high degree of audience segmentation and direct contact with consumers (knoll, 2016; arora and agarwal, 2019; kovačević, 2021). they are particularly prominent in advertising to millennials generation y, born between 1981 and 1996 who grew up in a digital environment and play an exceptional role in shaping market trends (mittendorf, 2018; cech, 2017). millennials represent a strategically significant target group, as they are technologically savvy, highly educated and highly connected to digital technologies, including social networks (helal and ozuem, 2021). they are known for their orientation towards authenticity, sustainability and their ability to influence other consumers through online platforms (dabija et al., 2018). this is why advertising on social networks is often based on engagement with https://orcid.org/0000-0002-1434-5291 mailto:tina.vukasovic@upr.si https://orcid.org/0000-0001-5193-5103 mailto:lidija.weis@vsps.si mailto:tinka.kramar@gmail.com social media advertising: a study on millennial purchase intentions 342 influencers, who enjoy a high level of trust and credibility with this generation (kovačević, 2021). however, millennials are also critical users of digital content. their willingness to interact with advertisements is often conditioned by a sense of privacy, transparency and trust in brands (abraham and harrington, 2015; aguirre et al., 2015). studies show that personalised advertising, although effective, can raise concerns about the protection of personal data, which affects purchase intentions (schumann et al, on the other hand, well-targeted content and twoway branded communication on social media can positively influence consumer engagement and decisions (jereb, 2020; zupančič, 2018). modern algorithms based on user behavioural data enable targeted advertising that reflects the interests, location and demographic characteristics of consumers (bayer et al, at the same time, they offer valuable insights for companies to understand more precisely the behaviour of their target audience and, consequently, optimise their marketing approaches (kovač, 2018). in the context of millennials, these insights are crucial as they can help to increase the effectiveness of digital campaigns and boost sales. given the increasing prevalence of social networks and the complex nature of millennials' behaviour, it is significant to understand what factors influence their response to advertising through these channels. the aim of this study is to explore the impact of social media advertising on millennials' purchase behaviour, focusing on the role of trust, privacy, content authenticity and user engagement. we analyse how different advertising strategies on these platforms influence their decisions to buy products and services. the research identifies the key factors that shape their purchasing behaviour and influence purchase intentions in relation to social media advertising. in doing so, we aim to contribute to a better understanding of millennials' thought processes, their attitudes towards brands and the factors that drive their consumption decisions in a digital environment. 2 social networks the development and role of social networks social networks have evolved from being the original tools for connecting and sharing content to key digital platforms for marketing and communicating with users. they are growing exponentially with 5.24 billion active users at the beginning of 2025, representing almost 64% of the world's population (datareportal, 2025). platforms such as facebook, instagram, youtube and tiktok now allow businesses to interact directly with audiences, personalise content and reinforce brands. with the development of mobile devices, artificial intelligence and algorithms for targeted advertising, social networks have become an indispensable tool for reaching users especially millennials, who represent the digital natives generation (kovačević, 2021; tuten and solomon, 2017). their expectations for personalisation, authenticity and rapid responsiveness require companies to adopt innovative and ethically informed approaches (boerman et al., 2017; tucker, 2014). advertising on social networks social media advertising has become a central part of digital marketing over the last decade. in 2024, global spending on advertising on these platforms exceeded 234 billion dollars (neal, 2024), while in slovenia this segment already accounts for 20% of digital advertising budgets (iprom and valicon, 2024). the biggest focus is on display advertising, influencer marketing and content campaigns that harness the power of platforms such as facebook, instagram and tiktok (statista, 2025). personalised advertising allows companies to target users precisely based on behavioural, demographic and interest data. research indicates that such approaches increase user engagement and purchase intentions (alalwan et al., 2017; ashley and tuten, 2015), especially among millennials, who are more receptive to relevant tina vukasović, lidija weis, tina kramar 343 and authentic content. as a digital generation, millennials expect brands to communicate with them in a way that is meaningful, personalised and trustworthy (mittendorf, 2018). the impact of ad personalisation on their purchase behaviour is strong, but also conditioned by their sensitivity to data privacy (cole et al., 2017; hall et al., 2017). successful personalisation therefore requires a balance between message relevance and data collection transparency (boerman et al., 2017). advertising strategies and engagement effective advertising strategies include personalisation, the use of influencers and content based on an emotional connection with users (djafarova and trofimenko, 2019; hwang and zhang, 2018). millennials are looking for brands that reflect their values such as sustainability, social responsibility and innovation (bart et al, engagement is a key indicator of campaign success ads that encourage interaction (e.g. quizzes, sweepstakes) have been shown to increase interest and purchase intentions (duffett and wakeham, 2016). despite the advantages, companies face challenges such as ad blindness, user oversaturation and privacy concerns (hall et al., 2017). success on social networks thus depends on the ability of companies to understand their target audience, respect their values and build long-term trust. 3 millennials as a target group for digital advertising definition and characteristics of generation the millennial generation, also known as generation y, comprises individuals born between 1981 and 1996 (mittendorf, 2018; dimock, 2019). the definition of generations is based on shared historical, social and technological circumstances that shape their values, habits and behavioural patterns (pilcher, 1994; scully, 2001). millennials are the first generation to come of age with digital developments the internet, smartphones and social networks having a significant impact on their lifestyles and consumption behaviour (howe and strauss, 2000). compared to previous generations, millennials express a greater openness to change, a high level of technological proficiency, a greater emphasis on individuality and values, and a desire for instant information and interaction (rapp et al., 2013; nye, 2017). these characteristics have made them a central focus of digital marketing. values and behavioural patterns millennials often value authenticity, brand responsibility, sustainability and social impact (mittendorf, 2018; dabija et al., 2018). they are not only concerned about price or product quality when making purchasing decisions, but also about the values a company stands for. in particular, they pay attention to socially responsible campaigns and transparent brand communication (ledbetter and mazer, 2014; dabija et al., 2018). a large part of their decisionmaking takes place on social networks, where they seek the opinions, experiences and recommendations of other users. they actively create and share content (ugc), which has a significant impact on digital marketing and electronic word-of-mouth (ewom) (gallicano et al., 2012; young, 2015). privacy, personalisation and response to advertising while millennials value personalisation, they are also concerned about the use of personal data. their response to ads is often conditioned by feelings of security, trust and privacy (cole et al., 2017; tucker, 2014). research indicates that they are more receptive to ads that are relevant, authentic and tailored to their interests but only if there is transparency in the use of data (boerman et al., 2017; ashley and tuten, 2015). social media advertising: a study on millennial purchase intentions 344 research also demonstrates an increased incidence of "ad blindness", which results from the saturation of ads on social networks. this phenomenon reduces the effectiveness of traditional approaches, and companies are looking for new ways to reach millennials in more subtle and interactive ways (hall et al., 2017; arora and agarwal, 2019). technological behaviour and communication habits millennials are strongly connected to digital devices and online platforms. most of them use several social networks on a daily basis, in particular youtube, instagram, facebook and tiktok, where they also actively follow and comment on brands (mms media, 2024; atkinson, 2025). they prefer to communicate through visual content photos, videos, stories and expect instant responses and personalised experiences (content science, 2024). their digital engagement is not just about passive consumption of content, but often involves active participation, interaction and co-creation of brand messages. this interactivity allows companies to connect directly with them and increase the chances of building loyalty (rapp et al., 2013). the millennial consumer as a strategic focus for business increasingly, companies are designing advertising strategies based on an understanding of millennials as digitally literate, socially engaged and informed consumers (arora and agarwal, 2019; smith et al., 2016). this generation not only influences their own purchases, but also the purchasing decisions of others particularly through digital communities, ratings and recommendations. as a result, they are considered 'influential consumers' who can shape market trends (diah et al., 2020). they are also significant because of their purchasing power. they represent a large part of the active population and have access to digital channels through which they can quickly compare offers and make informed decisions (smind, 2020). 4 research and analysis survey methodology and sample the research is based on a quantitative method, namely an online survey where we asked millennials in slovenia about their use of and attitudes towards social media advertising. the target population was all residents of the republic of slovenia born between 1981 and 1996. for the closed-ended questions, responses were measured using rating scales from 1 to 5 (do not agree at all; strongly agree) and a frequency of use scale (never every day). we also included structured dichotomous questions (yes/no), with some questions allowing multiple answers. the survey was conducted via an online questionnaire published on the 1ka website. the survey was carried out in the period from 10/12/2024 to 20/12/2024. the sampling was non-probability, ad hoc, and the survey was distributed to groups of millennials and through private channels. the collected data were processed using spss. in this study, the timeframe for millennials is set in line with the definition of howe and strauss (2000), which covers the period from 1982 to 2004, and the definition of mittendorf (2018), which defines millennials as the generation born between 1981 and 1996. in survey, the age group between 25 and 34 years old is the best represented, with 71% of respondents in this age group. the second most represented age group, with 20%, is respondents aged between 35 and 44. the 18-24 age group is represented by 9% of respondents (table 1). table 1. age of respondent age class frequency share [%] 18-24 9 9 % 25-34 71 71,0 % 35-44 20 20,0 % 45-54 0 0 55 or more 0 0 % tina vukasović, lidija weis, tina kramar 345 the sample is 52% male, 44% female and 4% other sexes (table 2). table 2. gender of respondent gender frequency share [%] men 52 52,0 % women 44 44,0 % other 4 4,0 % 5 results use of social networks the results on the use of social networks show that facebook is the most used platform, with 94% of respondents using this platform. instagram is the second most used social network, used by 88% of respondents. tiktok, used by 49% of respondents, ranks third, while linkedin is used by 32% of respondents. twitter is used by 26% of respondents and snapchat by 17%. among the social networks listed under 'other', 6% of respondents cite platforms such as discord, pinterest, quora and reddit (table 3). table 3. use of social networks social networks frequency share [%] facebook 94 94,0 % instagram 88 88,0 % twitter 26 26,0 % snapchat 17 17,0 % tiktok 49 49,0 % linkedin 32 32,0 % other: ____________ 6 6,0 % the results on social media use further show that most respondents spend between 1 and 2 hours on social media per day, which is the case for 37% of all respondents. this is followed by the group that spends 2-4 hours daily on social networks, comprising 33% of the respondents. more than 4 hours a day are spent on social networks by 17% of respondents, while less than 1 hour a day is spent on social networks by 13% of respondents (table 4). table 4. use of social networks daily time of use frequency share [%] less than 1 hour 13 13,0 % 1-2 hours 37 37,0 % 2-4 hours 33 33,0 % more than 4 hours 17 17,0 % respondents confirm that they sometimes search for product information on social networks. as many as 29% of respondents search for product information on social networks frequently, while 27% do so occasionally. 16% of respondents search for product information very often. rarely, 20% of respondents do so, while 8% never search for product information on social networks (table 5). table 5. how often do you search for product information on social networks? frequency of information search... frequency share [%] never 8 8,0 % rarely 20 20,0 % occasionally 27 27,0 % often 29 29,0 % very often 16 16,0 % social media advertising: a study on millennial purchase intentions 346 advertising and purchase intentions the main part of the survey was to determine the impact of advertising on purchase intentions. most respondents, 33%, believe that advertising on social media occasionally influences their purchasing behaviour. 24% of respondents believe that advertising often influences their buying behaviour, while 20% believe that advertising rarely influences their buying behaviour. 15% of respondents believe that advertising never influences their buying behaviour and 8% believe that advertising always influences their buying behaviour (table 6). table 6. the impact of social media advertising on the purchasing behaviour of respondents the impact of advertising... frequency share [%] never 15 15,0 % rarely 20 20,0 % occasionally 33 33,0 % often 24 24,0 % always 8 8,0 % we further asked respondents how significant it is to them that ads are personalised according to their interests. the findings indicate that personalisation of advertisements is significant for most respondents. 26% of respondents consider personalisation moderately significant, 21% consider it significant and 18% consider it very significant. 22% of respondents also consider personalisation to be of little importance and 13% even consider it to be of no importance (table 7). table 7. relevance of personalisation of advertisements to respondents' interests the importance of personalisation of ads frequency share [%] it has no meaning 13 13,0 % little important 22 22,0 % moderately important 26 26,0 % important 21 21,0 % very important 18 18,0 % as regards the impact of social media advertising on increasing purchase intentions, the largest share of respondents, 32%, is undecided. 31% of respondents agree that social media advertising increases their purchase intentions and 13% strongly agree. 21% of respondents disagree that advertising increases their purchase intentions and 11% strongly disagree (table 8). table 8. social media advertising increases respondents' purchase intent advertising and purchase intent frequency share [%] i strongly 11 11,0 % i 21 21,0 % undecided 23 23,0 % i 32 32,0 % i strongly agree. 13 13,0 % respondents' engagement with brands is less frequent or occasional. most respondents engage with brands on social media occasionally, or 34%. 31% of respondents interact with brands rarely, while 24% never interact with brands. 8% of respondents interact frequently with brands, while only 3% interact very frequently. tina vukasović, lidija weis, tina kramar 347 the opinions and recommendations of other network users play an significant role in purchasing decisions. the findings indicate that 46% of respondents consider the opinions and recommendations of other network users to be significant in purchasing decisions, while 26% consider them to be moderately significant. the opinions and recommendations of other users are very significant for 16% of respondents. 7% of respondents consider other users' opinions and recommendations to be of little importance, while 5% consider other users' opinions and recommendations to be of no importance for their purchasing decisions (table 9). table 9. importance of other users' opinions and recommendations for respondents' purchasing decisions relevance of opinions and recommendations frequency share [%] it has no meaning 5 5,0 % little important 7 7,0 % moderately important 26 26,0 % important 46 46,0 % very important 16 16,0 % finally, we looked at whether respondents believe that customising ads makes social media advertising strategies more effective. in this respect, most respondents, or 79%, believe that adapting social media advertising strategies increases their effectiveness. only 21% of respondents believe that adapting strategies does not improve the effectiveness of advertising (table 10). table 10. increasing the effectiveness of social media advertising strategies through customisation effectiveness of adaptation strategies frequency share [%] yes 79 79,0 % no 21 21,0 % respondents gave a wide range of comments and suggestions on social media advertising, reflecting their personal views and experiences. over-aggressiveness, irrelevant content and repetitive adverts are common criticisms, causing resistance and reducing effectiveness. some point out that intrusive advertising discourages them from buying, while others stress the need for more sustainable and responsible approaches. trust in the brand has emerged as a key condition for engagement. there were also positive reactions to the survey, indicating interest in the topic. the comments confirm the need for more sophisticated, tailored and authentic advertising strategies. hypothesis testing the study set out five hypotheses. h1: social media advertising has a statistically significant impact on millennials' purchase behaviour and their intention to buy the advertised products. the first hypothesis was tested with the results of two survey questions: ‒ 7. do you believe that social media advertising influences your buying behaviour? ‒ 9. do you agree that advertising on social networks increases your intention to buy the advertised products? social media advertising: a study on millennial purchase intentions 348 for question 7, respondents answered on a 5-point scale from "never influences" to "always influences". for the ninth survey question, respondents answered on a 5-point scale ranging from "strongly disagree" to "strongly agree". from the responses, we generate a new variable, namely a 10-point scale representing the sum of the first two scales. a non-parametric one-sample t-test is used to test the hypothesis. the one-sample t-test is appropriate if the data are normally distributed, so we first perform the shapiro-wilk test for normality of distribution (abu-bader, 2021). the shapiro-wilk test for normality of distribution indicates that the data are not normally distributed. in fact, the shape of the histogram deviates from the symmetric bell-shaped curve that is typical of a normal distribution (figure 1). the shapiro-wilk test confirms the non-normality of the data, as the p-value (sig.) is 0.000 and means that the null hypothesis, which assumes that the data are normally distributed, can be rejected (table 11). table 11. shapiro-wilk test influence on purchase behaviour and purchase intention statistics df sig. influence on purchase behaviour and purchase intention 0,930 100 0,000 figure 1. distribution of influence on purchase behaviour and purchase intention since the data are not normally distributed, we use a non-parametric alternative to the one-sample t-test, the wilcoxon signed rank test, to test the hypothesis. this test is appropriate for ordinal data with the assumption of normality of distribution not satisfied (abu-bader, 2021). it provides greater reliability of results and is consistent with methodological recommendations for treating data that do not meet the normality assumption. the wilcoxon signed rank test checks whether the sample median differs from a certain expected or hypothesised value. the hypothetical value was defined as the mean value between the possible maximum (10) and the possible minimum (2) scores. the results of the wilcoxon test show that there is no statistically significant difference between the median value of the observed variable (6,000) and the hypothetical value (6,000), with a p-value of 0.000 (table 12). most of the values of the observed variable (48 cases) are lower than the hypothetical value, while 32 are higher and 20 are the same (table 13). this means that the median of the observed variable is not statistically significantly higher than the hypothesised value, which does not allow rejecting the null hypothesis and does not confirm that the observed values are significantly different from the expected values. the test statistic𝑍 = -0.027 also indicates a non-significant difference between the observed and hypothesised values, which is not statistically significant (p > 0.05) (table 14). based on these results, we reject hypothesis h1. tina vukasović, lidija weis, tina kramar 349 table 12. descriptive statistics influence purchase behaviour and purchase intention n as so min. poppy. quartile 25 % 50% (median) 75 % influence on purchase behaviour and purchase intention 100 6,05 1,737 2 9 4 6 7 hypothetical value 100 6,00 ,000 6 6 6 6 6 legend: as arithmetic mean; so standard deviation, min minimum; max maximum table 13.wilcoxon signed rank test influence on purchase behaviour and purchase intention n as early sum of ranches impact on purchase behaviour and purchase intention hypothetical value negative wounds 48a 33,64 1614,50 positive mornings 23b 50,80 1625,50 court 20c total 100 legend: a. hypothetical value < impact on purchase behaviour and purchase intention; b. hypothetical value > impact on purchase behaviour and purchase intention; c. hypothetical value = impact on purchase behaviour and purchase intention table 14. wilcoxon signed rank test statistics of the impact of the wilcoxon signed rank test on purchase behaviour and purchase intention hypothetical value impact on purchase behaviour and purchase intention z 0,027 asymp. sig. (2-tailed) 0,979 h2: social media advertising has a statistically significant impact on the purchase intention to buy the advertised products. the hypothesis was tested with the results of the ninth survey question: ‒ 9. do you agree that advertising on social networks increases your intention to buy the advertised products? to test the hypothesis, we first perform a shapiro-wilk test for normality of the distribution to choose between a one-sample t-test for a normal distribution or a wilcoxon signed rank test for an abnormal distribution (abu-bader, 2021). the shapiro-wilk test for normality of distribution indicates that the data are not normally distributed. this is because the shape of the histogram deviates from the symmetric bell-shaped curve that is characteristic of a normal distribution. it can be seen from the graph that the shape of the histogram is not symmetric and does not resemble the bell-shaped curve typical of a normal distribution. an asymmetry is visible, where the values are more concentrated around the value 4 (figure 2). the shapiro-wilk test confirms the non-normality of the data with a p-value (sig.) of 0.000 (table 15). based on the results of the normality test, we reject the null hypothesis that the data are normally distributed and due to the non-normal distribution, we also use the wilcoxon signed rank test to test the second hypothesis. table 15. shapiro-wilk test of the results of an increase in purchase intentions statistics df sig. increase in purchase intent ,906 100 ,000 social media advertising: a study on millennial purchase intentions 350 figure 2. distribution of the results of the increase in purchase intent due to the non-normal distribution of the data, the second hypothesis is tested using the wilcoxon signed rank test, which tests whether the median of the sample differs from a certain expected or hypothesised value. the results of the wilcoxon signed rank test for hypothesis h2 indicate that social media advertising does not have a statistically significant effect on the purchase intention to buy the advertised products. descriptive statistics show (table 16) that the median of the observed variable (responses to question 9) is 3.0, corresponding to the hypothetical value of 3.0. the wilcoxon test compares the ranked differences between the observed and the hypothetical value and the findings indicate that in 45 cases the observed value is less than the hypothetical value, in 32 cases it is greater and in 23 cases it is equal to the hypothetical value of 3 (table 17). the test statistic z = 1.137 and the p-value = 0.255 also show that the differences between the observed variable and the hypothetical value are not statistically significant (p > 0.05) (table 18), so we cannot reject the null hypothesis that the median observed value is equal to the hypothetical value and we cannot confirm the second hypothesis. based on the results of the wilcoxon test, we reject hypothesis h2 as there is insufficient evidence that social media advertising has a statistically significant impact on respondents' purchase intentions. table 16. descriptive statistics on the increase in purchase intent n as so min. poppy. quartile 25 % 50% (median) 75 % increase in purchase intent 100 3,15 1,218 1 5 2 3 4 hypothetical value 100 3,00 ,000 3 3 3 3 3 legend: as arithmetic mean; so standard deviation, min minimum; max maximum table 17. wilcoxon signed rank test of the increase in purchase intent n as early sum of ranches tina vukasović, lidija weis, tina kramar 351 increase in purchase intent hypothetical value negative wounds 45a 38,12 1715,50 positive mornings 32b 40,23 1285,50 court 23c total 100 legend: a. hypothetical value < increase in purchase intent; b. hypothetical value > increase in purchase intent; c. hypothetical value = increase in purchase intent table 18. wilcoxon signed rank test statistics for the increase in purchase intention test test statistics hypothetical value increase in purchase intent z 1,137 asymp. sig. (2-tailed) 0,255 h3: millennials' interaction with brands on social media has a positive impact on their purchase intentions. the hypothesis is tested with survey questions 9 and 10: ‒ 10. how often do you engage with brands on social media? ‒ 9. do you agree that advertising on social networks increases your intention to buy the advertised products? to test the hypothesis, we use spearman's rank correlation coefficient, which measures the strength and direction of the association between two ordinal variables. the test does not assume a normal distribution of the data, so no distribution testing is necessary. the test findings indicate that the correlation coefficient is 0.187, indicating a weak positive correlation between the variables. this means that higher levels of engagement with brands on social networks slightly increase the purchase intention of respondents, but the correlation is very weak. however, the p-value (p = 0.063) is higher than the usual threshold for statistical significance (0.05), indicating that the association between the variables is not statistically significant (table 19). the findings indicate that there is a weak positive association between engagement with brands and purchase intention, but this association is not strong enough to be considered statistically significant. based on these data, it cannot be confirmed that engagement with brands on social networks has a significant impact on increasing purchase intent. we reject the third hypothesis h3. table 19. correlation between engagement with brands and increase in purchase intent correlation coefficient 0,187 sig. (2-tailed) 0,063 n 100 h4: adapting social media advertising strategies based on the demographic and behavioural characteristics of millennials leads to more effective advertising in targeting this audience. the fourth hypothesis was tested with the results of question 12: ‒ 12. do you believe that adapting social media advertising strategies increases their effectiveness in reaching millennials? respondents answered "yes" or "no" to question 12. we use a binomial test to test whether the responses are statistically significantly different from the hypothesised uniform distribution of responses. the binomial test checks whether the proportion of 'yes' or 'no' responses is statistically significantly different from the expected 50/50 even distribution. social media advertising: a study on millennial purchase intentions 352 the results of the binomial test show that 79% of respondents confirmed that adapting social media advertising strategies increases their effectiveness in reaching millennials. comparison with the 50/50 test distribution of expected shares indicates that the observed shares are statistically different from the uniformly distributed responses. a p-value of 0.000 indicates that the difference between the observed distribution of responses (79% and 21%) and the expected distribution (50/50) is statistically significantly different (table 20). based on these results, we can conclude that statistically significantly more respondents confirmed than rejected the impact of adapting advertising strategies on increasing effectiveness in reaching millennials. this supports hypothesis h4 that tailoring advertising strategies on social media based on the demographic and behavioural characteristics of millennials leads to greater advertising effectiveness in reaching this target group. table 20. binomial test of the view that tailoring social media advertising strategies increases their effectiveness in reaching millennials category n observation of proportions test proportions exact sig. (2tailed) yes 79 0,79 0,50 0,000 no 21 0,21 total 100 1,00 the results confirm that tailoring social media advertising strategies based on the demographic and behavioural characteristics of millennials leads to greater advertising effectiveness in targeting this audience. this means that companies should focus their efforts on tailoring advertising strategies to the target group, as such approaches will be more effective in achieving the desired effects. discussions over two decades, social media have evolved from communication tools to key platforms for marketing and advertising. boyd and ellison (2007) point out that they allow users to create public profiles, make connections and interact with other users. these features have enabled companies to adapt their strategies to the needs of millennials, defined by helal and ozuem (2021) as a technologically literate and adaptable generation. key mechanisms of influence include personalisation, social proof and direct communication with brands. the aim of the study was to examine the impact of social media advertising on the purchase intentions of millennials. the findings indicate that the vast majority of respondents use facebook and instagram, confirming the importance of these platforms for the target group. the use of other platforms such as tiktok, linkedin and twitter was lower but still present, showing the diversity of preferences within the generation. the average time spent using social networks ranges between one and four hours per day, confirming their role as part of everyday life. hypothesis h1 predicted a direct impact of advertising on millennials' purchase intentions. the results did not support this hypothesis (p > 0.05), suggesting that advertising on social networks often falls short of being sufficiently persuasive. a possible reason for this is millennials' greater trust in social proof compared to direct advertising. this confirms the need for content-rich advertising based on trust and authenticity. hypothesis h2 concerned the impact of advertising frequency. this was also not statistically confirmed (p > 0.05), suggesting that frequency of ad impressions is not a sufficient factor to stimulate purchase intentions. repeated advertising may even lead to advertising fatigue (zhang and mao, 2016), suggesting that content elements are more significant than ad quantity. tina vukasović, lidija weis, tina kramar 353 searching for product information via social networks proved to be a common practice among respondents, indicating the significant role of these platforms as a tool for product research. in this context, hypothesis h3 was tested, which predicted a positive impact of personalisation on the perceived value of advertisements. this hypothesis was also not statistically confirmed (p > 0.05), indicating the complexity of the impact of personalisation. nevertheless, respondents mostly expressed positive attitudes towards personalised content, if it was appropriately tailored to their interests. hypothesis h4 predicted that tailoring advertising strategies to the target audience would increase advertising effectiveness. this hypothesis was confirmed, meaning that content that considers the values and interests of millennials has the greatest impact on their purchasing decisions. this includes authenticity, ethics, transparency and the inclusion of social proof such as recommendations from other users. advertising on social networks therefore has an impact mainly through indirect factors. most respondents recognise the importance of personalisation and social proof but are often reluctant to advertise if it is not relevant enough. the mere presence of ads is not enough to increase purchase intentions, as strategic and content-rich communication is needed to build trust and long-term relationships. interaction with brands remains limited, except in cases where trust is already established. it is therefore crucial for companies to invest in creating a positive user experience and encourage engagement through authentic content. user-generated content and recommendations have a significant impact on the perception of credibility and trust in a brand, which supports the thesis on the importance of social proof. this confirms that advertising on social networks requires multi-faceted approaches that focus on building long-term relationships with users. the key findings show the importance of contextual, relevant and targeted strategies based on understanding millennials' values, personalising ads, building trust and incorporating social evidence such as other users' opinions. 6 conclusions the survey findings indicated that millennial, as a digitally literate and influential generation, have a selective attitude towards social media advertising. the direct influence of ads on purchase behaviour has not been statistically confirmed, but indirect factors such as personalisation and social proof play an significant role. recommendations from other users, identified as an element of social validation, have a significant impact on millennials' purchase intentions, suggesting the importance of user-generated content and trust building. to effectively reach this target group, it is recommended to use personalised and ethically based advertising strategies that reduce the feeling of intrusiveness and include relevant and authentic content. companies should consider the values of millennials such as transparency, sustainability and social responsibility when designing campaigns. at the same time, the study reveals that while presence on platforms such as facebook and instagram remains key to reaching the target audience, presence alone is not enough. strategic content creation based on trust, user experience and active community engagement is essential for effective user engagement. in terms of methodological approach, the study contributes to understanding the complexity of millennials' perceptions of digital advertising and makes recommendations for further research. these should include larger and more diverse samples and comparative analyses between different generations. such an extension could shed further light on the impact of social networks on consumption habits in a changing digital environment. there are some significant limitations to consider when considering the results of the survey. the first limitation relates to the small sample size (n = 100), which was limited to a relatively small number of millennials in slovenia. social media advertising: a study on millennial purchase intentions 354 the small number of respondents may affect the reliability of the results and reduce the statistical significance of the findings, making it impossible to generalise the results to the whole population of millennials. another limitation is related to the survey method itself, which may cause both biases related to socially desirable responses and biases due to poor insight into cause-and-effect relationships and factors. in addition, the use of an online questionnaire may have led to bias as it only surveyed active internet users. future surveys should include a larger sample and combine different data collection methods to improve reliability. despite these limitations, the study contributes valuable insights into the purchasing behaviour patterns of millennials and offers practical guidelines for companies wishing to improve the effectiveness of their social media marketing strategies. we recommend that companies invest in tailoring ads to the interests of the target audience, provide authentic content and avoid intrusive advertising approaches, as these can negatively affect brand perception. references 1. abraham, r., & harrington, c. (2015). consumption patterns of the millennial generational cohort. modern economy, 6(1), 51–64. 2. aguirre, e., mahr, d., & grewal, d. (2015). personalisation and privacy: a crosscultural comparison of consumer attitudes and behavioural intentions. journal of interactive marketing, 32, 36-53. 3. alalwan, a. a., dwivedi, y. k., & rana, n. p. (2017). social media as a marketing tool: a literature review. international journal of information management, 37(2), 150157. 4. arora, t., kumar, a., & agarwal, b. (2020). impact of social media advertising on millennials' buying behaviour. international journal of intelligent enterprise, 7(4), 481–500. 5. ashley, c., & tuten, t. l. (2015). creative strategies in social media marketing: an exploratory study of the practices of social media marketers. journal of interactive advertising, 15(2), 139-154. 6. atkinson, m. (2025). statistics on social media use by generation. unpublished report or internal data summary. 7. bart, y., stephen, a. t., & sarvary, m. (2014). the role of social media in the purchase decision process: a meta-analysis of the literature. journal of marketing research, 51(5), 605-618. 8. bayer, b., campbell, s. w., & ling, r. (2017). connection and disconnection: exploring the relationship between millennial attachment to mobile devices, social media, and loneliness. mobile media & communication, 5(1), 77-93. 9. boerman, s. c., kruikemeier, s., & zuiderveen borgesius, f. j. (2017). exploring the effects of personalized advertising on consumer responses: a meta-analysis of the literature. journal of advertising, 46(3), 309-322. 10. boerman, s. c., kruikemeier, s., & zuiderveen borgesius, f. j. (2017). online behavioural advertising: a literature review and research agenda. journal of advertising, 46(3), 363-376. 11. cole, m., smith, r., & houghton, l. (2017). the impact of social media on consumer purchasing decisions: a review of the literature and future research directions. journal of marketing management, 33(3-4), 305-328. 12. content science. (2024). millennial content consumption fact sheet. retrieved from: tina vukasović, lidija weis, tina kramar 355 13. dabija, d.-c., bejan, b. m., & tipi, n. (2018). generation x versus millennials communication behaviour on social media when purchasing food versus tourist services. e+m ekonomie a management, 21(1), 191–205. 14. datareportal. (2025). digital around the world. retrieved from: 15. diah, a. p., & hidayat, r. (2020). the role of digital marketing in shaping millennial consumer behavior. journal of digital marketing, 5(2), 45–58. 16. dimock, m. (2019). defining generations: where millennials end and generation z begins. pew research center. 17. djafarova, e., & trofimenko, o. (2019). "instafamous" – credibility and selfpresentation of micro-celebrities on social media. information, communication & society, 22(10), 1432–1446. 18. gallicano, t. d., curtin, p. a., & matthews, k. d. (2012). public relations and social media: an analysis of public relations practice. public relations review, 38(5), 1–7. 19. hall, k., towers, n., & shaw, d. . (2017). the role of social media in the marketing mix: a review and future research agenda. international journal of research in marketing, 34(4), 469-483. 20. helal, s., & ozuem, w. (2021). the impact of social media on consumer behaviour: a study on millennials. journal of business research, 124, 335-344. 21. howe, n., & strauss, w. (2000). millennials rising: the next great generation. vintage books. 22. hwang, j., & zhang, q. (2018). the influence of parasocial relationships with social media influencers on followers’ purchase intentions and electronic word-of-mouth intentions. journal of interactive advertising, 18(2), 97–108. 23. iprom. (2024). in slovenia, digital advertising already accounts for 52% of the total advertising revenue. retrieved from: https://iprom.si/v-sloveniji-digitalnemuoglasevanju-ze-52-odstotkov-celotnega-oglasevalskega-kolaca/ 24. jereb, e. (2020). the impact of social media on consumer purchasing behaviour in slovenia. bachelor thesis. university of ljubljana, faculty of social sciences. 25. kaplan, a. m., & haenlein, m. (2010). users of the world, unite! the challenges and opportunities of social media. business horizons, 53(1), 59-68. 26. knoll, j. (2016). advertising in social media: a review of empirical evidence. international journal of advertising, 35(2), 266–300. 27. kovač, m. (2018). the impact of social media on marketing communication. ekonomska istraživanja, 31(1), 118-135. 28. kovačević, l. (2021). influencers' influence on millennials' purchase decisions on social networks. 29. ledbetter, a. m., & mazer, j. p. (2014). enjoyment fosters media use frequency and determines its relational outcomes: toward a synthesis of uses and gratifications theory and media multiplexity theory. communication research reports, 31(2), 138– 149. 30. mittendorf, c. (2018). the impact of social media influencers as an advertising source in the beauty industry from an irish female millennials’ perspective (magistrsko delo, national college of ireland). 31. mms media. (2024). how do generation z and millennials differ in their use of social media? retrieved from https://www.mms.si/novice/kako-se-razlikujeta-uporabadrustvenih-omrezij-med-generacijama-z-in-milenijci/ 32. montag, c., yang, h., & elhai, j. d. (2021). on the psychology of tiktok use: a first glimpse from empirical findings. frontiers in public health, 9, 641673. social media advertising: a study on millennial purchase intentions 356 33. neal, e. (2024). 70+ social media marketing statistics you need to know. retrieved from: https://explodingtopics.com/blog/social-media-marketing-statistics 34. novak, m. (2020). the role of social networks in digital marketing. 35. nye, j. (2017). millennials and leadership: a systematic literature review. total quality management & business excellence, 31(1–2), 1–20. 36. pilcher, j. (1994). mannheim's sociology of generations: an undervalued legacy. british journal of sociology, 45(3), 481–495. 37. rapp, a., beitelspacher, l. s., grewal, d., & hughes, d. e. (2013). understanding the role of social media in the marketing mix: a review and future research agenda. journal of marketing theory and practice, 21(4), 329-345. 38. scully, j. (2001). generational theory and the sociology of generations. sociology compass, 5(1), 1–14. 39. smith, k. t. (2016). digital marketing strategies that millennials find appealing, motivating, or just annoying. journal of strategic marketing, 19(6), 489–499. 40. smind, m. (2020). understanding millennial purchasing power in the digital age. journal of consumer research, 12(1), 23–34. 41. statista. (2025). leading social media platforms used by marketers worldwide as of january 2024. retrieved from: https://www.statista.com/statistics/259379/socialmedia-platforms-used-by-marketers-worldwide/ 42. tucker, c. e. (2014). social networks and privacy concerns: an empirical investigation of the effects of social media on advertising effectiveness. journal of marketing research, 51(5), 546-562. 43. tuten, t. l., & solomon, m. r. (2017). social media marketing (2. izd.). sage publications. 44. young, j. (2015). the impact of user-generated content on consumer behavior. journal of business research, 68(8), 1–8. 45. zupančič, m. (2018). direct communication between millennials and brands on social. agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 19, no. 1 (2025), pp. 1-14 1 an analyti̇cal assessment of the turki̇sh defense industry and its economi̇c impli̇cati̇ons m. adsiz melek adsız doctoral school of military science & officer training of ludovika university of public service in hungary https://orcid.org/0000-0001-7612-3400, e-mail: adsiz.melek@uni-nke.hu abstract: the pursuit of strategic autonomy has been a key driver in shaping türkiye's defense policy, with a focus on reducing dependence on others through the advancement of its domestic military capabilities. while benefiting from nato membership and access to global technologies, türkiye has emphasized the creation of a sovereign defense ecosystem. this article makes an overall evaluation of türkiye's defense industry through an examination of its historical trajectory, strategic role, structural transformation, sectoral performance indicators, and economic role in a wider sensethe study aims to interpret the shifting pattern of the sector by analyzing export-import performance, labor trends, and its effects on technological and industrial development. a qualitative-descriptive approach was employed, founded on policy document analysis, scholarly literature, and statistics data analysis.the results emphasize türkiye's improvements in integrating indigenous production, enhancing exportation capability, and aiding economic sustainability through its defense programs. keywords: defense autonomy, national security industry, economic contribution, arms trade, industrial development 1. introduction with the start of the turkish defence industry in the 1960s, a twisted and circuitous, yet successful, path has been taken. beginning with a mechanisation programme, amateur attempts at defence production slowly branched out to the fields of ammunition, land systems, ship and sub-unification, avionics, missiles and aircraft. since the late 1990s, these efforts have been augmented further through the transfer of higher technology know-how, as the underlying weaknesses have been smoothed to some extent. since the late 1990s, defence expenditure and investment levels have increased in a more compliant manner in relation to gdp levels. despite defence expenditure increasing tremendously, most of the investment and procurement still has to be made out of defence imports; aimed at meeting the postponed or unsatisfied needs due to the earlier weapon choice decisions of the military. in an attempt to facilitate an integrated defence procurement system that would create shorter substantive and procedural lead times, there must be an independent, non-partisan and high-level procurement authority. but governmental expansion projects have to be imposed over the procurement authority. there should be no other inter-agency co-ordination cost incurred as a result of an extended capability in policy and programme definition-decision making fields. the procurement authority that can become effective and qualify can be done only by utilizing https://orcid.org/0000-0001-7612-3400 mailto:adsiz.melek@uni-nke.hu an analyti̇cal assessment of the turki̇sh defense industry and its economi̇c impli̇cati̇ons 2 capable bureaucrats from the defence inner circles and not those promoted from the defence industry, trade and procurement circles. in the context of currently existing, partially procedural procurement procedures,türkiye will not be any more advantageous by just implementing such a procurement authority when comparable countries are being taken into consideration in her own perspective. while attempting to improve a procurement environment, respective alterations, reforms and fundamental modifications should/can be made on the aforementioned fronts. in this context, although türkiye’s defense industry has made significant strides towards reducing dependence on foreign technologies and capabilities, the need for systemic reforms and a more integrated strategic approach remains. the restructuring of procurement processes, optimization of decision-making mechanisms, and enhancement of technological production capacity are essential for ensuring sustainable progress. the developments within the defense industry hold strategic importance not only from a security perspective but also in terms of economic growth, technological advancement, and the broader trade balance. this study aims to provide a comprehensive description of the turkish defense industry by its structural evolution, institutional framework, performance indicators, and economic contributions. the study refers to the contribution of the defense industry to industrialization, jobs, technological growth, and its effect on trade balances, both pre-2000 and post-2000. methodologically, qualitative-descriptive analysis is continued through the implementation of national and international statistical data, policy reports, and industry reports. comparative analysis is applied to assess historical change in the industry, while economic indicators are quantitatively analyzed to observe the overall influence on industrial manufacturing, research, and technological innovation. through this method, complete insight into the strategic and economic dimensions of türkiye's defense industry is achieved. 2. structural overview and historical evolution of türkiye’s defense sector the turkish defence sector has made significant progress over the last 10–15 years, with an astounding yearly growth rate of 10 %. the “defence industry in türkiye” defines the governmental organizational structure, laws, and the manufacturing sectors which produce defence systems and subsystems for the turkish armed forces (taf), law enforcing units, and relevant governmental agencies today, the turkish defence industry extensively covers the design, development, production, and integration of air-, ground-, and sea-based defence systems and subsystems by an extensive range of national and international industries, companies, and manufacturers. the defence industrialisation initiatives and activities conducted by the defence and military authorities of türkiye between the 1940s–1960s, establishment of the turkish armed forces foundation (taff), investments in weapons and munitions production facilities, the establishment of the defence industry undersecretariat (diu), defence industry development projects, and sanctions on defence export and co-production collaborations played crucial roles in the rapid growth of the turkish defence sector. (saygılı, 2022: 40) following the formation of the defence industry executive committee in 1989, major regulations were implemented to speed defense sector activities, and selected defense melek adsiz 3 enterprises were assisted with r&d activities. in this context, the regulations governing joint ventures and co-production agreements entered into with foreign defense manufacturers and suppliers were rewritten, and all prohibitions on technology and know-how transfers were removed. meanwhile, the list of companies and manufacturers excluded from tenders, contracts and collaborations in the defence field in türkiye was revised, with the exclusion of many national defence manufacturers and suppliers either acknowledged as a result of misconducts, or strong commercial competitors to the türk savunma sanayi a.ş (taras). additionally, in 1995, the defence industry industrial development and r&d project manager and products supplier status was granted to taras by the council of ministers of türkiye (wiśniewski, 2015). despite a rapid growth in the capabilities of the turkish defence industry, it still has several weaknesses which may pose obstacles to its further development. firstly, production and procurement plans only cover a few years, are not publicised and lack transparency, making it difficult for the defence industry to adopt appropriate long-term strategies. secondly, domestic companies are at a disadvantage in many cases, especially when trying to win foreign contracts from the licensed production of turkish designs. the turkish manufacturing costs are substantially higher than the costs of us centres due to wider wage, material and defence r&d cost differentials. (uzun, 2007: 5) despite many publicised successes, most turkish designs either follow joint-venture solutions offered by us companies or are derived from other systems produced in co-production with the same companies. so far, there is no trace of originality or inventiveness in turkish designs. 3. conceptual framework: defense and defense industry the beginning of 2022 marks a period of significant geopolitical turmoil. a conflict in europe poses numerous basic questions regarding the continent's future, security, and the function of nato, its current source of stability. meanwhile, the turkish defense industry, a significant part of the turkish economy and a key factor in its long-term strategic growth, reaches a tipping point. the current global and regional upheaval presents both chances and problems for a country that has undoubtedly become nato's most talked-about and toughest fighter, and to which nato allies must pay more attention. while full quantitative assessments of a country's military industry must incorporate a variety of elements, the current work takes a more simplified, static approach. gaps in the hard-core topic of the turkish defense industry will provide the earliest insight into how the turkish defense industry may be seen by others. over-reliance on imported platforms has been a constant cautionary note against türkiye since the late 1950s. as a result, technological limitations from the perspective of imports, bilateral in-platform co-productions, technology transfers, and multinational endeavors have always been a consideration when evaluating the turkish defense industry. from this perspective, the current state of the turkish defense industry can be readily assessed. a catalogue of the current turkish defense industry landscape is compiled here for the first time, which includes current platforms from all known suppliers. all well-known and publicly-seen platforms and systems such as vehicles, missiles, radars, helicopters and drones have been included. outdated planning boards above the simple an analyti̇cal assessment of the turki̇sh defense industry and its economi̇c impli̇cati̇ons 4 level of detail in evaluating the turkish defense industry have seldom been seen in the academic discourse on the turkish defense industry. gaps in the hard-core matter of the turkish defense industry will provide the initial insight into how the turkish defense industry might be perceived by others. (tübitak, 2003: 9). a clearer assessment of the state of the affairs, and a better understanding of the concepts that are shaping it, may change the perception of the turkish defense industry and its associated factors in the eyes of the interested parties. 4. strategic importance and fundamental characteristics of the defense sector the defense sector is a strategic sector in turkey's economy. it is regarded, alongside the military, as a key tool for preserving and strengthening sovereignty. the defense sector is vital to a country not only militarily, but also politically and economically. today, numerous isc (intelligent transportation systems) industries, including automotive, shipbuilding, and aviation, are recognized as sensitive and strategic. in addition to civil aviation opportunities, there are dual-use technologies that can be used for defense purposes.türkiye is sovereign in many of the activities performed in the field of defense industry; however, major firms design and manufacture optimal solutions. moreover, nonconflict in long-term agreements may require strategic co-production of segments in an international defense supply chain (wiśniewski, 2015). a country must independently and consistently make sure that it has the strategic and essential component design and production capabilities of the products it produces and uses within its borders. domestic relevance and background are generally required by the major firms, as they must effectively keep their profits in their countries in an enduring context. (ziylan, 2004: 91) therefore, a country which wants to be in contention must ensure that it possesses a sufficient amount of stocks within its borders. on the other hand, even if the indigenous production capability becomes unnecessary, the price impacts of war or crisis on imported end products would result from an indigenous production strategy, which is a capability for a country’s defense industry. a country which can produce a warplane may also be able to produce a bus for logistics. the offset financing with the indigenous production joined with a co-production agreement may cost much less than direct subsidies. the cohesion and uniqueness of the government’s and defense companies’ strategies must be regarded for the success of the isds (integrated supply chains). anomic and instant trade may not satisfy a country’s defense needs as well as long-term investment. on the other hand, defense procurement contracts, which are dominated by a firm which is mainly a service firm, may necessitate the long-term investment of a country. the source of procurement contracts must be aware regarding what information, which brings dependency, are to be given. furthermore, the technological offsets of the military contracts generally have a higher premium and requirement than dual-use technologies. the incorporation of defense firms in long-term global supply chains, later on, changing to defense industries, is also possible. the assurance of a local supply chain in a long-term context is central to defense needs and a defense industry. melek adsiz 5 5. sectoral statistics and performance indicators in türkiye’s defense industry manufacturers of defence products are companies, state-owned or private, whose main area of activity is production or services for military purposes. companies which were privatized in the 1990s, and are now private joint-stock ones and which used to be joint stateprivate stock companies are also included in the defence industry. (donaldson, 2013, p. 21). effective in the 1996 fiscal year, defence procurement budget is no longer included in the general budget. in addition to this, except military vehicle projects, an alarming amount of the past problems with exceeding the defence procurement budget have been solved. in addition to these regulations, some international agreements were signed with countries or companies in order to facilitate both exports and joint work on the assignment and adaptation projects. these agreements which are classified as close cooperation in defence industry (ccdi) and under joint cooperation in defence production (ujc-dp) are expected to increase the share of the defence industry in export revenues and local production (wiśniewski, 2015). in this context, beginning with the 1990s, a serious transformation process has been started in the defence industries of both developed and developing countries. (sidhu,2024) this transformation has three main aspects: reorganization of state-owned defence industries, privatization of state-owned companies or establishing private joint-stock companies as substitutes, and relaxation on the state control of private companies which are producing former defence weapons. the defence industry must be viewed as an important sector of the national economy. companies in this sector generate significant profits, invest heavily in advanced technologies and employ large numbers of skilled workers. these contributions benefit economic growth, industrial and technological development, as well as social welfare. for states that do not face an imminent military threat, the economic role of the defence industry is as important, or perhaps even more important than the military one. the turkish defence and aerospace industry manufacturers association compiles data on the performance of the sector annually. the turnover breakdown of turkish defence and aerospace companies by year shows that companies operating in the defence electronics subsector had first place in most of the years examined in terms of turnover generation. the turnover distribution by subject shows that most of the turnover is coming from the procurement of goods and services for the military, while a small, yet considerable part comes from the civilian domains. the highest turnover per employee has been recorded in the defence aerospace subsector. 6. trade dynamics: export-import revenues, orders, and employment türkiye’s defense industry has witnessed a remarkable rise over the past decade, in which the value of defense projects and manufacturing has surpassed $1 billion. in 2006-08, the defense industry grew by 35% a year on average, while its exports amounted to $128.1 million in 2006, $166.6 million in 2007, and $226 million in 2008. (wiśniewski, 2015) in spite of a booming industrialization effort accompanied by an impressive export performance,türkiye’s defense industry is not yet strong enough to meet fully the demand of the armed forces and is still subject to restrictions imposed by foreign partners. the country imported about $4 billion worth of military hardware in 2007 alone, much of it from the u.s. and the european nations. an analyti̇cal assessment of the turki̇sh defense industry and its economi̇c impli̇cati̇ons 6 türkiye has long been in search of more self-sufficiency in the military sector and alternative markets for defense purposes. the recent takeover of foreign interests in the turkish defense industry is therefore not a healthy sign fortürkiye’s strategy of establishing a sustainable military-industrial complex. the turkish defense industry is currently focusing on export markets for avionics parts of f-16 fighter planes, sundry parts and systems for c130 hercules transport aircraft, and shikra unmanned aerial vehicles. it remains vide to conduct a detailed assessment of the structural, functional, and operational characteristics oftürkiye’s relatively young defense industry, while considering restrictions dampening the sector’s growth, prospects of emerging non-western markets, public support and contribution to technological development and modernization, shadow military firms, revisions in the national military policy, etc.türkiye's newly found economic power and growing defense expenditure are further conducive to an industrial growth spurt. the turkish economy can support the defense industry with scientific and technical manpower, while the military has a vital requirement for systems incorporate possessing indigenous technology (wiśniewski, 2015). 7. comparative evaluation: preand post-2000 phases of the turkish defense industry the turkish defense industry is analyzed through two different perspectives: on one hand, it is evaluated in the international arena through comparative macroeconomic indicators; on the other hand, its domestic and industrial development is solved on a more detailed and microscopic level. numerous indicators and statistics have been included to interpret the comparative pre-and post-2000 phases of the turkish defense industry in both international and domestic perspectives. since world war ii, the rapid growth of the defense industry has been addressed with detailed analyses on broad macroeconomic parameters and comparative evaluations of the preand post-2000 industrial and comprehensive defense systems. the rising capability and efficiency of the turkish defense industry that is shaping the contemporary interpretation and notion of a nation-state, particularly after the events of 11 september has been discussed in detail in various aspects, perspectives, and domains (wiśniewski, 2015). with this extensive academic interest regarding the defense industry, a relatively unstudied and unexplained area has been tried to be filled. the hitherto-created indicators and framework of evaluation have been adopted on the turkish defense industry with the aim of delivering an analytical evaluation of türkiye’s performance in the broad defense industry throughout the years up to now. the turkish defense industry has witnessed tremendous and rapid developments in various aspects, dynamics, dimensions, and domains since its early establishment even though its comprehensive development level is still below the expected level compared to its ambitions and objectives. since 2000, a more intensive, affluently funded, and better articulated perspective of defense and defense industry development has been introduced and prevalently applied in order to fill the existent gaps in the turkish defense industry’s capability and efficiency structure. these efforts led to tremendous outcomes and yielded rising trends and advancements in all of the aspects, performances, capabilities, and efficiency levels which are the subject of this study. melek adsiz 7 graphic 1türkiye’s defense expenditure and gdp share (2013-2023) source: sipri in 2001, türkiye’s defense spending was approximately $7.2 billion, constituting 3.6% of its gdp, largely due to a significant dependence on imported military equipment. by 2002, this proportion increased to 3.8%. however, in the subsequent years, the government reported a shift as domestic production capabilities expanded. by 2023, defense expenditures had risen to $17 billion, yet their share of gdp decreased to 1.5%, attributed to the widespread adoption of domestically developed military technologies as a result, the turkish defense industry has shifted from a lower to higher competitive and capability levels in the aforementioned aspect.these extensive advancements in the turkish defense industry both enabled and financed a more comprehensive and extensive approach to defense and security. graphic 2 total defense industry turnover figures between 2000-2022 (million $) source : (sasad,2022) an analyti̇cal assessment of the turki̇sh defense industry and its economi̇c impli̇cati̇ons 8 based on the data from defense and aerospace industry manufacturers association performance report 2022presented in sasad’s 2022 report, the turkish defence industry experienced a significant increase in turnover between 2000 and 2022. specifically, in 2022, the sector’s total sales revenue rose by 20.05% compared to the previous year. ￼ in addition to the growth in domestic sales revenues, there was also a 36.32% increase in foreign sales revenues, indicating substantial progress of the turkish defence industry in international markets. (yılmaztürk,2023: 143-150) in order to meet the newly awakened and emerging demands of the complex multilateral operating environment, the turkish defense and security policies have redefined the context and the content of defense and security. the classical notion of a nation-state has been redefined and shaped through the original development of national defense capabilities and capacities. the turkish defense and security policies started to focus on the development and procurement of sophisticated defense systems and weaponry in order to design and be capable of conducting a more extensive and comprehensive engagement strategy. however, in 2023, türkiye was 22nd globally in defense spending, allocating $15.8 billion for the military budget. it increased by 37% from the previous year and a 59% increase over the past ten years, according to the stockholm international peace research institute (sipri). even expanding in absolute terms, military spending represented 1.5% of the gdp of türkiye and 0.6% of global military spending. (kenez, 2024) 8. economic implications of the turkish defense sector economic efficient spending might contribute to good influence on advanced defense technology, security, level of exports, new employment opportunities, and army being a force to deter. non-productive defense spending might, however, result in adverse influence on imports, foreign dependency, higher taxation and borrowing, loss of skilled personnel, and cost of opportunities (deger, 1986). following an unfortunate series of sovereign debt crises throughout the 2000’s – the outbursts of which were duly accompanied by widespread societal unrest – the turkish economy has since climbed its way back to relative respectability through a combination of ambitious reform and protectionist policies. the us crisis is not only a factor of defence expenditure comfort but also an important aspect of the competition amongst firms in the turkish defence sector (wiśniewski, 2015). with defence expenditure hovering around a satisfactory 2.2% of gdp there is little doubt that türkiye’s position in the international arms market is set to rise and with this rise will come economic growth and important sectoral reforms across the turkish economy. it has indeed been indicated elsewhere thattürkiye’s growing involvement in the international arms market will warrant a pocket of exports. coupled with strong performing strategic firms this is sure to accelerate economic growth in tandem with deft industrial policy reform. additionally, it remains to be seen how the brics correspond totürkiye’s current development strategy. should, on the one hand, the turkish defence sector be able to wrestle in one of these nations then its defence aspirations will be aligned with the rest of its aspirations. alternatively, if these powers oppose greater turkish involvement in the arms market then it may find itself entrapped in a new defence dependency, albeit a different one. melek adsiz 9 thus the future for the turkish economy is one awash with opportunity and peril, necessitating a deft comprehension of the current world in which it operates. 8.1. contribution to industrialization turkish defence policy explicitly highlights the requirement for extensive industrial cooperation to accompany foreign acquisition of weapon systems. it is also noted that, at least officially, “making as much of a system, where design installations and integration work is concerned, intürkiye, and producing the components to a greatest extent through local defence industry, followed by assembling the system with local capabilities” are requirements for weapons technology acquisitions intürkiye (wiśniewski, 2015). however, the turkish defence policy, until recently, could not provide a viable strategy to advance the indigenous defence industry. the reasons for the insufficiently developed indigenous defence industry intürkiye have been highlighted in the earlier sections. at present, alongside the threats, new opportunities are appearing with respect to the main forces affecting the advancement of the turkish defence industry. (demir, 2020) table 1. selected turkish defence exports to european countries, 2019–present source: military balance+, milbalplus.iss.org *first of several contracts. apc = armoured personnel carrier; auv = armoured utility vehicle; cisr = combat, intelligence, surveillance and reconnaissance; sp = selfpropelled; ppv = protected patrol vehicle; uav = uninhabited aerial vehicle table 1 highlights türkiye's selected defence exports to a number of countries in europe since 2019, marking the growing country presence within the regional defence market. the data demonstrate a wide diversification of the type of defence equipment exported, ranging from unmanned aerial vehicles (uavs) such as the bayraktar tb2 to armoured vehicles (e.g., ejder yalçın, cobra ii), artillery systems (e.g., the boran howitzer), and naval ships such as corvettes and replenishment ships. an analyti̇cal assessment of the turki̇sh defense industry and its economi̇c impli̇cati̇ons 10 of these, the bayraktar tb2 uav has been a flagship export, acquired by various european nations like poland, romania, albania, and kosovo. this indicates increasing worldwide interest in turkish-produced drone technology. in addition, the inclusion of advanced land and naval systems in export orders shows a shift towards a broader and more advanced range of defence products. these steps reinforce türkiye's growing role as a competitive european defence industry supplier, supported by its focus on building domestic output capabilities and technology development. furthermore, the rising number of european beneficiaries also further signal upgraded defence collaboration between türkiye and some of the nato and eu member countries. (waldwyn, 2025) in recent years, a significantly more favourable domestic environment for the defence industry has gradually emerged. there has been a significant expansion in the size of the armed forces and the number of frames within its responsibility. turkish firms have qualified the industry to undertake larger system responsibilities. with respect to exports, within a relatively short period of time, the turkish defence industry succeeded in substantially increasing arms exports from a couple of hundred million dollars annually to a level where the exports exceed one billion dollars. the development of the turkish defence industry and the prospects in this regard are at least very rare in the contemporary arms industry context. at least for the time being, or until 2030, the turkish defence industry possesses a subjective opportunity to expand into defence production, which is relatively easily sellable, through a development strategy aiming at the export of the smaller systems and subsystems, provided that the internal constraints and eventual threats do not block this opportunity.türkiye’s possession of these opportunities, in terms of their timing and specification, is rare in the contemporary international arms industry context. 8.2. strengths and limitations türkiye’s defence policy strongly relies on the military-industrial sector. this defence policy forges far-reaching linkages between foreign policy and the defence industry. defensive policy appears on the one hand as ensuring external security and on other hand as the development of defence sector.türkiye’s geopolitical position has affected its perception of external threats. the establishment of a well-developed military industrial enterprise is being perceived as a very important component of strategic independence. in evaluating threats to security, special attention is put on internal threats to stability. a prediction is made that in the current decade the prevention of internal threats to security will be paramount in national defence policy. the defence industry has long been at the centre of türkiye’s security. the achievement of full autonomy in the procurement of large-scale armaments and the establishment of a well-developed military-industrial enterprise appear to be the most important components of strategic independence. however, the arms embargo imposed ontürkiye has exposed limitations in producing advanced weapons systems independently. domestic production options were virtually exhausted, andtürkiye was left with only one alternative: foreign suppliers. melek adsiz 11 anti-americanism in turkish political circles was cyclical, and the defence industry faced a formidable task to mitigate damage caused by hostile perceptions. problematization of dependence on external sources for security ledtürkiye to attempt to maximize the national capability of self-reliance. a period of extensive military cooperation began in 1950. the main purpose of nato membership and military co-operation was to deter aggression. the requirement for extensive industrial cooperation to accompany foreign acquisition of weapon systems is an important feature of official turkish policy. turkish defense industry is looking to establish regional arms industry co-operation within the region, as a part of the current export drive strategy. the future development of the turkish defense industry perhaps has two major threats, which are associated with its two main drivers of growth export demand and domestic demand. the outlook for the turkish economy over the next few years seems to be uncertain. a critical assessment of the internal drivers proves that the turkish economic trends could significantly affect the defence sector in the next five years. the defence industry has to deal with the economic status which is unfavorable regarding local demand. 8.3. impact on research, development, and technological advancement military science and technology research, development and technological advancement. the defence sector has also accomplished successful designs in the field of harnessing defence industry tools with an open system approach, achieving substantial technological know-how and capability transfer in partnership with defence industry companies and institutions. academic institutions working on defence matters have made breakthroughs in projects on modelling and simulating advanced avionics, radar, simulation of missiles, helicopter flight dynamics, civilian aviation aspects and fire control systems. in all of these, the defence industries and their institutional partners with extensive experience in relevant fields had substantial support to accelerate indigenous capabilities before realistic engagements with national security concerns. (yenturk, 2014, p. 4) design and development work is carried out with professional competence for defence system representation and simulation. defence industries focused centre design contractors for modelling and simulation are supporting the adaptation of these tools according to the requirements of the recent projects. (tübitak sage) besides the defence industries, some government agencies also engage in designing and developing diverse training and mission rehearsal simulation products in hardware and software. aboriginal academic organizations have been able to deliver projects. design and development of an integrated flight simulator for a modern trainer aircraft have been achieved. air combat simulation capabilities' aircraft model and mission locations have been enhanced. there has been some advancement in the software and content areas of 3d scene generation and management. the simulator is now integrated fully with the aircraft model created at one of the original software companies leading to a homogeneous scene management and model compatibility. both companies have similar successful histories in training the customers with reliable information and with much experience of continuously running develop-and-fix scenario for training. an analyti̇cal assessment of the turki̇sh defense industry and its economi̇c impli̇cati̇ons 12 the development of an open systems architecture avitors training environment is achieved. it is foreseen that this environment shall become modelling and simulation capabilities’ centre with reliable and controllable engine for dynamic mission rehearsals and robust system training for civil aviation ground handling systems. to sustain effectiveness in the field of operation, advanced simulation and modelling tools are being evaluated. the system will provide high-fidelity representations of the operating environment for both the physical and text simulation domains. 8.4. effects on economic stability the turkish defence industry that has begun to be shaped with the turkish importation of armoured amphibious assault vehicles from the us in 1975, has gone through a tremendous development process from the assemblage based period on foreign sub-systems at the beginning, to the manufacture and generation of an independent defence technology true to the national assets. since the late 1980’s, the turkish defence industry has been on its way to defence self-sufficiency, with the full understanding of the economic and strategic needs of the new millennium. defence technology has begun to be regarded essential for achieving the technological level required for the independence of the nation’s technological infrastructures, as well as for improving the economic efficiency of the concentration of resources on the national priorities. in this regard, the defence technology transfer policy coupled with the establishment of a defence technology oriented infrastructure was paved the way for the defence sector to flourish through both fostering defence expenditure and lengthy offset contracts on production and technology transfer of a wide variety of defence sub-systems. the establishment of a technology oriented defence industry has been considered crucial in the sense that it would enable indigenous high-technology manufacture, as well as the much needed technology generation capability (wiśniewski, 2015).türkiye’s defence industry has been one of the rare sectors to have continuously expanded in production and capability since the late 1990s. built on shaky ground through decades of assembly contracts and technology transfer agreements, during the late 1970s and early 1980s, the self sufficiency rate has improved with exports acquisitions having risen to usd 1 billion in this period. (kopits, 1987) however, as the geopolitics surroundingtürkiye rapidly change, and economic pressures increase, the country’s defence procurement landscape is forced to be reshaped. the requirement for extensive industrial cooperation to accompany foreign acquisition of weapon systems is an important feature of official turkish policy. the turkish defence industries are still state-owned (although in accordance with the majority of other sectors, some companies such as tai or aselsan have been listed among publicly-traded turkish companies). defence equipment manufacturing is the most technology-intensive type of production intürkiye after automotive, with the highly qualified workforce, which can engage in the international supply chain of most types of aerospace and military electronics projects. there are three processes by which defence industries are created: (1) indigenous design and manufacture of simple systems only, (2) importation of capital melek adsiz 13 systems and equipment for licensed manufacture of same, and (3) transfer of advisory licences for production techniques, upgrades, modular and refurbishment services. nevertheless, defence industrialisation could be counted as successful only if it is accompanied by efforts at the establishment of a national defence technology base. in this regard, turkish experience differed markedly from the typical pattern of military-industrial evolution among other newly industrialising countries. the record of defence industrialisation in türkiye evolved through a much less gradual process. 9. conclusion internationally, turkish defence industry will have stringent competition in gaining access to third-country markets. however, the potential is extremely high for turkey to develop an efficient export development strategy. the defence market is becoming multipolar with a shifting interest from the north to the south with high dynamism. emerging new defence expenditure patterns are seen, and sophisticated defence products and defence systems with roots in complex technologies are being purchased, particularly by countries with rapidly growing economies. even though türkiyes top defence industry manufacturers make not perhaps produce a great number of excellent international products annually, the success in the development of the defence industry will indeed give positive contributions to national security and defence. the turkish defence industry is thoroughly integrated into the democratisation and normalisation process of social and economic life, national unity has finally been achieved, and an independent foreign policy formation. but what will be needed in the longer term is a transition from a narrowly defined, state-centered defence effort to competition on the home and foreign market, which is tied to the promotion of entrepreneurial behavior, the growth of civilian control, and a change of style towards defence policy. without this transition, there is an increasing risk that the ability to establish a base of producers of advanced defence products will be lost and economic and societal costs associated with huge imports of weapons and equipment will be incurred instead. if defence exports and foreign participation by indigenous companies in defence programs abroad are made mandatory to the defence industry sector as some political goal, then this may lead to greater insularity of the defence sector and along with it ultimately to the limitation of its growth over the long run. the destiny of the defence sector and militarytechnical cooperation significantly relies on the geopolitics and geoeconomics situation under which the turkish republic has developed its defence and military policy. the strength of the turkish defence industry relative to other "emerging" ones stems from the acquisition by national enterprises of major licences for the manufacturing of advanced armament systems. references 1. donaldson, p. (2013). defence innovations from türkiye. military technology, no. 5. 2. deger, s. (1986). economic development and defense expenditure. economic development and cultural change, 35(1), 179–196. 3. geopolitical monitor. (n.d.). türkiye’s defense industry emerges as a global player. retrieved april 13, 2024, from https://www.geopoliticalmonitor.com/turkiyes-defenseindustry-emerges-as-a-global-player/ an analyti̇cal assessment of the turki̇sh defense industry and its economi̇c impli̇cati̇ons 14 4. international institute for strategic studies (iiss). (n.d.). the military balance. retrieved april 13, 2024, from https://www.iiss.org/publications/the-military-balance/ 5. invest in türkiye. (n.d.). defense & aerospace industry report. retrieved april 13, 2024, from https://www.invest.gov.tr/en/library/publications/lists/investpublications/defenseaerospace-industry.pdf 6. kenez, g. (2024). türkiye’nin savunma harcamaları ve ekonomik etkileri. imf finance & development journal, 24(3). retrieved from https://www.elibrary.imf.org/view/journals/022/0024/003/article-a003-en.xml 7. nordic monitor. (2024). türkiye falls short of nato standards in $33.7 billion defense budget despite record increase. retrieved april 13, 2024, from https://nordicmonitor.com/2024/12/türkiye-falls-short-of-nato-standards-in-33-7-billiondefense-budget-despite-record-increase/ 8. sage. (n.d.). who we are. tübi̇tak. retrieved april 13, 2024, from https://www.sage.tubitak.gov.tr/en/who-we-are/ 9. sasad. (2022). 2021 performans raporu. retrieved april 13, 2024, from https://www.sasad.org.tr/uploaded/sasadperformans-raporu-2021.pdf 10. savunmasanayi.org. (n.d.). roketsan’ın kritik sistemlerde yurt dışına bağımlılığı neredeyse kalmadı. retrieved april 13, 2024, from https://www.savunmasanayi.org/roketsanin-kritik-sistemlerde-yurt-disina-bagimliligineredeyse-kalmadi/ 11. saygılı, z. (2022). savunma sanayi ve savunma harcamalarının ekonomik büyüme üzerine etkisi: türkiye örneği (2002-2019). altınbaş üniversitesi lisansüstü eğitim enstitüsü, doktora tezi. 12. ssb (cumhurbaşkanlığı savunma sanayi başkanlığı). (n.d.). 2018–2022 savunma sanayi sektörel strateji dökümanı. 13. turkish armed forces (tsk). (n.d.). retrieved april 13, 2024, from https://www.tsk.tr/ 14. üçler, g. (2017). türkiye’de savunma harcamaları ve işsizlik oranları: 1980–2014 dönemi için ekonometrik bir analiz. journal of yaşar university, 12(46). 15. uzun, a. d. (2007). savunma sanayi ve yeni yapılanmalar (yayımlanmamış yüksek lisans tezi). i̇nönü üniversitesi, sosyal bilimler enstitüsü, malatya. 16. waldwyn, t. (2025). türkiye’s defence industry charts a course for european growth. retrieved april 13, 2024, from https://www.iiss.org/online-analysis/militarybalance/2025/01/turkiyes-defence-industry-charts-a-course-for-european-growth/ 17. wiśniewski, r. (2015). military-industrial aspects of turkish defence policy. 18. yentürk, n. (2014). measuring turkish military expenditure. sipri insights on peace and security, no. 1. 19. yılmaztürk, a. (2023). türkiye’de savunma sanayi sektörü ve ekonomi üzerindeki etkisinin değerlendirilmesi. journal of enderun, 7(2). e-issn: 2618-592x. 20. sipri. (n.d.). türkiye’s defense expenditure and gdp share (2013–2023). retrieved april 13, 2024, from https://www.sipri.org/ 21. zi̇ylan, a. (2004). ulusal teknoloji yeteneği ve savunma sanayi. ankara: savunma sanayicileri derneği yayını. https://www.sipri.org/ agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 18, no. 2 (2024), pp. 218-244 218 how does the (de)centrali̇zati̇on of secondary educati̇on affect i̇ndi̇vi̇dual i̇nnovati̇veness? evi̇dence from azerbai̇jan e. nuralizade ehtiman nuralizade doctoral school of public administration sciences, national university of public service, budapest, hungary. https://orcid.org/0009-0005-3822-3685, e-mail: nuralizade.ehtiman@stud.uni-nke.hu abstract: this paper explores the relationship between centralization of decisionmaking in secondary education and individual innovativeness in developing countries, specifically within the context of azerbaijan. the research examines to what level centralized decision-making can hinder or promote individual innovativeness, utilizing secondary data and quantitative analysis. the outcomes of this study, even if a significant difference was not found, indicate the need for a broader lens that considers various factors affecting individual innovativeness. this bears significant implications for politicians, policymakers, and other stakeholders in azerbaijan and other developing countries to reconsider their current form of decision-making structure in educational systems. keywords: centralization, secondary education, individual innovativeness, azerbaijan introducti̇on the education system plays an important role in the overall development of a country. it not only shapes the future of individuals but also influences the economy and society as a whole (hanushek & woessmann, 2015). it is a known fact that education can impact an individual's cognitive abilities, attitudes, and overall well-being (binder, 2013). in recent decades, there has been an increasing interest in the role of innovation in education. innovativeness is the ability to generate and implement new ideas and is seen as a critical driver of economic growth and social development (jukneviciene, 2019). innovation as a desired attribute significantly triggers the development of society, and often challenges norms and inspires new ideas (rogers, 2003). yet, a crucial question arises when innovation encounters centralized decision-making systems. current research delves into this dynamic, focusing on its effect on people's innovative capacities. particularly, i assume that individuals educated under a centralized system may demonstrate lower levels of innovativeness than their counterparts from decentralized educational structures. to test this hypothesis, we need to explore how creativity, problem-solving skills, and ultimately innovation were influenced within certain educational contexts due to centralized decisions (tarman, 2016). this research underscores the urgent need to scrutinize whether top-down policy formulations stifle creativity in contrast to bottom-up structures. both of these frameworks are prevalent worldwide, and assessing their effect on innovation will yield significant insights https://orcid.org/0009-0005-3822-3685 mailto:nuralizade.ehtiman@stud.uni-nke.hu ehtiman nurali̇zade 219 (caldwell, 2009). many developing countries are under research on this theme due to their significant educational reforms (world bank, 2010). such reforms often involve a transition from centrally-administered to decentralized education administration at different levels (winokur, 2014). to properly evaluate these changes, our inquiry will also touch on the educational background of these developing countries. this exploration involves understanding why certain countries prefer highly-centralized education systems while others adopt more decentralized models. furthermore, this raises a relevant question: which system is more conducive to student success, and is there any correlation between the chosen system and the students' creative capacities? 1. concepts 1.1. individual innovativeness individual innovativeness is defined as “developing, adopting, or implementing an innovation” (yuan & woodman, 2010). rogers (2003) states that “in individual innovativeness theory, there is always new information within the social system and that this new information is processed by adopters”. put simply, innovativeness is the ability to generate and implement new ideas, which is seen as a key driver of economic growth and social development. the question is under what circumstances can this innovation, which encompasses new ideas and knowledge, emerge and serve as a key driver of economic growth and social development? hayek (1945) argues that knowledge is decentralized. in his essay "the use of knowledge in society" hayek (1945) discusses the concept of decentralization of knowledge, which refers to the idea that individuals in a society are better equipped to make decisions and solve problems than a centralized authority. this is because individuals have access to unique and local knowledge that a centralized authority may not have, and they can use this knowledge to make decisions that are better suited to their particular circumstances. studies indicate that various factors contribute to individual innovativeness, including individual traits, cultural norms, resource availability, and institutional environment (scott & vincent-lancrin, 2014). current study will focus on a particularly influential aspect – the centralization of decision-making within educational settings which could potentially stifle or foster innovativeness. analyzing the implications of centralized decision-making on innovativeness can shed light on how best to structure educational institutions to promote individual innovativeness. (rubalcaba, 2022) the focus on secondary education, specifically high schools, in this case study is purposeful for multiple reasons. first, high school is the stage where students begin to develop advanced cognitive and creative skills that are instrumental to individual innovativeness. this period of education often includes exposure to a wider range of subjects and more complex problem-solving activities, fostering critical thinking and creativity. secondly, secondary education is the final compulsory stage of schooling in many countries, including azerbaijan. therefore, it represents the educational experiences of most individuals in the population, providing a more generalized perspective on the effects of the education system. lastly, the centralization of decision-making is particularly salient in secondary education where curriculum, teaching methodologies, and assessment strategies are often dictated by a central authority. thus, high schools provide an excellent unit of analysis to study the impact of centralized decision-making on individual innovativeness (hofman et al., 2013). how does the (de)centrali̇zati̇on of secondary educati̇on affect i̇ndi̇vi̇dual i̇nnovati̇veness? evi̇dence from azerbai̇jan 220 1.2. centralization of decision-making in education one of the well-known principles of the modern administrative system is centralization. simply, centralization is the concentration of power and authority in one center. according to white (1965, p.41), centralization is “the process of transfer of administrative authority from a lower level to a higher level of government is called centralization”. the concept of decision making is the major element of centralization. it is very important to define who has authority to make decisions in the administrative system. it is the process by which choices are made to change (or leave unchanged) an existing situation and to choose the most appropriate course of action to achieve the desired goal while minimizing risk and uncertainty to the extent possible. (carvalho, 2013) in this modern and rapidly changing world, education has evolved beyond the mere imparting of knowledge on specific subjects or skills. the focus now lies on cultivating students' abilities and knowledge to prepare them for success in their future lives (hendarman & cantner, 2018). however, with an ever-growing population, providing high-quality education to every individual presents a significant challenge. a crucial issue among these challenges is related to the decision-making process employed in the education system (caldwell, 2009). the decision-making process within the educational sector can either be centralized or decentralized, depending on who holds power over it. many centralized countries across the globe, particularly developing countries face centralization-related obstacles throughout its decision-making procedures (hawkins, 2000). analyzing this relationship's dynamics provides valuable insights into countries grappling with similar dilemmas concerning educational matters that require critical decisions. it is essential that we delve deep into this matter because centralizing control over pivotal aspects of education may streamline processes but also stifle innovation and creativity emanating from both individual learners as well as educators (caldwell, 2009). the standard method for making decisions in education has long been the top-down approach (moe, 2003). nevertheless, this style of decision-making has elicited criticism due to its negative impact on creativity and critical thinking within the educational system. relying exclusively on a top-down approach can limit the progression of a well-rounded education system (mok, 2004). one crucial component that is often disregarded in top-down decisionmaking is student involvement. when teachers and administrators neglect the voices and opinions of students, they forfeit important insights into what works best for individual learners (yilmaz et al., 2014). ultimately this lack of consideration toward students stifles their creative expression while hindering their capacity to think critically. moreover, when decisions are made from just one perspective without considering diverse viewpoints or alternative ideas, there remains little space for innovation or experimentation with new methods or techniques. as a result, this restrains not only student creativity but also teacher ingenuity as they may feel restricted by strict guidelines imposed by the administration. to create an effective education system that stimulates growth across all areas including creativity and critical thinking educators must embrace more comprehensive approaches to decision-making that value diversity of thought inside classrooms as well as outside them (amalia et al., 2020). ehtiman nurali̇zade 221 1.3. (de)centralization and individual innovativeness the form of decision-making in education has its upsides like better efficiency, consistency, equity of outcomes, streamlined processes and more opportunities for collaboration among stakeholders. however, it also carries potential drawbacks such as reduced flexibility to respond to local needs, loss of local autonomy, increased bureaucracy and an augmented chance for the misuse of power. (nurakhir, 2021) this research scrutinizes the impact that centralizing decisions can have on two primary areas – improved equity of outcomes and streamlined procedures. however, before delving into these topics we need to grasp how centralization influences internal functioning; whether positively or negatively depending on multiple factors mentioned above. this study contends that while certain aspects may improve through centralization initiatives in the right decision-making structure such as streamlining procedures or boosting equity proper planning must take place beforehand if these improvements are going to outweigh any negative externalities caused by them over time such as lost local autonomy (welsh & mcginn, 1999). centralization offers significant benefits, one of them is amplified efficiency that results from having a distinct chain of command. (bray, 1999) this ensures everyone knows who is in charge of making decisions, which simplifies communication across departments and mitigates the possibility of errors or misunderstandings. another key advantage to centralization is consistency. all choices are made using the same set of criteria leading to an approach that's more standardized. notably, collaboration becomes more productive when decision-making power resides in one place since it promotes teamwork among employees with shared objectives. caldwell argues that centralizing decision-making may enhance efficiency, consistency, and collaboration" (2009). providing clarity on roles and responsibilities within an organization's hierarchy through centralized-decision-making policies can help people see how their contributions fit into overall objectives while also promoting synergy between teams working towards shared goals. in sum, centralizing decision-making not only leads to better communication but also promotes trust among team stakeholders by ensuring transparency in organizational operations ultimately resulting in higher-quality work output and greater satisfaction levels among stakeholders. organizations may suffer significant drawbacks when decision-making is centralized. one downside is the loss of local autonomy which can lead to decreased creativity and innovation at lower levels. central decision-making leaves lower-level employees feeling disconnected from their work, resulting in reduced morale and productivity (nurakhir, 2021). moreover, centralization restricts flexibility as it neglects regional differences or changes in circumstances that require unique solutions. this rigidity causes suboptimal outcomes when enforcing universal policies across varying geographical regions or situations. ultimately, there's a risk of power misuse by those who possess decision-making authority; centralizing power offers little oversight on how decisions are executed at lower levels where actual implementation takes place. given these negative consequences for organizational performance and dynamics, leaders must explore alternatives that balance centralized directives with devolved responsibilities concerning planning, budgeting, and staffing among others depending on specific organizational needs (bray, 1999). the centralization of decision-making could lead to streamlined procedures while improving the equity of outcomes. this is because when decisions are made by a centralized how does the (de)centrali̇zati̇on of secondary educati̇on affect i̇ndi̇vi̇dual i̇nnovati̇veness? evi̇dence from azerbai̇jan 222 body, they're consistent across the organization, creating uniformity in rules and regulations for everyone. however, on the other hand, such an unvarying organizational structure could stifle innovation at lower levels of management. to support this assertion further, caldwell (2009) defended that centralized decision-making can be essential for some functions that require tight control or coordination, but it also may restrict employees' discretion. thus while there may be advantages to centralizing decision-making in specific situations, weighing them against likely downsides becomes mandatory. let us consider an illustration where a retail chain decides to hoard its purchasing decisions for all stores nationwide. while this would result in more consistent pricing and inventory levels across locations thereby improving equity of results it could as well hinder each store's ability to cater quickly enough to local customer needs or preferences, which ultimately reduces overall efficiency. therefore, organizations must critically evaluate potential benefits before implementing any centralized decision-making structure. in conclusion, evaluating the impact of centralizing decisionmaking requires carefully weighing out pros against cons since rushing into such structures without giving due consideration might end up curtailing employee discretion even though doing such might be essential for achieving strict controls over corporate operations, as highlighted by caldwell (2009). to draw to a close, the form of structure in education may offer numerous advantages and disadvantages. it's crucial to weigh both sides before deciding whether or not your organization should adopt centralization policies. evaluate how much autonomy you're willing to sacrifice when considering the impact on streamlining processes and improving equity of outcomes. ultimately institutions need to make sure any decisions made relating to centralization align with their mission and values because there are bound to be tradeoffs involved during this process. careful consideration will allow institutions more effective methods that result in better overall effectiveness levels within their organizations. literature review indicates that centralization in decision-making processes plays a crucial role in shaping individual innovativeness within the educational sphere, with both direct and indirect factors contributing to its impact. direct factors (table 1), such as curriculum development, teacher training, assessment and evaluation, may have a more immediate influence on the design and delivery of educational content, thereby directly affecting the innovative capabilities of students (stevenson & baker, 1991). table 1. centralization vs individual innovativeness form of centralization description effect on individual innovativeness direct effects centralization of curriculum development a centralized curriculum means that decisions about what is taught are made by a single authority, usually the government or a national organization. this may limit teachers' and students' ability to adapt and innovate based on local needs or unique situations, as they are required to follow a standardized curriculum. centralization of teacher training teacher training is directed by a central authority, with uniform standards and methods applied to all teachers in the system. with standardized training methods, teachers may have limited exposure to diverse teaching styles or innovative practices, ehtiman nurali̇zade 223 reducing their potential for innovation in the classroom. centralization of assessment and evaluation a centralized authority designs and implements standardized assessments and evaluations for teachers and students, which may include testing, grading, and performance reviews. this may discourage individual innovativeness, as teachers and students might focus on meeting standardized criteria rather than exploring new and creative ways of learning and teaching. indirect effects centralization of resource allocation a centralized authority determines how resources, such as funding, materials, and personnel, are allocated to schools and districts. centralized resource allocation may limit the flexibility for individual schools and teachers to pursue innovative projects or ideas, as they must rely on the centralized authority for resources. centralization of policy and regulation centralized policies and regulations are established by a single authority that all schools and districts must adhere to. strict adherence to centralized policies and regulations may hinder innovation by discouraging experimentation and the development of localized solutions to unique challenges. centralization of parents and community involvement a central authority oversees and directs the extent and nature of parents' and community members' involvement in schools. by limiting the autonomy of local communities and parents, this centralization can hinder the exchange of diverse ideas and grassroots innovation that could otherwise benefit schools and students. source: author’s own completion. in contrast, indirect factors (table 1), including resource allocation, policy and regulation, as well as parents and community involvement, may not have an immediate bearing on individual innovativeness but still hold a significant effect on the overall educational environment, indirectly on individual innovativeness (ragmoun & alfalih, 2021). a full understanding of this process is essential to fostering a more innovative and adaptable educational landscape, which can, in turn, enable dynamic teaching and learning experiences for all involved (model 1). figure 1. (de)centralization and individual innovativeness source: author’s own creation centralization individual innovativeness directly indirectly curriculum development teacher training assessment and evaluation resource allocation policy and regulation community involvement how does the (de)centrali̇zati̇on of secondary educati̇on affect i̇ndi̇vi̇dual i̇nnovati̇veness? evi̇dence from azerbai̇jan 224 2. literature review how (de)centralization in education affects individual innovativeness innovation in education systems cannot always be achieved through centralized decision-making. instead, as amalia et al. (2020) point out, this style of leadership structure may pose a significant obstacle to those who seek to innovate and expand their horizons within their respective fields. the rigidity inherent in centralized decision-making limits opportunities for experimentation or exploration by creative thinkers seeking fresh solutions to complex problems. decentralized approaches offer a more effective framework for fostering innovation among educators. by empowering teachers with autonomy and agency over curriculum development and implementation, administrators encourage them to experiment with new methodologies that can enhance student outcomes while remaining true to their areas of expertise. in essence, educational leaders must recognize the crucial importance of cultivating an environment where creativity flourishes without fear of retribution from central authority figures. only then will teachers and students alike have greater opportunities for learning while pushing our education system forward toward greater effectiveness and success as a whole. in today's world, education systems are trending toward decentralization. the reason for this shift is rooted in the belief that it can lead to better educational outcomes and promote innovation at an individual level. that’s why many developed countries have joined this trend by implementing various policies aimed at granting schools more autonomy in their decisionmaking processes (payne, 2008). research indicates that such decentralization can indeed have a positive impact on innovativeness levels among individuals. a study conducted by pollock (2008) found that decentralized school management positively influences teachers' innovative behavior. this discovery should not come as a surprise since people tend to take ownership of their responsibilities when given more authority over their work environment, making them more likely to experiment with new ideas. however, some experts caution against embracing this change too quickly without weighing its consequences fully. critics argue that there may be downsides to education system decentralization, too such as disparities between regions or schools within countrieswhich could harm students' learning outcomes overall (fiske, 1996). therefore, policymakers must be careful not to tip the scale too far in either direction when considering these changes. they need to balance centralized power enough so all students receive a quality education while still providing decentralized autonomy for schools where experimentation might be beneficial. the research concludes that educational decentralization promotes innovativeness amongst teachers and individuals alike; however, policymakers must consider all implications before implementing any significant changes because they can have both positive and negative effects on society as a whole if not done correctly (brown & mcintyre, 1981). additionally, studies such as winokur (2014) indicate that centralization of decisionmaking in education can have a positive impact on individual innovativeness if they consider innovativeness as an important element in the curriculum, but it is not the sole determinant. other factors, such as adequate resources and support for teachers, also play a crucial role in fostering innovation in the education sector. if the necessary conditions are met, centralization of decision-making in the education system may enhance individual innovativeness among ehtiman nurali̇zade 225 students (winokur, 2014). however, more research is needed to understand the underlying mechanisms and the potential limitations of this approach. 3. data and research methodology 3.1. research question and hypothesis the main aim of this study is to investigate the relationship between the centralization of decision-making in the education system and the level of individual innovativeness, with a specific focus on azerbaijan. this research has the potential to contribute to our understanding of how educational systems can foster or hinder individual innovativeness. by examining the case of azerbaijan, this research can provide insights into how centralized decision-making in education affects individual innovativeness in a specific context (guliyev, 2016). the findings of this research have implications for educational policy and practice, as well as for our understanding of the relationship between educational systems and individual innovativeness more broadly. the main research question of the study is as follows: how does the centralization of decision-making in secondary education affect the level of individual innovativeness? in the study, i hypothesize that: h: individuals who have received education in a system with centralized decisionmaking will have lower levels of innovativeness compared to those who have received education in a system with more decentralized decision-making. through this study, i hope to contribute to the ongoing debate on the role of education in fostering individual innovativeness. by providing empirical evidence on the relationship between the centralization of decision-making in education and individual innovativeness, this research can inform discussions on how educational systems can best support the development of innovative individuals (goldsmith & foxall, 2003). ultimately, this research aims to provide insights that can help improve educational systems and support the development of innovative individuals. briefly, this study has two main ambitions. the first is to test the proposed hypothesis, while the second is to generate new hypotheses that can guide subsequent exploration of this topic. 3.2. case selection the unit of analysis in the case is high schools (public and private) in terms of individual innovativeness. the population of the case mainly covers azerbaijan, but also this case can be applied as an example for former soviet member countries and other developing countries in which similar situation are experienced. the case to explain the effectiveness of centralization of decision-making in education system is azerbaijan as a developing country. if we consider that it has gained its independence since 1991 and had a transition period from the soviet management system to the education system, it will be useful to investigate the centralization of decision-making in the education system and its effectiveness in terms of individual innovativeness in azerbaijan during its independence (1991-2022). the other factor which makes this case unique is baku, the capital city of azerbaijan remains the only capital city in the council of europe area with no directly elected governance (’’council of europe”, 2021). baku is not the only city in azerbaijan that experiences this, but how does the (de)centrali̇zati̇on of secondary educati̇on affect i̇ndi̇vi̇dual i̇nnovati̇veness? evi̇dence from azerbai̇jan 226 also other big cities of azerbaijan remain the same. in azerbaijan, only small areas like villages and settlements have municipalities and directly elected officials but they have no competences to intervene any issue of local education. this also demonstrates that there is no possibility for decision-making in education at local government level. there is a centralized education system in this case which makes it specific enough to be investigated. in terms of innovation, azerbaijan holds the 93rd position among the 132 economies featured in the global innovation index (gii) 2022, reflecting a need for improvement in fostering a culture of innovation within the nation. interestingly, the country performs better in innovation inputs (79th) than innovation outputs (110th), although both rankings have seen a decline since 2021 and 2020. this disparity suggests that while resources and infrastructures for innovation are present, the country is facing challenges in translating these inputs into tangible results. as azerbaijan seeks to strengthen its position in the gii, it becomes essential to harness individual innovativeness and inspire a national mindset that encourages creativity and risk-taking to boost the translation of innovation inputs into successful outputs (table 2). table 2. world intellectual property organization, 2022 the focus on secondary education, specifically high schools, in this case study is purposeful for multiple reasons. first, high school is the stage where students begin to develop advanced cognitive and creative skills that are instrumental to individual innovativeness. this period of education often includes exposure to a wider range of subjects and more complex problem-solving activities, fostering critical thinking and creativity. secondly, secondary education is the final compulsory stage of schooling in many countries, including azerbaijan. therefore, it represents the educational experiences of most individuals in the population, providing a more generalized perspective on the effects of the education system. lastly, the centralization of decision-making is particularly salient in secondary education where curriculum, teaching methodologies, and assessment strategies are often dictated by a central authority. thus, high schools provide an excellent unit of analysis to study the impact of centralized decision-making on individual innovativeness. regardless of the result, whether centralization of decision-making in the education system negatively affects individual innovativeness or not, it is worth investigating the case of high schools in azerbaijan. briefly, the case will help us to observe a proper example of a highly centralized system looking to improve its contribution to innovativeness. 3.3. data collection and variables this data is the result of a survey on innovativeness and entrepreneurship potential among high school students in azerbaijan (gasimov et al., 2021). it is an unpublished dataset that is being used as secondary data. dataset includes high school students selected from private and public schools. gasimov et al. (2021) have been cautious while choosing public schools to ehtiman nurali̇zade 227 maintain public-private balance in quality of staff and target audience. such homogeneity is required to reveal actual difference due to (de)centralization. individual innovativeness index (iii) is a scale developed by hurt, joseph and cook (1977) to evaluate how innovative people generally are.the original model of the scale contains 20 statements (annex 1) that describe the features of people in five different classes, from highly innovative to very traditional. each statement related to individual innovativeness was initially scored using a 7-point likert scale, from "strongly disagree" to "strongly agree". the final version of the scale uses a 5-point likert scale. there are 12 positive (1, 2, 3, 5, 8, 9, 11, 12, 14, 16, 18, 19) statements and 8 negative (4, 6, 7, 10, 13, 15, 17, 20) statements in the scale. the innovativeness score is determined by adding 42 points to the difference between the total positive and negative scores. the lowest possible score is 14, and the highest is 94. it is calculated as follows: 1. calculate sum of numbers for positions 4, 6, 7, 10, 13, 15, 17, and 20. 2. calculate sum of numbers for positions 1, 2, 3, 5, 8, 9, 11, 12, 14, 16, 18, and 19. 3. use the following formula to find ii: ii = 42 + total sum from stage 2 total sum from stage 1 individuals can be classified according to their innovativeness on the basis of their scores. they can be considered as "innovators" if their ii score is above 80, "early adopters" if the ii score is between 69 and 80, "early majority" if the ii score is between 57 and 68, "late majority" if the ii score is between 46 and 56, and "laggards/traditionalists" if the ii score is below 46. these scores can also be used to provide an overall evaluation of a person's level of innovativeness. in general, individuals who score above 68 are considered as highly innovative, whereas those who score below 64 are considered as low in innovativeness. (hurt, joseph & cook, 1977) table 3. summary of data variable name abbreviation meaning measure source individual innovativeness (ii) index score_all it is a scale to evaluate how innovative people (students) generally are. continuous own calculation ii index of public school students scorec it represents the ii index of students from centralized public schools. continuous own calculation ii index of private school students scored it represents the ii index of students from decentralized private schools. continuous own calculation type of schools (public or private) school_type it represents the type of schools either it is public or private. nominal survey all schools (public and private) school_all it represents both centralized public schools and decentralized private schools. nominal survey public schools schoolc it represents centralized public schools. nominal survey private schools schoold it represents decentralized private schools. nominal survey gender gender_all it represents the gender of students from both public and private schools. nominal survey family income income_all it represents the family income of students from both public and private schools. ordinal survey family business business_all it represents whether families of students have a business or not. nominal survey how does the (de)centrali̇zati̇on of secondary educati̇on affect i̇ndi̇vi̇dual i̇nnovati̇veness? evi̇dence from azerbai̇jan 228 3.4. data analysis in the process of data analysis, quantitative methods were employed to assess the research outcomes. a) one-way analysis of variance (anova) anova was utilized to assess the variations between and within different school groups. the dependent variables "scorec" and "scored" denoting centralized public schools and decentralized private schools respectively were investigated. the results of the anova test displayed key statistics such as the sum of squares, degrees of freedom (df), mean square, f-value, and significance (sig.). the f-value, a statistic used to interpret the significance of the group differences, and the significance value, which shows the statistical validity of these differences, were particularly instrumental in the analysis. there are the mean differences between different pairs of schools using a tukey hsd post-hoc test. this test is useful in comparing all possible pairs of means to understand significant differences between group means after conducting an anova. these tables present statistics such as mean differences, standard error, significance, and 95% confidence intervals for each pair of schools, which were analyzed to understand the relative performance of the schools. by observing these quantitative measures, the significance level of the results, and comparing this with the conventional threshold of 0.05, an understanding of the statistical significance of the differences between the school groups was derived. this led to the conclusion that while most schools performed at similar levels, certain significant outliers existed that require more focused examination. b) multiple regression multiple regression is a statistical method used to analyze the connection between one dependent variable and several independent variables. in this case, this method was used to predict an outcome (innovativeness score of students) based on various predictor variables (such as family business, gender, type of school, and family income). it creates a model to estimate how these variables collectively influence the dependent variable. the method includes assessing the strength of the relationship, measuring how much variability in the outcome can be explained by the predictors, adjusting for the number of predictors, checking the model's overall significance, examining the contribution of each predictor individually, evaluating model assumptions, and diagnosing issues such as multicollinearity (high correlation among predictors). it's a comprehensive process aimed at accurately forecasting the outcome variable using the selected predictors. 4. results the republic of azerbaijan sees education as a strategic priority and the constitution guarantees the right of all citizens to education. the state plays a significant role in controlling the education system, setting minimum educational standards, and providing free compulsory secondary education. all decision-making processes for secondary education take place at the central level mainly by the ministry of education in azerbaijan. this body is responsible for setting educational standards and curriculum, managing teacher training, and regulating the establishment and operations of schools. this centralized system allows for a unified ehtiman nurali̇zade 229 educational framework across the country but may also present challenges, such as potential lack of local autonomy and flexibility. an example of central decision-making is the government's strategy to realign the country's education system with global standards by improving the quality of skilled workers and providing equal opportunity in education at all levels. as part of the country's national development strategy 2020, the government’s strategy is to extend primary and secondary education to 12 years, making attendance obligatory for students up to the age of 16. the central government's decision-making and policy-making in secondary education highlights the centralization of the education system in azerbaijan (asian development bank, 2015). 4.1. descriptive statistics of variables in the year 2021, an online survey was conducted with the participation of 335 respondents who were all high school students from the capital city of baku (gasimov et al., 2021). those students were studying in the 10th and 11th grades from both public and private schools. however, the distribution of students was somewhat skewed from these schools, with 252 students, or 75.2% of the total, attending public schools, while the remaining 83 students, representing 24.8% of the total, came from private schools (see table 4). table 4. school_type frequency percent valid percent cumulative percent valid public 252 75.2 75.2 75.2 private 83 24.8 24.8 100.0 total 335 100.0 100.0 source: author’s own completion the gender distribution of the respondents is nearly balanced, 183 of the participants, accounting for 54.6% of the total, are males, while females make up the remaining 152 participants, or 45.4% of the total (see table 5). table 5. gender_all frequency percent valid percent cumulative percent valid male 183 54.6 54.6 54.6 female 152 45.4 45.4 100.0 total 335 100.0 100.0 source: author’s own completion table 6 provides a distribution of income levels of families of 335 students. the largest proportion, 36.1%, earn between 0 to 500, while 15.8% earn from 501 to 1000. the next income bracket, 1001 to 2000, constitutes 20.3% of the population. those earning between 2001 to 3000 make up 13.7% of the total, followed by 7.2% earning 3001 to 5000. the smallest group how does the (de)centrali̇zati̇on of secondary educati̇on affect i̇ndi̇vi̇dual i̇nnovati̇veness? evi̇dence from azerbai̇jan 230 is individuals earning over 5000, representing 6.9% of the population. the cumulative percentage column reflects the growing total proportion as each income group is sequentially added, reaching 100% by the final group. table 6. income_all frequency percent valid percent cumulative percent valid 0-500 121 36.1 36.1 36.1 501-1000 53 15.8 15.8 51.9 1001-2000 68 20.3 20.3 72.2 2001-3000 46 13.7 13.7 86.0 3001-5000 24 7.2 7.2 93.1 5000+ 23 6.9 6.9 100.0 total 335 100.0 100.0 source: author’s own completion table 7 shows the distribution of “business_all” which represents whether students' families possess their own business or not. out of a total of 335 students, 119, or 35.5% responded with "yes", while 216, which is 64.5% of the respondents, answered "no". table 7. business_all frequency percent valid percent cumulative percent valid yes 119 35.5 35.5 35.5 no 216 64.5 64.5 100.0 total 335 100.0 100.0 source: author’s own completion 4.2. comparative statistics of public or private schools table 8 provides insights into the key differences between public and private schools. in terms of gender demographics, public schools appear to have a higher proportion of female students compared to private schools. it's also noteworthy that a larger percentage of students attending private schools come from families owning a business and those with higher income brackets. additionally, both school types exhibit some differences in the ii index, but they are relatively close in their mean, median, and standard deviation values. table 8. comparative statistics of public or private schools public private no. of observations 252 83 females (%) 48.8 34.9 ehtiman nurali̇zade 231 family business (%) 25.4 66.3 family income (%) (low [0-500 azn], high [2000+ azn]) 45.6; 16.7 7.2; 61.5 ii index (mean, median, std. dev, [min-max]) 67.57; 68; 9.001 [37-90] 65.06; 65; 8.45 [38-85] source: author’s own completion 4.3. anova the analysis (see table 9) displays the results of the anova test conducted on the dependent variable, scorec, which represents centralized public schools. the test is used to examine the differences between group means and their associated procedures. it is organized into three sections: between groups, within groups, and total. the 'between groups' section represents the variance between different groups, while the 'within groups' section represents the variance within each group. the 'total' section represents the sum of these variances. h0: there is no significant difference between and within public schools. h1: there is a significant difference between and within public schools. based on the table, the variability in the 'scorec' variable is not significantly explained by the group variable, as the p-value (.117) is greater than the commonly used significance level of .05. this suggests that the means across the different groups are not significantly different from each other. the f-value is 1.865, but due to the high p-value, the null hypothesis of equal group means is accepted. table 9. public schools’ group means (anova) scorec sum of squares df mean square f sig. between groups 596.089 4 149.022 1.865 .117 within groups 19737.625 247 79.909 total 20333.714 251 source: author’s own completion table 10 shows the results of the tukey hsd post-hoc test for the dependent variable "scorec", which represents centralized public schools, across five different schools (schoolc 1-5). it indicates that none of the mean differences between the schools' scores reached statistical significance, as indicated by the significance (sig.) values all exceeding the typical threshold of 0.05. for example, the mean score difference between school 1 and school 2 is 2.295 with a sig. of .716, showing no significant difference. this pattern is consistent across all school comparisons. consequently, the conclusion from this data is that there are no statistically significant differences in scorec between the five schools based on this analysis. table 10. public schools’ multiple comparisons dependent variable: scorec tukey hsd how does the (de)centrali̇zati̇on of secondary educati̇on affect i̇ndi̇vi̇dual i̇nnovati̇veness? evi̇dence from azerbai̇jan 232 (i) schoolc (j) schoolc mean difference (i-j) std. error sig. 95% confidence interval lower bound upper bound 1 2 -2.295 1.822 .716 -7.30 2.71 3 2.085 1.527 .650 -2.11 6.28 4 2.089 1.518 .643 -2.08 6.26 5 2.580 2.412 .822 -4.05 9.21 2 1 2.295 1.822 .716 -2.71 7.30 3 4.380 2.001 .187 -1.12 9.88 4 4.384 1.994 .184 -1.10 9.86 5 4.875 2.737 .387 -2.65 12.40 3 1 -2.085 1.527 .650 -6.28 2.11 2 -4.380 2.001 .187 -9.88 1.12 4 .005 1.728 1.000 -4.75 4.75 5 .495 2.550 1.000 -6.51 7.50 4 1 -2.089 1.518 .643 -6.26 2.08 2 -4.384 1.994 .184 -9.86 1.10 3 -.005 1.728 1.000 -4.75 4.75 5 .491 2.544 1.000 -6.50 7.48 5 1 -2.580 2.412 .822 -9.21 4.05 2 -4.875 2.737 .387 -12.40 2.65 3 -.495 2.550 1.000 -7.50 6.51 4 -.491 2.544 1.000 -7.48 6.50 source: author’s own completion table 11 presents the results of an anova (analysis of variance) test conducted on the dependent variable, scored which represents decentralized private schools. h0: there is no significant difference between and within private schools. h1: there is a significant difference between and within private schools. the test shows the difference between the groups is statistically significant. the sum of squares between groups is 1159.478, resulting in a mean square of 165.640, while the within groups sum of squares is 4695.221, with a mean square of 62.603. the f statistic is 2.646, and the significance level (p-value) is .017. because the p-value is less than .05, the null hypothesis is rejected, meaning the differences between the groups are not due to chance, and there are significant differences in scores between the groups. table 11. private schools’ group means scored sum of squares df mean square f sig. between groups 1159.478 7 165.640 2.646 .017 within groups 4695.221 75 62.603 total 5854.699 82 source: author’s own completion the table 18 shows the results of the tukey hsd post-hoc test conducted on the dependent variable, scored, to analyze the mean differences between various public schools (schoold). the majority of pairwise comparisons showed non-significant differences, with pvalues above 0.05. however, one comparison stood out with a statistically significant ehtiman nurali̇zade 233 difference: school 6 had a higher scored compared to school 3 (mean difference = 14.247, p = .009). this suggests that students at school 6 scored significantly higher than students at school 3. all other comparisons did not reveal significant differences in scores across the schools (see annex 3). table 12 displays the results of the anova test conducted on the dependent variable, scoreall which represents both public and private schools. h0: there is no significant difference between and within schools (both public and private). h1: there is a significant difference between and within schools (both public and private). the test shows that the observed f-value is 5.006 with a significance level (p-value) of .026. this means there is a statistically significant difference between the groups being compared, as the p-value is less than the common threshold of 0.05. thus, the alternative hypothesis (h1) is accepted which means there is a difference between groups. the high between-groups sum of squares relative to the within-groups sum of squares further supports this conclusion. briefly, we can see a significant difference between schools. table 12. all schools’ group means scoreall sum of squares df mean square f sig. between groups 393.724 1 393.724 5.006 .026 within groups 26188.413 333 78.644 total 26582.137 334 source: author’s own completion 4.4. multiple regression table 13 is a summary output of a multiple regression analysis, where the dependent variable 'score_all' represents the individual innovativeness score of students and independent variables 'business_all', 'gender_all', 'school_type', and 'income_all' represent accordingly family business, gender, type of the school and family income of students. the model provides a weak fit for the data. the multiple correlation coefficient (r) is low at .146, suggesting a weak correlation between the predicted and observed values of the dependent variable 'score_all'. the coefficient of determination (r square) is .021, indicating that a mere 2.1% of the variability in 'score_all' can be explained by the independent variables 'business_all', 'gender_all', 'school_type', and 'income_all'. the adjusted r square further reduces to .009, pointing towards the potential presence of irrelevant predictors in the model. the standard error of the estimate stands at 8.879, which measures the variability of the predictions, and appears high. on a positive note, the durbin-watson statistic is 1.888, showing no significant autocorrelation in the model, a desirable attribute. however, the overall model's lack of statistical significance is evidenced by the sig. f change value of .129, which exceeds typical significance levels such as .05. hence, based on these results, the model in its current form seems insufficient to accurately predict 'score_all' using the chosen independent variables. how does the (de)centrali̇zati̇on of secondary educati̇on affect i̇ndi̇vi̇dual i̇nnovati̇veness? evi̇dence from azerbai̇jan 234 source: author’s own completion table 14 represents an analysis of variance (anova) for a multiple linear regression model which shows that the set of predictors 'business_all', 'gender_all', 'school_type', and 'income_all' may not significantly predict the dependent variable 'score_all'. the sum of squares for regression, which measures the variation explained by the model, is 566.421, while the residual sum of squares, indicating the variation is quite high at 26015.717. the f statistic, a measure used to determine if the model significantly explains more variance than residuals, is 1.796. however, the p-value, which estimates the likelihood that the observed data could have occurred if there were no relationship between the predictors and dependent variable, is 0.129. this value is greater than the commonly used threshold of 0.05, indicating that we cannot reject the null hypothesis at this significance level. in other words, this set of predictors may not significantly predict the 'score_all' based on these results. table 14. anovaa model sum of squares df mean square f sig. 1 regression 566.421 4 141.605 1.796 .129b residual 26015.717 330 78.836 total 26582.137 334 a. dependent variable: score_all b. predictors: (constant), business_all, gender_all, school_type, income_all source: author’s own completion table 15 presents the results from a multiple regression analysis, focusing on the variable score_all as the outcome. the unstandardized coefficients section provides the change in score_all for each unit increase in the predictor variables. however, none of these predictor variables school_type, gender_all, income_all, and business_all showed a significant association with score_all, as indicated by p-values greater than 0.05 in the sig. column. these p-values reflect the probability that the observed relationships could have occurred by chance. the t-values in the table, calculated as the ratio of departure of an estimated parameter from its notional value to its standard deviation, were used to derive these p-values. comparatively, the standardized coefficients (beta) show the relative importance of each predictor when the variances of dependent and independent variables are standardized to 1. lastly, the collinearity statistics (tolerance and vif) suggest that there is no significant issue table 13. model summaryb model r r square adjusted r square std. error of the estimate change statistics durbinwatson r square change f change df1 df2 sig. f change 1 .146a .021 .009 8.879 .021 1.796 4 330 .129 1.888 a. predictors: (constant), business_all, gender_all, school_type, income_all b. dependent variable: score_all ehtiman nurali̇zade 235 of multicollinearity among the predictor variables, meaning they are not highly correlated with each other. this is further confirmed by the fact that all vif values are below 5, which means there is no serious issue of multicollinearity. table 15. coefficientsa model unstandardized coefficients standardized coefficients t sig. collinearity statistics b std. error beta tolerance vif 1 (constant) 72.880 3.514 20.743 .000 school_type -2.172 1.301 -.105 -1.669 .096 .746 1.341 gender_all .266 .988 .015 .269 .788 .973 1.028 income_all -.495 .394 -.088 -1.256 .210 .608 1.644 business_all -1.409 1.215 -.076 -1.159 .247 .695 1.438 a. dependent variable: score_all source: author’s own completion the collinearity diagnostic table (table 16) presented represents a test of multicollinearity, which is the statistical phenomenon where predictor variables in a model are highly correlated. the table shows that the model contains five predictors: school_type, gender_all, income_all, and business_all, all used to predict the dependent variable score_all. the condition index is greater than 5 for dimensions 2, 3, 4, and 5, which may indicate potential issues with multicollinearity. more specifically, the predictor "business_all" shows high variance proportions on the 5th dimension with a condition index of 17.819, signifying it might be the source of high multicollinearity in the model. this could impact the reliability of the model, as it suggests that business_all might be linearly predictable from the other predictors, thus potentially inflating the variance of its estimated regression coefficient. table 16. collinearity diagnosticsa model dimension eigenvalue condition index variance proportions (constant) school_type gender_all income_all business_all 1 1 4.522 1.000 .00 .00 .00 .01 .00 2 .305 3.852 .00 .01 .04 .32 .04 3 .090 7.091 .00 .12 .72 .04 .11 4 .069 8.098 .00 .66 .05 .45 .16 5 .014 17.819 .99 .20 .19 .18 .68 a. dependent variable: score_all source: author’s own completion table 17 represents residuals and predicted values for a model with a dependent variable "score_all". with a sample size (n) of 335, the predicted value ranges between 63.01 and 69.34 with a mean of 66.95 and a standard deviation of 1.302. the residual values vary how does the (de)centrali̇zati̇on of secondary educati̇on affect i̇ndi̇vi̇dual i̇nnovati̇veness? evi̇dence from azerbai̇jan 236 between -29.928 and 22.072 with a mean of 0 and a standard deviation of 8.826. the standardized predicted values and residuals exhibit similar characteristics; they both center around 0 with standard deviations close to 1. these data suggest a reasonably well-fitted model with some outliers. table 17. residuals statisticsa minimum maximum mean std. deviation n predicted value 63.01 69.34 66.95 1.302 335 residual -29.928 22.072 .000 8.826 335 std. predicted value -3.022 1.833 .000 1.000 335 std. residual -3.371 2.486 .000 .994 335 a. dependent variable: score_all source: author’s own completion from the plot for the distribution of the dependent variable “score_all” which represents the ii index (see graph 1), it seems it is fairly close to normal distribution which can allow to continue with a simple ols regression. the simple ols (ordinary least squares regression) model can be as follows in this case: score_all = β0 + β1business_all + β2gender_all + β3school_type + β4income_all + ε where: ● score_all is the dependent variable. ● business_all, gender_all, school_type, and income_all are the independent variables. ● β0 is the y-intercept (the value of score_all when all independent variables are 0). ● β1, β2, β3, and β4 are the coefficients of the independent variables, which represent the expected change in the dependent variable for a one-unit change in the corresponding independent variable, holding all other independent variables constant. ● ε represents the error term (residuals), which captures the variation in score_all not explained by the independent variables. g r a p h 1 ehtiman nurali̇zade 237 to summarize, the analysis indicates that the residuals of the regression model are quite normally distributed. this is a positive outcome as it suggests that the model adequately captures the underlying patterns in the data. additionally, the absence of high vif scores indicates that multicollinearity is not a significant issue, which strengthens the reliability of the results. the p-value of 0.129 for the overall model suggests that the model's explanatory power is not considered statistically significant. this means that the model doesn’t explain the amount of the variance in the dependent variable, individual innovativeness, but it cannot be considered statistically significant at the conventional significance level (e.g., p < 0.05). one possible explanation for the lack of significant results could be the small sample size of 335. with a small sample, the statistical power to detect significant effects may be limited. therefore, caution should be exercised when interpreting the overall significance of the model. moving on to the independent variable 'school_type,' its p-value is just below 10%, which indicates that there may be a marginally significant relationship between school type and individual innovativeness. although it does not meet the conventional threshold for significance, this result suggests that the type of school attended by students might have some influence on their level of innovativeness. furthermore, the negative beta parameter associated with the 'school_type' variable indicates that there is a negative relationship between school type and individual innovativeness, which contradicts the initial hypothesis. this finding suggests that students attending a certain type of school (as represented by the 'school_type' variable) may exhibit lower levels of innovativeness compared to other types of schools. in essence, the multiple regression analysis shows that the overall model explains a moderate amount of variance in individual innovativeness but is not statistically significant. this lack of significance may have different reasons; it may occur because more variables would explain more of the dependent's variance or the small sample size of 335 may not be sufficient to predict the dependent variable. 5. discussion the development and success of individuals are inextricably linked to education. but, as educational systems become increasingly centralized, questions arise about their impact on creativity and problem-solving skills (tether et al., 2005). centralized decision-making is a top-down approach where higher authorities make decisions instead of grassroots-level participation. this type of decision-making can have lasting impacts on how people perceive the challenges they face in their lives. research conducted by topsakal et al. (2022) shows that people prefer autonomy when it comes to seeking new information or taking risks for greater creativity. when decision-making processes are centralized, this ability may be limited, leading to rigid thinking patterns which stifle innovation. moreover, homogenization across different regions or countries could result from centralized decision-making in education settings. this would mean students receive similar educational experiences irrespective of their background or location hindering diversity and cross-pollination of ideas among learners. policymakers should seek the balance between centralization and decentralization for consistency while preserving unique learning environments where diverse ideas breed excellence among all levels how does the (de)centrali̇zati̇on of secondary educati̇on affect i̇ndi̇vi̇dual i̇nnovati̇veness? evi̇dence from azerbai̇jan 238 of society regardless of jurisdictional differences. (hanson, 1998) in essence, understanding the effects centralized decision-making has on human development requires an investigation into its influence on individual creativity and problem-solving abilities. policymakers should create balanced policies that cater towards consistency whilst nurturing unique learning environments for fostering creative expression amongst learners at all levels within varied contexts without impeding upon academic standards. the literature review demonstrated a correlation linking the centralization of decisionmaking in education to individual innovativeness. exploring the effects of centralized decisionmaking on student creativity and problem-solving skills has considerable consequences for policymakers, educators, parents, and other stakeholders involved in creating educational policies. it indicates that delegating control over decisions is beneficial since it can lead to greater inventiveness and imagination as well as improved problem-solving abilities among pupils (brown & mcintyre, 1981). moreover, this highlights the requirement for future studies to understand how different forms of decentralization impact student results across varied cultural contexts. more investigation needs to be conducted so we may better understand how choices are made within schools and their effects on academic achievements. to sum up whilst there may be some upsides when it comes down to uniformity or standardization practices within regions or areas, some studies indicate its negative influence on children's creative reserves must not be disregarded either. therefore, it is vital educators find effective ways they can create safe spaces for kids where innovative ideas are encouraged without restraint something which could potentially stimulate greater levels of innovative thinking with time (amalia et al., 2020). whereas the results of this study did not show a significant difference in individual innovativeness between public (centralized) and private (decentralized) schools, and the outcome of the multiple regression which analyzed the innovative innovativeness by considering several independent variables including the type of school, gender, family income, and family business, cannot be considered statistically significant, the study can be considered useful for further investigation. one possible explanation for the lack of a significant difference between public and private schools is that despite the differences in governance, there might be different factors such as student selection, family income, etc, leading to similar outcomes in terms of individual innovativeness. (yilmaz et al., 2014) it is also possible that the measures of innovativeness used in the study were not sufficiently sensitive or comprehensive to capture the other factors affecting individual innovativeness. even if the study's findings do not provide definitive evidence for the hypothesis, they do contribute to a broader understanding of the complex interplay between centralization, decentralization, and individual innovativeness in education. future research might benefit from a more in-depth investigation of the specific factors that influence individual innovativeness in different educational contexts, as well as the potential mediating or moderating variables that could be impacting the relationship between centralization and individual innovativeness. for instance, researchers could explore how the degree of autonomy granted to teachers and school administrators, the flexibility of curricula, and the availability ehtiman nurali̇zade 239 of resources for experimentation and creativity vary across different systems, and how these factors might interact with centralized or decentralized decision-making structures. additionally, longitudinal and cross-national comparative studies could be conducted to examine the long-term effects of centralization or decentralization on individual innovativeness, as well as to explore the generalizability of the findings to other countries and contexts. such research could provide further insight into the potential benefits and drawbacks of different governance models in education, helping policymakers and practitioners make more informed decisions regarding the design and implementation of education systems that best foster innovation and creativity. in light of the findings from this study, it is clear that the relationship between centralization of decision-making in education and individual innovativeness is not straightforward, and that further research is needed to fully understand the complex dynamics at play. however, the expert opinions gathered in this research suggest that decentralized systems may hold promise for fostering greater individual innovativeness, by allowing for more flexible, adaptive, and context-specific educational experiences. as the world continues to evolve and the need for innovative, adaptable individuals grows ever more critical, it is essential for education systems to adapt and evolve as well, fostering the skills and mindsets needed to thrive in a rapidly changing global landscape. this research contributes to the ongoing conversation around the best ways to achieve that goal, highlighting the importance of considering the impact of governance structures on the development of individual innovativeness within education systems. 6. limitations the present study is subject to a number of limitations that should be considered when interpreting the findings. these limitations pertain to the data sources, sample size, and generalizability of the results. the subsequent paragraphs detail these limitations and their potential impact on the study. firstly, this study relies on a secondary dataset collected in 2021 by independent researchers. the use of this data poses several limitations. for one, it covers only students in the 10th and 11th grades, which may not be representative of the broader student population. additionally, the data is limited to the best schools in azerbaijan, and was collected exclusively in the capital city, baku. this geographical constraint may limit the generalizability of the findings to other regions or types of schools within the country. secondly, the cross-sectional nature of the data poses another limitation. as the data was collected only once from the students, it is not possible to compare their innovativeness before and after joining the schools in question. this precludes any conclusions about the causal effects of the school environment on individual innovativeness, and may lead to an over or underestimation of the relationship between centralization of decision-making and innovativeness. future research would benefit from a longitudinal study design, which could provide insights into the temporal dynamics of this relationship. consequently, the limitations of this study should be acknowledged when interpreting the findings. the reliance on a secondary dataset with a restricted scope and the cross-sectional nature of the data may all have implications for the generalizability and validity of the results. despite these limitations, the study provides a valuable starting point for future research on the how does the (de)centrali̇zati̇on of secondary educati̇on affect i̇ndi̇vi̇dual i̇nnovati̇veness? evi̇dence from azerbai̇jan 240 relationship between centralization of decision-making in education and individual innovativeness in azerbaijan. further investigation, employing longitudinal data and more diverse samples would contribute to a deeper understanding of this important issue. conclusi̇ons this research paper aimed to explore the impact of the centralization of decisionmaking in education on individual innovativeness, specifically focusing on the case of azerbaijan. while my hypothesis suggested a greater level of innovativeness in individuals educated within a decentralized system, our quantitative analysis did not yield a significant distinction between students from centralized and decentralized schools in azerbaijan. this discrepancy, however, does not detract from the value of the research but rather illuminates the intricacies that underlie the relationship between centralization and individual innovativeness. the difference between the hypothesis and findings demonstrates the need for a broader lens that takes into account the various factors that influence individual innovativeness. it underscores the necessity of more in-depth, longitudinal, and cross-national comparative studies, which might reveal the long-term and far-reaching consequences of centralization versus decentralization in education. this research, although not affirming the initial hypothesis definitively, contributes to a nuanced understanding of the complexities between educational governance and individual innovativeness, which is invaluable for future exploration and decision-making. it sets the stage for ongoing dialogue about how education systems can best foster the innovativeness required in our rapidly changing global society. there are some hypotheses driven by this study that can be investigated in the future: h2: decentralization of decision-making in education might have a positive impact on individual innovativeness in rural areas. this study is primarily urban-centric, focusing on schools in the capital, baku. there might be significant differences in rural areas that were not accounted for in this study. h3: decentralization of decision-making on individual innovativeness might have a positive impact in the long term. a longitudinal study might reveal that the impact of centralization or decentralization on individual innovativeness becomes more evident over time. the cross-sectional nature of this study may have limited its ability to detect the longterm effects of the educational system on innovativeness. h4: the centralization of decision-making might have a more significant effect on the innovativeness of the educators rather than the students. teachers and administrators who have more autonomy might be more innovative themselves, which could indirectly affect the innovativeness of their students. h5: the level of resources available to a school could mediate the impact of centralization or decentralization on individual innovativeness. schools with more resources might be better able to foster innovativeness regardless of the degree of decision-making autonomy. h6: the effects of centralization or decentralization on individual innovativeness might be less significant than the effects of other factors, such as teaching quality or curriculum relevance. this study did not find a significant difference in innovativeness between centralized and decentralized systems, suggesting other factors might be more important. ehtiman nurali̇zade 241 h7: centralized decision-making might lead to less innovation in the short term but provide a solid foundational knowledge base that enables greater innovation in the long term. it's possible that a more structured, centralized approach initially provides a solid base of knowledge upon which students can later innovate. additionally, the measures of individual innovativeness might be more sensitive to changes in the education system in different cultural contexts. this study focused more on the individual innovativeness index, but the relationship between centralization and innovativeness might look different in azerbaijan or countries with different cultural attitudes toward innovation and education. thus, it can be beneficial studying the interaction between cultural aspects and institutional aspects of the innovation ecosystem. references 1. amalia, k., komariah, a., sumarto, s., & asri, k. h. (2020). leadership in education: decision-making in education. atlantis press. https://doi.org/10.2991/assehr.k.200130.155 2. asian development bank. (2015, may 25). regional education forum in baku to discuss azerbaijan’s k-12 transition [press release]. retrieved from https://www.adb.org/news/regional-education-forum-baku-discuss-azerbaijan-s-k-12transition 3. binder, m. (2013) innovativeness and subjective well-being. soc indic res 111, 561–578. retrieved from https://doi.org/10.1007/s11205-012-0020-1 4. bray, m. (1999). control of education: issues and tensions in centralization and decentralization. comparative education: the dialectic of the global and the local, 1999, 207232. 5. brown, s., & mcintyre, d. (1981). an action‐research approach to innovation in centralized educational systems, european journal of science education, 3:3, 243-258. retrieved from http://dx.doi.org/10.1080/0140528810030302 6. caldwell, b.j. (2009). centralisation and decentralisation in education: a new dimension to policy. in: zajda, j., gamage, d. (eds) decentralisation, school-based management, and quality. globalisation, comparative education and policy research, vol 8. springer, dordrecht. https://doi.org/10.1007/978-90-481-2703-0_3 7. carvalho, e.d. (2013). decision-making in the public administration: a dialogue of rationalities. sociologia, problemas e praticas jurnal. no.73. 8. council of europe. (2021). local self-government in azerbaijan: few improvements observed, limited powers and weak financial position of municipalities must be urgently addressed. retrieved from https://www.coe.int/en/web/congress/-/local-self-government-inazerbaijan-few-improvements-observed-limited-powers-and-weak-financial-position-ofmunicipalities-must-be-urgently-addressed 9. fiske, e.b. (1996). decentralization of education: politics and consensus. washington, d.c.: the world bank. 10. gasimov, i., ismayilov, a., aliyev, k., & gasimov, i. (2021). a survey on innovativeness and entrepreneurship potential among high school students in azerbaijan. unpublished dataset. https://doi.org/10.2991/assehr.k.200130.155 https://doi.org/10.2991/assehr.k.200130.155 https://www.adb.org/news/regional-education-forum-baku-discuss-azerbaijan-s-k-12-transition https://www.adb.org/news/regional-education-forum-baku-discuss-azerbaijan-s-k-12-transition https://www.adb.org/news/regional-education-forum-baku-discuss-azerbaijan-s-k-12-transition https://www.adb.org/news/regional-education-forum-baku-discuss-azerbaijan-s-k-12-transition https://doi.org/10.1007/s11205-012-0020-1 https://doi.org/10.1007/s11205-012-0020-1 http://dx.doi.org/10.1080/0140528810030302 http://dx.doi.org/10.1080/0140528810030302 https://doi.org/10.1007/978-90-481-2703-0_3 https://doi.org/10.1007/978-90-481-2703-0_3 https://www.coe.int/en/web/congress/-/local-self-government-in-azerbaijan-few-improvements-observed-limited-powers-and-weak-financial-position-of-municipalities-must-be-urgently-addressed https://www.coe.int/en/web/congress/-/local-self-government-in-azerbaijan-few-improvements-observed-limited-powers-and-weak-financial-position-of-municipalities-must-be-urgently-addressed https://www.coe.int/en/web/congress/-/local-self-government-in-azerbaijan-few-improvements-observed-limited-powers-and-weak-financial-position-of-municipalities-must-be-urgently-addressed https://www.coe.int/en/web/congress/-/local-self-government-in-azerbaijan-few-improvements-observed-limited-powers-and-weak-financial-position-of-municipalities-must-be-urgently-addressed how does the (de)centrali̇zati̇on of secondary educati̇on affect i̇ndi̇vi̇dual i̇nnovati̇veness? evi̇dence from azerbai̇jan 242 11. goldsmith, r. e., & foxall, g. r. (2003). the measurement of innovativeness. in l. v. shavinina (ed.), the international handbook on innovation (pp. 321–330). oxford: elsevier science. 12. guliyev, f. (2016) the quality of education in azerbaijan: problems and prospects. caucasus analytical digest, no. 90. retrieved from https://ssrn.com/abstract=2885112 13. hanson, e.m. (1998). strategies of educational decentralization: key questions and core issues. journal of educational administration. 36 (2): 111–128. 14. hawkins, j.n. (2000). centralization, decentralization, recentralization: educational reform in china. journal of educational administration. 38 (5): 442–454. 15. hayek, f. a. (1945). the use of knowledge in a society. the american economic review, vol. 35, no. 4, pp. 519-530. 16. hendarman, a.f., cantner, u. (2018) soft skills, hard skills, and individual innovativeness. eurasian bus rev 8, 139–169. https://doi.org/10.1007/s40821-017-0076-6 17. hurt, h. t., joseph, k., & cook, c. d. (1977). scales for the measurement of innovativeness. human communication research, 4(1), 58-65. 18. jukneviciene, v. (2019). key factors for the successful implementation of the national innovation policy: the case of lithuania. annals of spiru haret university. economic series, 19(2), 25-50, https://doi.org/10.26458/1921 19. moe, t. m. (2003). the politics of centralization: concentrating power in american education. in p. e. peterson & m. r. west (eds.), no child left behind? the politics and practice of school accountability (pp. 47-76). brookings institution press. 20. mok, k.h. (2004). centralization and decentralization: changing governance in education. in: ka-ho, m. (eds) centralization and decentralization. cerc studies in comparative education, vol 13. springer, dordrecht. https://doi.org/10.1007/978-94-0070956-0_1 21. nurakhir, a. (2021). centralization and decentralization in education system: advantages and disadvantages. international journal of educational research and reviews, 12(1), 32-44. 22. payne, k. (2008). centralization versus decentralization in education: a global perspective. journal of education policy, planning and administration, 2(1), 1-10. 23. pollock, k. (2008). the four pillars of innovation: an elementary school perspective. the innovation journal: the public sector innovation journal, 13(2), article 2. retrieved from https://www.innovation.cc/scholarly-style/2008_13_2_2_pollack_4pillars-educate.pdf 24. ragmoun, w., alfalih, a.a. (2021) sustainable academic innovativeness: towards the understanding of a new construct and the development of scale. j knowl econ 12, 695–715. https://doi.org/10.1007/s13132-021-00744-7 25. rogers, e.m. (2003). diffusion of innovation (5th ed.). new york: free press. 26. rubalcaba, l. (2022). understanding innovation in education: a service co-production perspective. economies, 10:96. retrieved from https://doi.org/10.3390/economies10050096 27. scott, r., & vincent-lancrin, d. (2014). the human factor in innovation. in s. dutta, b. lanvin, & s. wunsch-vincent (eds). the global innovation index 2014. cornell university, insead, wipo fontainebleau, ithaca. 28. stevenson, d. l., & baker, d. p. (1991). state control of the curriculum and classroom instruction. sociology of education, 64(1), 1-10. https://ssrn.com/abstract=2885112 https://ssrn.com/abstract=2885112 https://doi.org/10.1007/s40821-017-0076-6 https://doi.org/10.1007/s40821-017-0076-6 https://doi.org/10.26458/1921 https://doi.org/10.26458/1921 https://doi.org/10.1007/978-94-007-0956-0_1 https://doi.org/10.1007/978-94-007-0956-0_1 https://doi.org/10.1007/978-94-007-0956-0_1 https://www.innovation.cc/scholarly-style/2008_13_2_2_pollack_4pillars-educate.pdf https://www.innovation.cc/scholarly-style/2008_13_2_2_pollack_4pillars-educate.pdf https://www.innovation.cc/scholarly-style/2008_13_2_2_pollack_4pillars-educate.pdf https://doi.org/10.1007/s13132-021-00744-7 https://doi.org/10.1007/s13132-021-00744-7 https://doi.org/10.1007/s13132-021-00744-7 https://doi.org/10.3390/economies10050096 https://doi.org/10.3390/economies10050096 ehtiman nurali̇zade 243 29. tarman, b. (2016). innovation and education. research in social sciences and technology, 1:1. retrieved from https://www.learntechlib.org/p/187548/. 30. tether, b., mina, a., consoli, d., & gagliardi, d. (2005). a literature review on skills and innovation: how does successful innovation impact on the demand for skills and how do skills drive innovation? united kingdom: department of trade and industry. 31. topsakal, i̇., altun yalçın, s., & çakır, z. (2022). the effect of problem-based stem education on the students’ critical thinking tendencies and their perceptions for problem solving skills. science education international, 33(2), 136-145. 32. welsh, t., & mcginn, n. f. (1999). decentralization of education: why, when, what and how. unesco: international institute for educational planning. retrieved from https://unesdoc.unesco.org/ark:/48223/pf0000120275 33. winokur, i. k. (2014). from centralized education to innovation: cultural shifts in kuwait’s education system. education for a knowledge society in arabian gulf countries (international perspectives on education and society, vol. 24, pp. 103-124). emerald group publishing limited. https://doi.org/10.1108/s1479-367920140000024013 34. world bank. (2010). innovation policy: a guide for developing countries. world bank. https://openknowledge.worldbank.org/handle/10986/2460. 35. world intellectual property organization. (2022). global innovation index (gii): azerbaijan. retrieved from https://www.wipo.int/edocs/pubdocs/en/wipo_pub_2000_2022/az.pdf 36. yilmaz, f., spokesmen, g., ayman, n., tuna, s., sancar, s., & deniz, y. m. (2014). i̇lköğretim bölümü öğretmen adaylarının mesleki yenilikçilik eğilimlerinin çeşitli değişkenler açısından incelenmesi. mustafa kemal üniversitesi sosyal bilimler enstitüsü dergisi, 11(27), 259–276. 37. yuan, f. & woodman, r.w. (2010). innovative behavior in the workplace: the role of performance and image outcome expectations. academic management journal, 53 (2), 323342 appendix 1. multiple comparisons dependent variable: scored tukey hsd (i) schoold (j) schoold mean difference (i-j) std. error sig. 95% confidence interval lower bound upper bound 1 2 .228 2.733 1.000 -8.29 8.75 3 3.713 2.998 .918 -5.63 13.06 4 -4.272 3.705 .942 -15.83 7.28 5 -.748 2.787 1.000 -9.44 7.94 6 -10.534 3.498 .066 -21.44 .37 7 -6.705 3.977 .696 -19.11 5.70 8 .395 3.705 1.000 -11.16 11.95 2 1 -.228 2.733 1.000 -8.75 8.29 3 3.485 3.141 .953 -6.31 13.28 4 -4.500 3.822 .936 -16.42 7.42 5 -.976 2.940 1.000 -10.14 8.19 6 -10.762 3.622 .073 -22.05 .53 7 -6.933 4.086 .689 -19.67 5.81 8 .167 3.822 1.000 -11.75 12.08 https://www.learntechlib.org/p/187548/ https://www.learntechlib.org/p/187548/ https://unesdoc.unesco.org/ark:/48223/pf0000120275 https://doi.org/10.1108/s1479-367920140000024013 https://doi.org/10.1108/s1479-367920140000024013 https://openknowledge.worldbank.org/handle/10986/2460 https://openknowledge.worldbank.org/handle/10986/2460 https://openknowledge.worldbank.org/handle/10986/2460 https://www.wipo.int/edocs/pubdocs/en/wipo_pub_2000_2022/az.pdf https://www.wipo.int/edocs/pubdocs/en/wipo_pub_2000_2022/az.pdf https://www.wipo.int/edocs/pubdocs/en/wipo_pub_2000_2022/az.pdf how does the (de)centrali̇zati̇on of secondary educati̇on affect i̇ndi̇vi̇dual i̇nnovati̇veness? evi̇dence from azerbai̇jan 244 3 1 -3.713 2.998 .918 -13.06 5.63 2 -3.485 3.141 .953 -13.28 6.31 4 -7.985 4.016 .496 -20.51 4.54 5 -4.461 3.188 .855 -14.40 5.48 6 -14.247* 3.826 .009 -26.18 -2.32 7 -10.418 4.268 .237 -23.72 2.89 8 -3.318 4.016 .991 -15.84 9.20 4 1 4.272 3.705 .942 -7.28 15.83 2 4.500 3.822 .936 -7.42 16.42 3 7.985 4.016 .496 -4.54 20.51 5 3.524 3.861 .984 -8.51 15.56 6 -6.262 4.402 .844 -19.99 7.46 7 -2.433 4.791 1.000 -17.37 12.51 8 4.667 4.568 .970 -9.58 18.91 5 1 .748 2.787 1.000 -7.94 9.44 2 .976 2.940 1.000 -8.19 10.14 3 4.461 3.188 .855 -5.48 14.40 4 -3.524 3.861 .984 -15.56 8.51 6 -9.786 3.663 .148 -21.21 1.63 7 -5.957 4.122 .833 -18.81 6.90 8 1.143 3.861 1.000 -10.90 13.18 6 1 10.534 3.498 .066 -.37 21.44 2 10.762 3.622 .073 -.53 22.05 3 14.247* 3.826 .009 2.32 26.18 4 6.262 4.402 .844 -7.46 19.99 5 9.786 3.663 .148 -1.63 21.21 7 3.829 4.633 .991 -10.62 18.27 8 10.929 4.402 .219 -2.80 24.65 7 1 6.705 3.977 .696 -5.70 19.11 2 6.933 4.086 .689 -5.81 19.67 3 10.418 4.268 .237 -2.89 23.72 4 2.433 4.791 1.000 -12.51 17.37 5 5.957 4.122 .833 -6.90 18.81 6 -3.829 4.633 .991 -18.27 10.62 8 7.100 4.791 .815 -7.84 22.04 8 1 -.395 3.705 1.000 -11.95 11.16 2 -.167 3.822 1.000 -12.08 11.75 3 3.318 4.016 .991 -9.20 15.84 4 -4.667 4.568 .970 -18.91 9.58 5 -1.143 3.861 1.000 -13.18 10.90 6 -10.929 4.402 .219 -24.65 2.80 7 -7.100 4.791 .815 -22.04 7.84 *. the mean difference is significant at the 0.05 level. source: author’s own completion agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 19, no. 1 (2025), pp. 315-328 315 understanding stem employment challenges in georgia: a qualitative analysis of employer perspectives a. vashakmadze, n. mikava, t. zhghenti, d. sikharulidze ani vashakmadze¹, nino mikava², tsotne zhghenti³, davit sikharulidze⁴ ¹ ² ³ business and technology university, georgia ¹ orcid.org/0000-0002-2072-6904, e-mail: ani.vashakmadze@btu.edu.ge ² orcid.org/0000-0002-9567-3958, e-mail: nino.mikava@btu.edu.ge ³ orcid.org/0000-0002-6779-172x, e-mail: tsotne.zhghenti@btu.edu.ge ⁴ ivane javakhishvili tbilisi state university, georgia orcid.org/0000-0003-1738-9828, e-mail: davit.sikharulidze@tsu.ge abstract: this paper explores the challenges and opportunities within georgia’s stem (science, technology, engineering, and mathematics) labor market from the perspective of employers. drawing on qualitative data from in-depth interviews and focus group discussions with representatives from key sectors—including ict, healthcare, engineering, and research— the study examines structural issues hindering stem workforce development. the analysis identifies six major challenges: talent drain, low salaries and limited career growth, mismatch between education and labor market demands, limited stem awareness, gender disparities, and regional inequalities. findings show that employers face persistent difficulty in attracting and retaining qualified professionals, largely due to inadequate training systems, underfunded research infrastructure, and limited career incentives. the study concludes that improved collaboration between academia, industry, and government is essential for enhancing workforce preparedness and promoting sustainable economic growth. policy recommendations include aligning academic programs with labor market needs, investing in regional infrastructure and promoting inclusive stem participation through early engagement and targeted reforms. keywords: stem, labor market, skills mismatch, talent drain. 1. introduction science, technology, engineering, and mathematics (stem) fields are fundamental to economic growth, technological advancement, and national competitiveness. countries that successfully develop and sustain a skilled stem workforce benefit from increased productivity, innovation, and long-term economic resilience. in georgia, as in many other countries, stem employment plays a crucial role in shaping industrial and technological progress. however, despite the growing demand for stem professionals, various structural and systemic challenges hinder workforce development and retention. following the collapse of the soviet union, many post-soviet states, including georgia experienced the dismantling of their once-robust research and development (r&d) sectors. during the soviet era, r&d institutions were heavily funded and integrated into industrial and technological development strategies. however, the transition to a market economy led to severe funding cuts, brain drain, and the fragmentation of research infrastructure, leaving stem fields struggling to recover. currently, approximately 10.5% of employees in georgia work in stem-related professions (source: authors' calculation based on labour force survey). however, stem employment is highly gender-segregated, with men dominating ict and engineering fields, while women are more represented in healthcare and certain science disciplines. http://www.orcid.org/0000-0002-2072-6904 mailto:ani.vashakmadze@btu.edu.ge http://www.orcid.org/0000-0002-9567-3958 mailto:nino.mikava@btu.edu.ge http://www.orcid.org/0000-0002-6779-172x mailto:tsotne.zhghenti@btu.edu.ge http://www.orcid.org/0000-0003-1738-9828 mailto:davit.sikharulidze@tsu.ge understanding stem employment challenges in georgia: a qualitative analysis of employer perspectives 316 through qualitative data from in-depth interviews and focus group discussions with employers and industry representatives, the research will evaluate challenges based on the employer’s perspective regarding stem employment. by analyzing them, the research aims to identify structural gaps and propose policy recommendations to enhance stem workforce retention, strengthen r&d capabilities, and foster innovation-driven economic growth in georgia and other developing nations facing similar obstacles. 2. literature review the growing discourse around the mismatch between stem (science, technology, engineering, and mathematics) education and industry demand highlights challenges in workforce development. while stem education is promoted as a pathway to innovation and economic growth, the actual employment landscape presents discrepancies between the skills students acquire and those employers seek. this literature review aims to identify the main challenges, and their extent related to stem employment which will be discussed in the practical research from the employers’ perspective. one of the main challenges on a labor market with regard to stem professions is talent drain. the exodus of skilled professionals in stem fields, commonly referred to as "brain drain," poses a significant threat to economic development, technological advancement, and workforce stability. various factors contribute to the migration of stem experts, including financial incentives, restricted career growth, and suboptimal work environments. salary differences play a crucial role in this mobility, with higher-paying sectors like finance drawing stem graduates away from traditional scientific and technical roles (marin & vona, 2017). moreover, the scarcity of career progression opportunities and inadequate research funding compel professionals to seek better prospects in other countries (schwager & gates, 2024). inferior working conditions, especially in less developed areas, further amplify this trend by pushing talent towards nations with superior research facilities (yu, piew, & fai, 2014). political unrest and administrative inefficiencies also contribute to the outflow of skilled workers (zwetsloot, 2021). the effects of this talent drain are debatable, with some researchers suggesting that global redistribution of talent can enhance labor market efficiency (horton et al., 2017), while others emphasize the detrimental impact on economic productivity and innovation in the countries of origin (auriol, 2010). to counter this trend, governments can bolster stem education, enhance workplace conditions, and implement programs that incentivize expatriates to return (chen & tan, 2024; duran & lopez, 2019). fostering stronger ties between industry and academia can also play a crucial role in retaining skilled professionals by promoting domestic career advancement (schwager & gates, 2024). the stem workforce plays a crucial role in driving economic growth and innovation, but professionals in this field encounter persistent challenges related to insufficient pay and limited career growth opportunities. career stagnation in stem fields is exacerbated by the lack of structured promotion pathways, particularly in academia and research, where professionals often struggle to advance due to unclear career trajectories and limited leadership opportunities (saras, 2024; xue & larson, 2015). additionally, public sector stem wages remain uncompetitive compared to private sector opportunities, making it difficult to attract and retain skilled professionals in government-funded research and technical roles (edwards, mccollester, & phillips, 2021). rapid technological advancements also contribute to career instability, as evolving industry demands frequently render certain skills obsolete, requiring continuous retraining to remain relevant (deming & noray, 2018). compounding these challenges, market saturation in stem fields has led to wage stagnation, particularly in 317 academia and research, where an oversupply of highly educated professionals has outpaced the availability of well-paying jobs (delavallade et al., 2024; salzman, 2013; xue & larson, 2015). furthermore, the mismatch between stem education and industry demand has been widely discussed in the literature (biagi & castaño muñoz, 2020; smith & white, 2022; pater et al., 2022; ghaffarzadegan et al., 2017; ngo et al., 2025; srivastava, 2025; ali & bangalore, 2025). the disconnect between stem education and industry needs leads to underemployment, as employers seek practical skills often absent from traditional stem degree programs (delavallade et al., 2024; rodríguez et al., 2025), especially stem curricula lag behind emerging technologies (tajudeen et al. 2025, zhou et al., 2025, gao, et al., 2025; wu & zhou, 2025). researchers also highlight the lack of industry-specific skills among stem graduates (kersanszki & nadai, 2020; teshome & oumer, 2024; morris et al., 2024). the growing skills gap in the labor market, especially among women and minorities, is largely attributed to insufficient stem awareness and engagement. research indicates that the absence of early stem exposure and traditional teaching methods that lack interdisciplinary integration contribute to this issue (owens et al., 2012). moreover, employers report that graduates often fall short in both technical proficiency and crucial problem-solving and communication abilities needed for contemporary stem positions (karimi & pina, 2021, hora et al. 2016; jiang et al., 2024). while programs to boost stem participation exist, many are found to be temporary and fail to provide lasting solutions to workforce deficits (hodgson et al., 2024). introducing stem education in early years increases interest and career aspirations in stem fields. without structured interventions, disengagement occurs (siregar et al. 2023). current research indicates ongoing gender inequalities in stem education and careers, despite initiatives to enhance diversity. reviewed literature demonstrates that gender disparities in stem emerge early, influenced by societal expectations, unconscious biases, and a scarcity of female exemplars (martínez-gómez et al., 2024; jimenez, santiago, & couvertier, 2024; burgos-lopez et al., 2024). female professionals in stem often encounter pay inequities and obstacles to professional growth, compounded by job segregation and workplace bias (ruiz, ganuza, & garcía, 2024; dolgikh & potanin, 2025). sector-specific inequalities are particularly evident in aerospace, ai, and green technology industries, where systemic obstacles further restrict women's involvement (costa et.al, 2024; conde-ruiz et al., 2024; moso-diez & mondaca-soto, 2025). policy measures have shown varied outcomes, with certain studies recommending more equitable recruitment practices, mentoring initiatives, and educational reforms to tackle ingrained biases (el khawand, 2025; lucietto & peters, 2024). still another challenge with regard to stem professions is the uneven distribution of stem careers across regions. this is influenced by a combination of economic, educational, and demographic elements that result in unequal access to opportunities in different geographical areas. studies show that urban centers with robust stem industries provide enhanced job prospects and salary levels, while rural and economically challenged areas struggle with ongoing issues due to scarce educational resources and industrial concentration (wright, ellis, & townley, 2017; lysenko & wang, 2020). these regional imbalances are further intensified by gender and racial disparities, as women and minority groups are often underrepresented in lucrative stem positions due to systemic and cultural obstacles (white & smith, 2024). economic strategies and workforce development initiatives are instrumental in shaping these disparities, with regions that actively invest in stem education and innovation centers typically demonstrating stronger labor market results (gregory, 2015; lópez‐bazo, monastiriotis, & motellón, 2017). understanding stem employment challenges in georgia: a qualitative analysis of employer perspectives 318 table 1. predefined stem employment broad challenges based on literature review challenge academic literature talent drain auriol, 2010; horton et al., 2017; marin & vona, 2017; yu, piew, & fai, 2014; zwetsloot, 2021; schwager & gates, 2024; chen & tan, 2024; duran & lopez, 2019 low salaries and limited career growth salzman, 2013; xue & larson, 2015; deming & noray, 2018; edwards, mccollester, & phillips, 2021; saras, 2024; delavallade et al., 2024 mismatch between industry demand and workforce skills ghaffarzadegan et al., 2017; smith & white, 2022; biagi & castaño muñoz, 2020; kersanszki & nadai, 2020; pater et al., 2022; teshome & oumer, 2024; morris et al., 2024; delavallade et al., 2024; ngo et al., 2025; srivastava, 2025; tajudeen et al., 2025; zhou et al., 2025; gao, et al., 2025; rodríguez et al., 2025; wu & zhou, 2025 limited stem awareness and engagement owens et al., 2012, hora et al., 2016; karimi & pina, 2021; siregar et al., 2023; hodgson et al., 2024, jiang et al., 2024; ali & bangalore (2025) gender disparities in stem jimenez, santiago, & couvertier, 2024; lucietto & peters, 2024; martínez-gómez et al., 2024; ruiz, ganuza, & garcía, 2024; white & smith, 2024; dolgikh & potanin, 2025; costa et. al, 2024; conderuiz et al., 2024; burgos-lopez et al., 2024; el khawand, 2025; moso-diez & mondaca-soto, 2025 regional disparities in stem gregory, 2015; wright, ellis, & townley, 2017; lópez‐bazo, monastiriotis, & motellón, 2017; lysenko & wang, 2020 source: developed by authors. 3. methodology 3.1 research materials this academic research is based on transcripts and qualitative data from the 2024 practical research project"stem opportunities and challenges in georgia: analysis of the education system, labor market, and legislative framework" which examined the challenges, needs, and opportunities faced by employers in stem fields within georgia’s labor market. the transcripts include interviews and focus group discussions conducted as part of the mentioned research project, providing a rich dataset for analysis. rather than collecting new primary data, this study utilizes those existing transcripts to examine key labor market trends, skill shortages, and employer perspectives in greater depth. the research respondents represent major sectors and organizations that employ stem professionals, ensuring a comprehensive understanding of workforce challenges and opportunities. stem professionals in this research are defined based on the ilo 2024 classification, which categorizes occupations relevant to science, technology, engineering, and mathematics. according to this classification, stem professions include engineering and science specialists (isco-08: 21, 31), it professionals (isco-08: 25, 35), and healthcare specialists (isco-08: 22, 32) involved in scientific and technological work. additionally, business and administrative roles (isco-08: 12, 13, 24) are included only when employees work in specific industries. isco-08: 12 (administrative and commercial managers) is considered stem if employed in nace 72 (scientific research and development). isco-08: 13 (production and specialized services managers) qualifies if employed in nace 62 (computer programming, consultancy, and related activities). isco-08: 24 (business and 319 administration professionals) is included if working in nace 62, 63 (information service activities), or 72. in total, transcripts are available for thirteen in-depth interviews and six focus group discussions, involving 43 participants. these transcripts form the foundation of this study, allowing for an in-depth examination of employer challenges and expectations. the list of respondents is displayed in table 2. table 2. overview of interview and focus group participants in-depth interview focus group discussion research institutes  r. agladze institute of inorganic chemistry and electrochemistry  ilia vekua sukhumi institute of physics and technology  institute of earth sciences and national seismic monitoring center  g. eliava institute of bacteriophages, microbiology, and virology  a. razmadze mathematical institute government & innovation agencies  agency "produce in georgia"  georgia’s innovation and technology agency industry associations & ngos  ict association of georgia  georgian association of artificial intelligence  georgian renewable energy development association  georgian farmers' association  n(n)le "healthcare association"  strategeast  managers of clinics and hospitals  representatives of sectoral skills organizations  board members of the georgian laboratory association  representatives of ict companies  managers of energy sector companies  representatives of technology startup companies source: developed by authors. 3.2 data analysis process the qualitative data analysis in this study was used to identify the importance and context of key challenges based on findings from the literature review. the predefined challenge categories were collected based on academic literature review and included following factors: talent drain, low salaries and limited career growth, mismatch between industry demand and workforce skills, limited stem awareness and engagement, gender disparities in stem, and regional disparities in stem (see the table 1 in previous chapter). to systematically analyze the transcripts, we applied a structured classification approach using ai-assisted content analysis. each transcript was assessed based on how prominently each challenge was discussed and the sentiment expressed by the respondents. the classification system used four categories: important (discussed in-depth with strong negative sentiment), somewhat important (mentioned but without strong emphasis), not important (rarely mentioned or explicitly dismissed), and not mentioned (not referenced at all). the analysis was conducted in several steps. first, ai tools (chatgpt-4o) processed the transcripts, categorized discussions, and assessed sentiment based on the predefined classification criteria. after this initial analysis, we reviewed the results and calculated combined values for each sector by determining the median value of the transcript analysis for each respondent within that sector. if the responses were tied or varied significantly, human intervention was used to determine the final category based on contextual interpretation and industry-specific insights. understanding stem employment challenges in georgia: a qualitative analysis of employer perspectives 320 figure 1. qualitative data analysis process source: developed by authors. during the sectoral analysis, we manually grouped the findings into four broad categories: ict, science, engineering, and health. these categories align with common international classifications used in stem workforce analysis, particularly those based on isco-08 and nace rev.2 standards, ensuring consistency with global research frameworks. additionally, they were identified as broad and easily understandable sectoral divisions that best represent the distribution of stem employment and challenges across industries. 3.3 research limitations this study examines stem employment challenges exclusively from the perspective of employers. this approach was chosen for two main reasons. first, the dataset consists solely of qualitative data from employers, making it the primary lens through which challenges are assessed. second, the challenges faced by employees represent a distinct research question requiring different research methods. employee perspectives tend to focus on more specific, personal-level concerns, whereas employers provide insight into systemic labor market issues. as a result, a separate study would be needed to properly capture the challenges from the employee’s viewpoint. additionally, this study does not compare employer perceptions of challenges to general labor market data. there are two reasons for this. first, reliable statistics on stem employment in georgia remain limited, making direct comparisons difficult. second, the study seeks to understand employer perceptions rather than objective market trends. employer sentiment does not always align with statistical realities; for example, while salaries in certain stem sectors may be high compared to other fields, employers may still perceive them as insufficient to attract or retain talent. understanding these perceptions is critical, as they influence hiring decisions and workforce strategies. furthermore, the dataset is limited to transcripts from stem-related organizations and companies, excluding non-stem industries that may also employ stem professionals. while this study captures insights from core stem sectors, it does not account for the demand for stem professionals in industries such as finance, consulting, and public administration, where technical expertise is increasingly valuable. future research could expand the scope to include perspectives from non-stem sectors to provide a more comprehensive picture of stem employment opportunities and challenges. literature review for identifying predefined challenges analyzing transcripts (ai processing with chatgpt-4o) calculation of median values of importancy for each sector human intervention for ties or discrepancies final categorization of challenges thematic analysis and interpretation 321 4. results and discussion 4.1 general overview of findings the analysis is systematically structured, beginning with an examination of each challenge identified through the literature review. this approach ensures a comprehensive assessment of the predefined issues, grounding the findings in established academic discourse. subsequently, each challenge is analyzed within the context of the studied sectors, providing a sector-specific perspective on the identified challenges. the main results for each sector are presented in table 3, indicating the significance of each challenge as follows: important (discussed in-depth with strong negative sentiment), somewhat important (mentioned but without strong emphasis), and not important (rarely mentioned or explicitly dismissed). table 3. sector-specific importance of identified stem challenges in georgia source: developed by authors. 4.2 discussion of key challenges in stem employment talent drain talent drain remains a critical challenge across stem fields in georgia, with many professionals choosing to work abroad or remotely for international companies. respondents highlight that this issue is particularly severe in healthcare, it, and research, where skilled professionals have access to significantly higher salaries and better working conditions outside georgia. for some fields, such as nursing, the migration trend is largely due to structured pathways leading to european jobs, where wages can be three to four times higher than in georgia. in other sectors, such as it and ai, the trend is different: while professionals remain in georgia physically, they work exclusively for foreign employers, bypassing the local job market and contributing to a shortage of senior professionals in georgian companies. the lack of career progression and research funding further fuels the brain drain. many researchers and engineers leave the country for doctoral programs and specialized training, often choosing to remain abroad due to better infrastructure, access to modern technology, and financial incentives. respondents also highlight the failure to retain international specialists who arrived in georgia during geopolitical shifts, particularly after the russia-ukraine war. bureaucratic hurdles and lack of targeted policies meant that many skilled foreign professionals ultimately moved on to european countries instead of staying in georgia. without long-term investment in local career opportunities, salaries, and research infrastructure, talent drain will likely continue to be a major obstacle for georgia’s stem workforce. low salaries and limited career growth respondents overwhelmingly agree that low wages and a lack of structured career growth are among the biggest obstacles to talent retention in stem fields. in many cases, salaries are not only non-competitive internationally challenge ict health sector science engineering talent drain important important important somewhat important low salaries and limited career growth important important important important mismatch between industry demand and workforce skills important important important somewhat important limited stem awareness and engagement not important somewhat important somewhat important important gender disparities in stem important somewhat important not important important regional disparities in stem somewhat important somewhat important important important understanding stem employment challenges in georgia: a qualitative analysis of employer perspectives 322 but also insufficient for professionals to remain in their fields domestically. the problem is most pronounced in healthcare, research, and engineering, where wages often do not match the skills, education, or workload required for the roles. for example, young researchers in physics, microbiology, and chemistry frequently leave academia because entry-level salaries are so low that continuing research is financially unsustainable. healthcare professionals, particularly nurses and therapeutic specialists, also cite salary stagnation as a key reason for leaving their fields or switching to higher-paying specialties like plastic surgery. in it and ai, while salaries are relatively higher, they still cannot compete with international companies, leading to a steady outflow of mid-to-senior level professionals. respondents also emphasize the lack of structured career progression pathways in many industries. young professionals often see few opportunities for promotions, professional training, or leadership roles, making long-term career growth in georgia unattractive. engineering and energy sector professionals specifically mention that public sector jobs fail to attract young talent, as salaries remain unchanged for years, and career development programs are either nonexistent or poorly implemented. without policy interventions that increase salaries and create clear career advancement structures, georgia risks continued workforce attrition in critical stem sectors. mismatch between industry demand and workforce skills respondents identify a serious gap between stem education and actual industry needs, with many graduates entering the job market without the necessary practical skills. across multiple sectors, employers report having to invest heavily in additional training, as many university graduates lack real-world experience and technical expertise required for their roles. in it, this issue is particularly visible in ai, data science, and cybersecurity, where university curricula have not kept pace with technological advancements. many graduates struggle with hands-on problem-solving, forcing companies to spend significant resources on internal training programs. similarly, engineering and energy sector respondents highlight that technical education is outdated, and many professionals graduate without exposure to modern industrial equipment, hydropower infrastructure, or automation technologies. healthcare professionals note that the medical specialization system does not align with sector demands, leading to shortages in therapeutic medicine and general practitioners, while oversaturation exists in certain high-paying specialties. laboratory professionals also emphasize that many graduates lack fundamental laboratory skills, requiring additional inhouse training. without curriculum modernization, better industry-university collaboration, and improved certification processes, georgia’s stem graduates will continue to face challenges in meeting labor market demands. limited stem awareness and engagement while awareness of stem careers has improved, respondents indicate that many young people still lack proper career guidance, leading to imbalances in sector growth. certain fields, such as it, have benefited from strong marketing and educational programs, leading to an influx of students. however, other critical stem fields—such as renewable energy, microbiology, and industrial engineering—struggle to attract young talent due to a lack of visibility and outreach efforts. respondents stress that many students choose quick certification programs instead of building a strong foundation in stem education, often entering the workforce with insufficient skills for long-term career success. this creates an oversupply of junior professionals in some areas while leaving critical gaps in others. some professionals argue that early engagement programs in schools, industry partnerships, and better career guidance could help direct students toward sustainable career paths in underrepresented stem fields. 323 gender disparities in stem it manifest differently across industries, but respondents agree that structural barriers still limit gender equality in leadership roles. in some fields, such as healthcare and laboratory sciences, women make up the majority of entry-level positions, but men dominate leadership roles, creating barriers to career progression. respondents in laboratory sciences emphasize that despite women being well-represented in technical roles, decision-making positions in research institutions remain largely maledominated. in it and engineering, the underrepresentation of women in technical roles is more pronounced. despite ongoing efforts to increase female participation in software development, ai, and hydropower engineering, respondents state that cultural perceptions and a lack of mentorship opportunities still discourage many women from pursuing stem careers. the healthcare sector presents an interesting contrast: while nursing is a female-dominated field, men are significantly underrepresented due to social stigma and traditional gender roles. addressing these disparities requires structural policy changes, mentorship programs, and targeted initiatives to promote greater gender diversity in stem careers. regional disparities in stem access to stem education and career opportunities remains highly concentrated in urban centers, with respondents highlighting severe workforce shortages in rural areas. schools outside major cities often lack high-speed internet, laboratory facilities, and trained educators, making it difficult for students to pursue stem careers outside of tbilisi and major regional hubs. in the energy and engineering sectors, respondents stress that the absence of regional training centers has created critical skill shortages, making it difficult to implement infrastructure projects in rural areas. it professionals note that rural students lack access to proper digital education, limiting their ability to enter high-demand fields like software engineering and cybersecurity. additionally, healthcare respondents point out that regional hospitals struggle to attract and retain skilled medical professionals, worsening the gap between urban and rural healthcare services. without targeted investment in regional education programs, workforce incentives, and infrastructure development, these disparities will continue to hinder economic growth and stem sector expansion outside major cities. table 4. key research findings for each challenge talent drain it and ai professionals remain in georgia but work remotely for international companies, bypassing local employers. healthcare and nursing professionals migrate to europe due to significantly higher salaries. research talent leaves due to lack of funding and career opportunities. georgia failed to retain international specialists who arrived during geopolitical shifts. low salaries and limited career growth salaries are not competitive with international markets, leading to workforce attrition. career progression pathways are unclear in engineering, healthcare, and research. public sector jobs fail to attract young professionals due to stagnant wages. mismatch between industry demand and workforce skills graduates often lack hands-on experience and require additional training. university curricula in it, ai, and engineering are outdated. specialization choices in healthcare do not align with labor market needs. understanding stem employment challenges in georgia: a qualitative analysis of employer perspectives 324 limited stem awareness and engagement certain stem fields, like renewable energy and microbiology, struggle to attract students. quick certification programs are leading to skill imbalances in the workforce. early engagement initiatives could improve career planning. gender disparities in stem women dominate lower-level laboratory and healthcare roles but are underrepresented in leadership. it and engineering have a significant gender gap, particularly in technical positions. nursing remains female-dominated, with few men entering the field due to societal perceptions. regional disparities in stem rural areas lack access to stem education, limiting career opportunities. engineering and healthcare sectors struggle to retain professionals outside major cities. limited digital infrastructure prevents rural students from entering it careers. source: developed by authors. 4.3 discussion of sector-specific trends and insights we also analyzed sector-specific findings to better understand the challenges and opportunities within different industries: ict sector according to it sector respondents, the industry faces a unique form of talent drain, where professionals remain in georgia but work exclusively for foreign companies, bypassing local employers. while there is a steady influx of new entrants into the field, mid-to-senior level professionals are in short supply. many respondents highlight that university graduates often lack practical experience, forcing companies to invest heavily in training. additionally, salary disparities between local and international employers make retention difficult. the gender gap in it remains another issue raised by respondents, with women being underrepresented in software development and technical roles, despite growing awareness initiatives. engineering & energy respondents in the engineering and energy sectors highlight that workforce shortages are one of the biggest challenges, primarily due to the lack of technical training programs and weak career incentives. while the demand for specialists continues to grow, many professionals either seek opportunities abroad or transition to better-paying fields. hydropower and infrastructure projects, in particular, face a shortage of skilled workers, especially in rural areas where training facilities are limited. public sector engineering jobs, according to respondents, fail to attract young professionals due to low wages and limited career development pathways. the gender gap remains particularly wide in this sector, with few women pursuing technical engineering roles. healthcare & life sciences respondents highlight severe talent shortages in the healthcare sector, particularly in nursing, where many professionals migrate to europe due to significantly higher salaries. while medical careers remain attractive, specialization choices do not always align with industry needs, leading to shortages in critical areas such as therapeutic medicine. some respondents note that financial considerations often dictate career paths, with professionals transitioning into more lucrative fields such as plastic surgery rather than remaining in essential medical specialties. additionally, urban-rural disparities in healthcare are a major concern, as regional hospitals and clinics struggle to retain qualified personnel due to low wages and limited access to professional development. from a gender perspective, nursing remains a female-dominated profession, with very few men entering the field. 325 respondents suggest that societal perceptions and stereotypes discourage men from pursuing careers in nursing, despite increasing demand for professionals in the sector. conversely, leadership roles in healthcare institutions remain male-dominated, with fewer women advancing into senior decision-making positions. science & research the science and research sector, including microbiology, physics, and laboratory sciences, faces major workforce challenges due to underfunding, outdated equipment, and low salaries. respondents emphasize that talented researchers in physics, microbiology, and industrial laboratory work frequently leave georgia due to a lack of career growth opportunities and poor research infrastructure. the disconnect between university curricula and practical industry needs is another key issue, as new graduates often require extensive additional training before becoming job-ready. laboratories, in particular, face a shortage of well-trained specialists, and employers note that many graduates lack handson experience with modern laboratory equipment. women are well-represented in laboratory roles at the entry level, but leadership positions are still dominated by men. respondents also highlight that rural areas lack access to modern research and laboratory facilities, limiting opportunities outside major cities. 5. conclusions and recommendations the study reveals several structural challenges in the stem labor market in georgia:  due to low income levels and limited prospects for career advancement, stem professionals show low engagement in scientific and research activities, particularly in natural and exact sciences. this creates a significant barrier to retaining qualified stem talent within the academic sector, which in turn hinders knowledge generation and the potential for research commercialization.  brain drain remains a persistent issue across multiple sectors, including ict, medicine, and engineering. notably, tech startups, which already face difficulties in attracting qualified personnel due to relatively low salaries, are further challenged by the high turnover of re-trained staff, resulting in resource losses after initial investments in skill development.  employers across all stem sectors report that the knowledge and competencies of job seekers often fail to meet market demands. this mismatch is particularly evident in the lack of practical skills and the limited applicability of theoretical knowledge. although the issue is widespread, it employers perceive it as a comparatively less critical concern.  there is a lack of sufficient efforts to promote stem education and career pathways across all stem fields, which undermines labor market readiness and long-term workforce planning.  gender stereotypes negatively influence hiring practices and educational choices. for example, women remain underrepresented in engineering and ict sectors, while men are underrepresented in nursing professions. these stereotypes, embedded in societal attitudes, discourage individuals from pursuing education and careers in certain stem fields, exacerbating existing labor shortages.  stem education and career opportunities are heavily concentrated in urban areas, especially tbilisi, leading to severe workforce shortages in rural regions. limited infrastructure and training centers outside cities create critical skill gaps and deepen regional inequalities. the recommendations are based solely on the perspectives of employers and are intended for key stakeholders in higher education, government, and the private sector. insights understanding stem employment challenges in georgia: a qualitative analysis of employer perspectives 326 from students, educators, or policymakers may lead to different or additional recommendations.  universities are encouraged to strengthen cooperation with employers to enhance students’ practical training and improve their transition into the workforce. this includes aligning academic programs more closely with current labor market demands.  to foster innovation, it is recommended to promote the commercialization of research through the establishment and integration of r&d centers within universities.  at the policy level, setting a progressively increasing national target for r&d expenditure as a share of gdp, along with regular monitoring, would help support sustainable scientific and technological development.  a stem employer working group, composed of private sector stakeholders, could regularly inform universities about evolving labor market needs and collaborate with public institutions to attract further investment into the stem sector. acknowledgment: this academic article draws on data collected as part of the 2024 policyoriented research project "stem opportunities and challenges in georgia: analysis of the education system, labor market, and legislative framework," conducted by the business and technology university in collaboration with the parliamentary research center of georgia, with official permission granted for its use. however, the academic findings presented in this article are the result of independent analysis and do not necessarily reflect the views of the original research project. references 1. ali, h., & bangalore, h. (2025). fostering stem identity: how culturally relevant engineering enhances student perception and participation. aligning stem education with labor needs. global stem education review. 2. auriol, l. (2010). careers of doctorate holders: employment and mobility patterns. oecd. 3. biagi, f., & castaño muñoz, j. (2020). education and employment mismatch in the eu. jrc working paper series. 4. burgos-lopez, m. y., ibarra-herrera, c. c., & chuck-hernández, c. (2024, december). fighting the gender drop off from stem careers throughout the university-industry collaboration: effects of corporate mentorship. in 2024 world engineering education forumglobal engineering deans council (weef-gedc) (pp. 1-8). ieee. skill gaps in modern tech industries. tech workforce journal. 5. conde-ruiz, j. i., ganuza fernandez, j. j., garcía, m., & victoria lanzón, c. (2024). ai and digital technology: gender gaps in higher education. cesifo economic studies, 70(3), 244270.pay inequities in stem. gender & work journal. 6. costa, l. f. c., nascimento, l. m. a., de lima, y. o., santos, a. m., barbosa, c. e., xexéo, g., & de souza, j. m. (2024). women’s journey in stem education in brazil: a rapid review on engineering and computer science. ieee access.. (2025). gender bias in green tech careers. sustainable industry review. 7. delavallade, c., koussoubé, e., rouanet, l., & zenaki, m. (2024). exploring the drivers of youth pursuing vocational training in high-paying sectors in côte d'ivoire. world bank. 8. deming, d. j., & noray, k. l. (2018). stem careers and the changing skill requirements of work (no. w25065). national bureau of economic research.). stem careers and changing skills. nber working paper series. 9. dolgikh, s., & potanin, b. (2025). gender differences in the returns to education and stem degree in mexico. journal of economic studies. gender inequality in post-soviet stem sectors. journal of post-socialist studies. 10. duran, a., & lopez, d. (2019). women from diverse backgrounds in the science, technology, engineering, and math (stem) professions: retention and career development. in gender 327 economics: breakthroughs in research and practice (pp. 729-767). igi global.. migration and stem workforce sustainability. migration policy institute report. 11. edwards, k. a., mccollester, m., phillips, b., acheson-field, h. a. n. n. a. h., leamon, i., johnson, n., & lytell, m. c. (2021). compensation and benefits for science, technology, engineering, and mathematics (stem) workers. 12. el khawand, r. (2025). jordanian women's perception of the discrepancy between education and access to labor market (doctoral dissertation, walden university).. structural barriers in gender-diverse hiring. gender equity in education review. 13. gao, y., eccles, j. s., & dicke, a. l. (2025). not a pipeline but a highway: men's and women's stem career trajectories from age 13 to 25. journal of vocational behavior, 156, 104067.the lag in stem education curriculum. technology and learning journal. 14. ghaffarzadegan, n., xue, y., & larson, r. c. (2017). work-education mismatch: an endogenous theory of professionalization. european journal of operational research, 261(3), 1085-1097.dynamics of the academic biomedical science labor market. plos one. 15. gregory, s. l. (2015). african american female engineering students' persistence in stereotype-threatening environments: a critical race theory perspective. utah state university. regional innovation strategies and workforce outcomes. economic development quarterly. 16. hodgson, s., reid, b., cooper, j., dunn, c., & raya, l. (2024). rcnet’s girls in stem: insights and recommendations for future projects and community college programs. shortterm impacts of stem outreach programs. stem participation journal. 17. hora, m. t., benbow, r. j., & oleson, a. k. (2016). beyond the skills gap: how the lack of systemic supports for teaching and learning undermines employer, student, and societal interests. wcer working paper no. 2016-9. wisconsin center for education research.beyond the skills gap. harvard education press. 18. horton, j., kerr, w. r., & stanton, c. (2017). digital labor markets and global talent flows (no. c13840). national bureau of economic research. 19. jiang, z., wei, b., chen, s., & tan, l. (2024). examining the formation of high school students’ science identity: the role of stem-pbl experiences. science & education, 33(1), 135-157.. returnee entrepreneurs and innovation. journal of economic development. 20. jimenez, m., santiago, n., & couvertier, i. (2024). an industry-university educational experience to broaden the participation of underrepresented students in computer engineering. in iceri2024 proceedings (pp. 7681-7687). iated.gender dynamics in stem. diversity in higher education. 21. karimi, h., & pina, a. (2021). strategically addressing the soft skills gap among stem undergraduates. journal of research in stem education, 7(1), 21-46.ommunication skills among stem graduates. employability studies journal. 22. kersanszki, t. l., & nadai, l. (2020). the position of stem higher education courses in the labor market. int. j. eng. pedagog., 10(5), 62-76.the gap between education and technical skills. labour market studies. 23. lestari, e., siregar, a., hidayat, a. k., & yusuf, a. a. (2024). stunting and its association with education and cognitive outcomes in adulthood: a longitudinal study in indonesia. plos one, 19(5), e0295380. 24. lópez-bazo, e., monastiriotis, v., & motellón, e. (2017). the role of education in regional labour markets: evidence from two fragile economies. regional upgrading in southern europe: spatial disparities and human capital, 215-244. stem and regional employment in the eu. regional science and urban economics. 25. lucietto, a. m., & peters, d. l. navigating the path of successful industry-academia collaboration: strengthening those relationships. reimagining transformative educational spaces: technological synergy for future education, 335. 26. lysenko, t., & wang, q. (2023). college location and labor market outcomes for stem graduates in the us. geojournal, 88(2), 1469-1491. stem disparities in rural education. comparative education review. understanding stem employment challenges in georgia: a qualitative analysis of employer perspectives 328 27. marin, g., & vona, f. (2017). finance and the misallocation of scientific, engineering and mathematical talent. 28. martínez-gómez, m., colon, s. c., & de la poza plaza, e. (2024). the gender gap and gender pay gap in higher stem studies: a case study. in iceri2024 proceedings (pp. 137-141). iated. early stem bias formation. educational psychology review. 29. owens, e. w., shelton, a. j., bloom, c. m., & cavil, j. k. (2012). the significance of hbcus to the production of stem graduates: answering the call. educational foundations, 26, 3347. 30. pater, r., cherniaiev, h., & kozak, m. (2022). a dream job? skill demand and skill mismatch in ict. journal of education and work, 35(6-7), 641-665. 31. rodríguez, i. d., gamboa, j. p., soto, a. m., & díez, m. m. (2025). higher vocational education: examining an unexpected pathway for upskilling and reskilling of stem and non-stem university graduates in spain. revista de educación, 1. 32. salzman, h. (2013). what shortages? the real evidence about the stem workforce. issues in science and technology, 29(4), 58-67. 33. šaras, e. d. (2024). theory and evaluation of undergraduate stem education interventions. the florida state university.. career pathways in academic stem. higher education policy. 34. schwager, k. a., & gates, m. (2024). mitigating rural brain drain in stem-related fields in louisiana and montana (doctoral dissertation). 35. smith, e., & white, p. (2022). moving along the stem pipeline? the long-term employment patterns of science, technology, engineering and maths graduates in the united kingdom. research papers in education, 37(4), 457-478.. systemic barriers in stem careers. equity in science review. 36. smith, e., & white, p. (2024). gender, participation and attainment in stem: a comprehensive overview of long‐term trends in the united kingdom. british educational research journal. 37. srivastava, r. (2025). industrial relevance of stem degrees. future of work journal. 38. tajudeen, f. p., moghavvemi, s., thirumoorthi, t., phoong, s. w., & bahri, e. n. b. a. (2025). nurturing future workforce: enhancing sme's readiness for digital transformation in malaysia. in digital transformation of malaysian small and medium enterprises (pp. 91-111). emerald publishing limited. 39. teshome, a., & oumer, j. (2024). stem education and labor needs: engineering graduates in ethiopia. international journal of research in stem education, 6(1), 46-58.. stem graduates and job market alignment. ethiopian journal of higher education. 40. wright, r., ellis, m., & townley, m. (2017). the matching of stem degree holders with stem occupations in large metropolitan labor markets in the united states. economic geography, 93(2), 185-201.. urban-rural divide in stem jobs. urban studies journal. 41. wu, m. l., & zhou, y. (2025). strengthening teachers’ stem preparedness through a technology integration online course. education and information technologies, 1-16.). curriculum gaps in ai education. journal of digital learning. 42. xue, y., & larson, r. c. (2015). stem crisis or stem surplus? yes and yes. monthly labor review, 2015, 10-21916.. stem crisis or stem surplus?. ieee transactions on engineering management. 43. yu, c. m., piew, t. h., & fai, f. k. (2014). brain drain, talent mobility and academic networking. journal of management and research, 1(1). 44. zwetsloot, r. (2021). america’s stem talent challenge. center for strategic and international studies. agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 19, no. 1 (2025), pp. 303-314 303 the impact of digital transformation on enterprises' resilience: evidence from ukraine a. sorokina, l. lebedeva alyona sorokina¹, larysa lebedeva² ¹ ² state university of trade and economics, ukraine ¹ https://orcid.org/0000-0002-6512-2776, e-mail: a.sorokina@knute.edu.ua ² https://orcid.org/0000-0001-8632-5460, e-mail: l.lebedeva@knute.edu.ua abstract: the research focuses on determining the impact of digitalization factors on the resilience of ukraine’s entrepreneurial sector. the main aim is to determine whether digitalization has a positive impact on the resilience of enterprises. the factors under research include the following: the availability of internet access at ukrainian enterprises, their ecommerce, the number of employees involved in research and development, and the share of enterprises that employ ict specialists. the research methodology has two components: the use of a multifactor nonlinear regression model and the calculation of the proposed index of digital penetration in the ukrainian business sector. the results show that the most influential factors of digitalization are: the presence of employees specializing in ict and e-commerce. both factors make ukrainian enterprises more resilient and adaptive to shocks. however, the results of the digital penetration index emphasize the low level of digital transformation in ukrainian enterprises, particularly limited automation and insufficient use of cloud computing and artificial intelligence technologies. the results of the study confirm that digitalization does enhance the resilience of ukraine's entrepreneurial sector, but the low level of digital transformation underscores the need for legislative action to accelerate the development of advanced digital technologies. in order to benchmark the experience, the authors compare the use of digital technologies in ukrainian and eu enterprises. the results of the research can be used to deepen the study of sectoral resilience, the experience of eu countries, and to provide recommendations for digital development of ukraine. keywords: digital transformation, economic resilience, enterprises' resilience, digitalization introduction enterprise resilience in the context of digitalization refers to the ability of businesses to integrate digital technologies to maintain competitiveness, ensure the continuity of business processes, and absorb shocks of various kinds. two positive effects of digital technology adoption by the entrepreneurial sector can be identified. first, at the micro-level, it directly improves enterprise efficiency (positive correlation may result from process automation, better data management, and enhanced communication capabilities (wang et al., 2023)). summarizing existing theoretical research (caputo et al., 2020; bican & brem, 2020; legner et al., 2017), digitalization affects enterprise productivity through operational efficiency improvement, market expansion, better communication between business and household sectors, product diversification, and adaptability to a changing business environment. in addition, according to recent research, the development of a digital culture has a beneficial impact on the sustainable development of enterprises (serafimova & vasilev, 2024). such https://orcid.org/0000-0002-6512-2776 mailto:a.sorokina@knute.edu.ua https://orcid.org/0000-0001-8632-5460 mailto:l.lebedeva@knute.edu.ua the impact of digital transformation on enterprises' resilience: evidence from ukraine 304 positive correlations contribute to enterprise resilience, as these conditions enable faster recovery following shock events. the second assertion logically follows: digital technology adoption by the entrepreneurial sector enhances the resilience of the entire economic system. this can be attributed to the transformation of business models and the creation of new products (which increase economic diversification and, hence, adaptability); global market entry and revenue source diversification (which improve competitiveness and recovery capacity); and cost reduction through digitalization (which enhances the system’s absorption capacity). this paper aims to assess the impact of digitalization factors on the resilience of ukraine’s entrepreneurial sector. research on the digitalization impact on enterprise resilience in ukraine remains limited. while significant attention has been paid to economic security (zinenko & kobielieva, 2022; hrinkevich et al., 2023; ohrenych & dibrova, 2023), innovation development, digitalization, and their implications for enterprise security (popelo et al., 2023; zubko et al., 2021; kuzior et al., 2022; dubyna et al., 2023), the concept of resilience and the direct impact of digital technologies are mostly explored theoretically. therefore, expanding the research focus is appropriate. this research addresses the following questions: (1) can digitalization factors influence the resilience of ukrainian enterprises? (2) if so, which factors have greater or lesser impacts? (3) if digital technologies affect enterprise resilience, what is the current level of digital technology penetration in ukraine’s entrepreneurial sector? methods the research consists of two quantitative components: (1) the application of a nonlinear regression model to assess the impact of digitalization on enterprise resilience and (2) the calculation of the digital technology penetration index for ukraine’s entrepreneurial sector. the assessment of the impact of digitalization factors on enterprise resilience was conducted using mathematical modeling, particularly a multifactor nonlinear regression model. this method is widely employed by both ukrainian (for assessing the impact of digitalization on economic security (zubko et al., 2021)) and international researchers (for assessing the impact of digital technologies on urban resilience (shi et al., 2023), the influence of digital transformation on sme resilience (omoush et al., 2023), and the effect of innovation on urban disaster resilience (samarakkody et al., 2023)). several key theoretical and methodological considerations justify the choice of a nonlinear regression model: the influence of digitalization factors is often nonlinear due to varying intensities and speeds of enterprise adaptation to digital changes, and complementary or substitution effects are better evaluated through nonlinear models. the calculation of the index involves the following steps: 1. selection of indicators and data collection. indicators were chosen to reflect the level of digital technology adoption and use by national economy enterprises (table 4). alyona sorokina, larysa lebedeva 305 2. definition of threshold values. thresholds were developed considering ukraine’s economic specifics (size, development dynamics, historical context, strategic digitalization goals), as well as the experience of eu countries. 3. data normalization according to threshold values. if an indicator value exceeds the threshold, it is normalized to 1; otherwise, it is normalized to 0. 4. calculation of digital technology penetration: 𝐼𝑚 = σ𝑁 = 1 σ𝑁𝑥 × 100% where 𝐼𝑚 is an integral indicator of the m-th sector of the economy, where m = (1, 2, 3) nx=1 — is the number of indicators whose normalized value is 1; nx — number of indicators. data the research process and results depend entirely on the availability of statistical data. the assessment of ukraine’s digital environment used data from the state statistics service of ukraine and official eu statistics, as well as international indices (global innovation index and frontier technology readiness index). due to the ongoing war initiated by russia, data collection has been suspended or restricted, limiting the research scope. the quantitative assessment took into account only those time periods that had the most complete statistical data. for missing indicators, the latest available data were used. results to build this model, it is necessary to define the dependent variable (y) and independent variables (x) (table 1). accordingly, within the model, the dependent variable will be an indicator that assesses the economic resilience of the entrepreneurial sector. the independent variables are indicators that will reflect the factors of digitalization's impact on resilience. as a dependent variable, the indicator of value added by production costs of economic entities was chosen. we believe that the selected indicator successfully demonstrates the resilience of the sector: value added by production costs actually means the ability of enterprises to create new economic value. even in the face of shocks, enterprises with a stable level of value added are better able to maintain their operations and ensure financial independence. the indicators that will serve as independent variables and reflect the impact of digitalization on economic resilience are: the number of enterprises with access to the internet; the volume of products (goods, services) sold by enterprises derived from e-commerce; the number of employees involved in research and development; and the share of enterprises with ict specialists. in addition, we believe that it would be appropriate to assess the use of crm systems by enterprises of the national economy (as this is a direct reflection of automation processes) and the state of cybersecurity, but currently there is no statistical data for the period under research. it should also be noted that due to the lack of statistical data for the share of the the impact of digital transformation on enterprises' resilience: evidence from ukraine 306 number of enterprises that employ ict specialists (statistical data are not available for 2020 and 2022), the model may contain a certain percentage of uncertainty for the purpose of the assessment, the indicators for 2020 and 2022 were projected based on the growth (decline) rates of previous years. table 1. initial data for assessing the impact of digitalization on value added by economic entities' expenditures value added by production costs of economic entities the number of employees involved in research and development the number of enterprises with access to the internet the volume of products (goods, services) sold by enterprises derived from e-commerce the share of enterprises with ict specialists year y x1 x2 x3 x4 2018 2640886379,2 88128 43303 228 035 634,70 22,3 2019 3121256476,2 79262 43785 292 731 939,10 21,6 2020 3294768464,7 78860 44271 364 571 488,00 20,9 2021 4594232280,4 68808 44508 435 909 793,90 21,7 2022 3947735837,3 53221 42785 465 316 898,70 17,7 2023 4838907049,6 58567 34204 547 590 249,30 17,7 source: website of the state statistics service of ukraine, 2022 calculations and model building were based on a regression model in excel. the level of reliability is defined as 0.95 the boundaries of the confidence interval for each regression coefficient cover the true value with a probability of 95%. considering the upper limit of the confidence interval for each of the coefficients, the model is as follows: �̌� = −49274,9𝑋1 − 72464,9𝑋2 + 6,5𝑋3 + 433463774,7𝑋4 − 1029872880 the coefficient of determination 𝑅2 is quite high and amounts to 0.999. thus, the variation of value added by the costs of economic entities is 99% determined by the variation of the proposed factors, but there are 0.1% that are unaccounted for. these results allow us to assess the adequacy of the model. according to the fisher's test of adequacy, the obtained f-value (0.02) is lower than the significance level (0.05), so since 𝐹 < 𝑎, we can say that the model is generally statistically significant and adequate. we can assess the adequacy and statistical significance of each coefficient separately by using the critical t value from the student's statistical table. if the critical significance level is 𝛼 = 0.05 and the degree of freedom is n-m=2, the critical value is 2.920. as can be seen from the results of the t-test (table 2), all available coefficients are greater than the critical value. this indicates that they are not statistically significant. therefore, we consider it necessary to use a different type of model to evaluate the selected indicators. alyona sorokina, larysa lebedeva 307 table 2. calculations of a multifactor linear model coefficients t-statistics p-value r-square the significance of f y -1029872879,60175 -2,33445888668255 0,257650973 0,999 0,0240 x1 -49274,90302 -10,8441748720604 0,058540589 x2 -72464,89698 -10,5163655881444 0,060354627 x3 6,54706318666723 17,1301999848115 0,037121463 x4 433463774,656223 19,6914621593524 0,032301987 source: compiled by the authors from now on, we will use a power function with its transformation to a linear form as a result of logarithmizing. the function will have the following form: 𝑙𝑛𝑌 = 𝑙𝑛𝐴 + 𝛼 × 𝑙𝑛𝑋1 + 𝛽 × 𝑙𝑛𝑋2 + 𝛾 × 𝑙𝑛𝑋3 + 𝛿 × 𝑙𝑛𝑋4 the calculations were performed by building a regression model in excel, and the results are as follows: �̀� = 10.33, 𝛼 = −1,02, 𝛽 = −0,9, 𝛾 = 0,61, 𝛿 = 2,39. accordingly, taking into account the logarithmization of the coefficients, we have the following form of the function: 𝑌𝑐𝑎𝑙𝑐 = exp (10,33) × 𝑋1 −1,02 × 𝑋2 −0,9 × 𝑋3 0,61 × 𝑋4 2,39 the final result after calculating the exponential function: 𝑌𝑐𝑎𝑙𝑐 = 30,638.1 × 𝑋1 −1,02 × 𝑋2 −0,9 × 𝑋3 0,61 × 𝑋4 2,39 the coefficient of determination 𝑅2 of the newly created model remained at the same level 0.99, which still indicates a high influence of the factors considered. we can also assess the adequacy of the model, in particular, using fisher's criteria. for this purpose, we will use the result of the f-value for the built model and the tabulated f-value for the significance level of 0.05. to select the correct table value, we also took into account the number of independent variables (4) and the total number of observations (6) minus the number of parameters. accordingly, 𝐹𝑡𝑎𝑏𝑙𝑒 = 7.7, 𝐹𝑐𝑎𝑙𝑐 = 3354,08; 𝐹𝑐𝑎𝑙𝑐 > 𝐹𝑡𝑎𝑏𝑙𝑒. we can conclude that the model is reliable, all factors have an impact on the dependent variable (p-value in table 3). table 3. results of calculations using a power function with logarithmization coefficients t-statistics p-value r-square the significance of f y 10,32814803 28,62656837 0,022229734 0,999 0,012949335 x1 -1,015903715 -24,22316748 0,026266527 x2 -0,903507143 -26,19640569 0,024290005 x3 0,607733673 39,84619939 0,015973573 x4 2,392693185 35,46667481 0,017945047 source: compiled by the authors thus, according to the results of the calculations, the factor of the availability of ict employees at enterprises has the greatest impact on the entrepreneurial sector's resilience. there are several reasons for this: first of all, enterprises with ict specialists are able to demonstrate the impact of digital transformation on enterprises' resilience: evidence from ukraine 308 greater preparedness for digital threats (cyberattacks or nda data leaks), which directly affects their ability to maintain functionality during economic shocks. in addition, there is a possibility of greater flexibility and technical competitiveness of the enterprise: the presence of ict specialists in the enterprise allows for the introduction of modern digital technologies, and thus, increases the efficiency of operational processes. the results also show that e-commerce has a significant impact, which can be explained accordingly: 1. e-commerce actually eliminates most of the barriers to doing business: physical interaction between consumer and seller is replaced by digital communication (which is faster and more affordable), and it is easier to expand the market it becomes possible to compete not only in the national but also in the international market, with a positive result of diversifying the customer base. 2. another positive effect of e-commerce is the reduction of transaction costs: enterprises can increase their profitability by reducing the cost of renting premises, logistics, etc. however, of course, there is also the possibility that costs will be incurred for maintaining a website, crm systems to automate customer interaction, and the development of digital marketing campaigns. the impact of internet access at the enterprise and the number of employees involved in r&d is also statistically significant. however, it should be noted that the effectiveness of these two factors is difficult to assess in the short term (which is why their impact is negative in the current situation, see table 3). for example, the effect of r&d can be traced conditionally in 5-10 years, and the effect of using the internet connection is also not immediately noticeable (or its significance is not so great). in order to comprehensively assess the level of digital transformation of ukraine's entrepreneurial sector, we propose to consider the developed digital penetration index (table 4). table 4. input data for the calculation of the digital penetration index in the entrepreneurial sector of ukraine № indicator threshold value 2022 1 share of enterprises engaged in e-commerce in the total number of enterprises, %. ≥ 22 6.1 2 share of the number of enterprises using fixed internet access in the total number of enterprises, %. ≥ 90 61.8 3 share of the number of enterprises applying ict security measures in the enterprise's information and communication systems in the total number of enterprises, %. ≥ 90 73.2* 4 share of enterprises purchasing cloud computing services in the total number of enterprises, %. ≥ 40 9,8 5 exports of ict services, usd billion ≥ 6.5 7.52 alyona sorokina, larysa lebedeva 309 6 share of the number of enterprises that faced problems due to ict security incidents in the total number of enterprises, %. ≥ 15 24.7 7 share of the employed population in the ict sector in the total number of employed people, % ≥ 4 1.9** 8 share of the number of enterprises using artificial intelligence technologies in the total number of enterprises, %. ≥ 6 5.4 9 global innovation index ≥ 30 32,3 10 frontier technology readiness index ≥ 0.61 0.59 source: website of the state statistics service of ukraine, global innovation index (gii), frontier technology readiness index * — statistical data for 2023; ** — statistical data for 2021; after analyzing the available statistics, we can calculate the level of digital penetration in ukraine's entrepreneurial sector using the following formula: 𝐼𝑚 = σ𝑁 = 1 σ𝑁𝑥 × 100% thus, the calculation is as follows: 𝐼1 = 3 10 × 100% = 30% the level of digital technology penetration in ukraine's business sector is 30%. according to the proposed assessment scale (table 5), this level is low, which means minimal adoption of digital technologies. business processes are mostly performed manually, but there is a small percentage of automation. the level of digital skills of employees is also low and needs to be significantly improved. table 5 digital penetration scale penetration level meaning 100-80% high business operations are fully dependent on digital technologies. business processes are automated, artificial intelligence, cloud computing, and iot are used. employees' digital skills are at a high level. 80-60% sufficient digital technologies are actively used in operations, but not to the fullest extent. thus, business process automation is selective and digital tools are partially used. the level of digital skills of employees is average. 60-40% moderate digital technologies are used only for certain business processes, automation is fragmented, with limited use of digital tools. there is a need to improve the digital skills of employees. the impact of digital transformation on enterprises' resilience: evidence from ukraine 310 40-20% low digital technologies are implemented at a minimal level. business processes are mostly performed manually, but there is a small percentage of automation and use of digital tools. low level of digital skills of employees. 20-0% extremely low digital technologies are hardly used, and enterprises are dominated by “traditional” approaches to doing business, without significant automation. the level of digital skills among employees is too low. source: compiled by the authors statistical analysis shows that the weakest points of ukraine's entrepreneurial sector are indicators related to automation (in particular, the use of ai and cloud computing in enterprises). compared to eu countries, the share of enterprises using ai technologies in ukraine is not very high 5.4% (statistical data of enterprises with 10 to 49 employees) (website of the state statistics service of ukraine, 2022), while the average value in eu countries is 6.2% (eurostat, 2022). it is also worth noting that a characteristic feature of the national economy is the invariance of this indicator depending on the size of the enterprise: the share of large enterprises using ai technologies in ukraine is 5.2% (which is 0.2% less than the same share in the context of small enterprises). on the contrary, compared to small enterprises, large enterprises in the eu use ai technologies more often 14.5% (eurostat, 2022) across the eu. obviously, the conditions of a full-scale war somewhat limit the introduction of innovative technologies in enterprises, but as a rule, large enterprises are more resilient and adaptive to shocks, so it is surprising that they fund ai technologies less. figure 1. share of enterprises using ai technologies in ukraine and eu countries source: compiled on the basis of (eurostat, 2022; website of the state statistics service of ukraine, 2022) 0 2 4 6 8 10 12 14 d en m ar k l u x em b o u rg f in la n d n et h er la n d s m al ta b el g iu m g er m an y a u st ri a s lo v en ia s w ed en n o rw ay c ro at ia s p ai n s lo v ak ia p o rt u g al b o sn ia a n d … u k ra in e ir el an d t u rk ey m o n te n eg ro f ra n ce it al y e st o n ia c ze ch r ep u b li c c y p ru s g re ec e l at v ia l it h u an ia b u lg ar ia h u n g ar y p o la n d s er b ia r o m an ia alyona sorokina, larysa lebedeva 311 the share of the number of enterprises that purchase and use cloud computing services is also low compared to eu enterprises. while the average value for the eu countries is 42.5% (2023), only 9.8% of ukrainian enterprises take advantage of cloud computing. internet access also needs to be improved. in 2023, 80.8% of ukrainian enterprises had access to a fixed-line internet connection, which is 19% more than in 2022. however, under ideal conditions, this figure should reach at least 90%, as the experience of eu countries shows. we assume that this may be due to infrastructure constraints: areas with low population density have a lower number of fixed internet access lines, where providers are not economically interested in laying fixed networks. in addition, damage to or destruction of infrastructure as a result of hostilities, especially in frontline areas, significantly complicates access to the fixed internet. it should not be forgotten that enterprises with unstable income tend to use an alternative network the mobile internet. the level of digital security in the business sector can be indicated by the share of enterprises that use ict security measures. according to statistics, in 2023, there were not too many ict incidents among ukrainian enterprises the share of the number of enterprises that faced problems was 24.7% (in the total number of enterprises) (website of the state statistics service of ukraine, 2022). the most vulnerable economic activities are: manufacturing (production of coke and petroleum products, basic pharmaceutical products and pharmaceuticals); wholesale and retail trade; computer programming, consulting and related activities; provision of information services; travel agencies, travel operators, provision of other reservation services and related activities. figure 2. types of ict incidents among ukrainian enterprises source: compiled on the basis of (eurostat, 2022; website of the state statistics service of ukraine, 2022) at the same time, security measures are used by the vast majority of enterprises in the national economy 73.2% in 2023. the most commonly used security measures include strong password authentication (66.3%) (unfortunately, more secure authentication methods, such as biometric methods or a combination of two authentication methods, are used much less frequently), backing up data to a secure location (52.7%), controlling network access (44.6%), encrypting data, documents, or email (23%), and vpn (21.4%). however, these figures are 21.8 3.9 5.9 2.2 0.6 0.7 0.0 5.0 10.0 15.0 20.0 25.0 unavailability of ict services due to hardware or… unavailability of ict services due to an external… destruction or corruption of data due to… destruction or corruption of data due to… disclosure of confidential data through… disclosure of confidential data due to… share of the number of enterprises that faced problems due to ict security incidents share of the number of enterprises that faced problems due to ict security incidents the impact of digital transformation on enterprises' resilience: evidence from ukraine 312 significantly lower than in the eu, where 92% of businesses use at least one security measure on average. the most popular in the eu are password authentication (82%), backups (78%), and network access control (65%). the strength of the digital transformation process of ukraine's business sector is the size of ict exports and the resilience of the it sector as a whole. even though the national economy's ict services exports have a positive upward trend, 2023 was the first year when the value of this indicator decreased. according to the world bank, in 2023, ukraine's ict services exports amounted to usd 6.8 billion. usd (for comparison, in 2022, the value of the indicator was 7.52 billion usd, which is 0.72 billion usd less. usd, which is 0.72 billion more). it is noted that the reason for this may be a slowdown in economic growth in global markets. the countries from which the revenue from ict exports comes are: usa (usd 2,667 million), malta (usd 567 million), great britain (usd 535 million), cyprus (usd 362 million), israel (usd 293 million), germany (usd 275 million), and switzerland (usd 274 million). all of these countries are currently experiencing a recession, and the demand for ict services is not as high as it was during covid-19. local reasons are also worth highlighting: increased investment risks due to a full-scale invasion and the mobilization process, which affects the number of it professionals. discussions thus, the use of a quantitative approach, specifically building a nonlinear regression model, enabled the identification of the impact of digitalization factors on the resilience of ukraine’s entrepreneurial sector. according to the results, the most significant influence on value added by production costs of economic entities stems from the presence of ict specialists in enterprises and the adoption of e-commerce. the presence of ict specialists directly affects economic resilience by ensuring productivity and adaptability. employees with ict skills and, accordingly, a high level of digital culture, increase resilience, strengthening the enterprise's innovation potential, flexibility to change and competitiveness (serafimova & vasilev, 2024). e-commerce, in turn, is no less important for enterprise resilience. enterprises that use e-commerce as a sales channel can respond more swiftly to demand fluctuations, scale sales, and optimize transaction costs. these factors most significantly contribute to enhancing: (1) economic efficiency, (2) digital adaptability, and (3) resilience to external shocks. however, the results of the digital technology penetration index for ukraine's entrepreneurial sector indicate that processes related to e-commerce and the employment of ict specialists remain among the weak points of the national economy, as their values fall below threshold levels. this undoubtedly limits the resilience of ukraine’s entrepreneurial sector. firstly, there is a substantial negative impact on adaptability—in the case of macroeconomic or geopolitical shocks (such as the onset of the full-scale invasion), enterprises lacking digital sales channels or automated processes are less able to adapt to changes. secondly, this contributes to reduced competitiveness across the economy, as a low percentage of ict specialists constrains the adoption of advanced digital technologies. alyona sorokina, larysa lebedeva 313 despite the comprehensive analysis, the research has certain limitations. the most significant limitation relates to the use of statistical data. it would have been preferable to analyze a longer time period, thereby obtaining more regression observations, which would have greatly increased the accuracy of the results. however, official data for some selected indicators were unavailable. this affected both the time frame for the regression model and the calculation of the digital technology penetration index. as noted, the index was calculated only for 2022, which considerably limits the ability to draw precise conclusions. nevertheless, this period provided the most comprehensive set of statistical data for the selected indicators. the choice of threshold values for the index indicators is also a matter of discussion. in most cases, their development is based on a quantitative method, i.e., calculating the median value among the results of the european union countries, but certain qualitative characteristics were also taken into account (such as the historical context of ukraine's economic development, the pace of digitalization and its strategic vision in the country, current shocks, etc.), which indicates a degree of subjectivity in this approach. considering the results and limitations, the study has the potential for further development. the publication of official statistics for more specific indicators (e.g., cybersecurity, cloud computing, and ai) is becoming regular, so it is expected that it will be possible to assess longer time periods in the future and expand the analysis of the index indicators, which will make the analysis more accurate and comprehensive. additionally, sectoral analysis warrants attention. understanding that digitalization factors do have a positive impact on the resilience of enterprises, the question arises as to which industries are more affected and whether digitalization is a key factor for all industries. in this regard, it would be valuable to compare the most significant sectors contributing to ukraine’s gdp and assess the impact of digitalization factors on them. also, since the research is partly based on a comparison of ukraine's experience with the eu countries, there is a need for a broader analysis: a comparison of regression analysis of the impact of digitalization on eu and ukrainian enterprises, and a study of the experience of european countries. although the results of the study and the developed index are adapted to the economic conditions of ukraine and there is no direct generalization of the study, it is possible to adapt the methodology and structure of the research to other countries. references 1. wang, z., lin, s., chen, y., lyulyov, o., & pimonenko, t. (2023). digitalization effect on business performance: role of business model innovation. sustainability, 15(11), 9020. https://doi.org/10.3390/su15119020 2. caputo, a., pizzi, s., pellegrini, m. m., & dabić, m. (2020). digitalization and business models: where are we going? a science map of the field. journal of business research, 123, 489–501. https://doi.org/10.1016/j.jbusres.2020.09.053 3. bican, p. m., & brem, a. (2020). digital business model, digital transformation, digital entrepreneurship: is there a sustainable “digital”? sustainability, 12(13), 5239. https://doi.org/10.3390/su12135239 4. legner, c., eymann, t., hess, t., matt, c., böhmann, t., drews, p., mädche, a., urbach, n., & ahlemann, f. (2017). digitalization: opportunity and challenge for the business and https://doi.org/10.3390/su15119020 https://doi.org/10.1016/j.jbusres.2020.09.053 https://doi.org/10.3390/su12135239 the impact of digital transformation on enterprises' resilience: evidence from ukraine 314 information systems engineering community. business & information systems engineering, 59(4), 301–308. https://doi.org/10.1007/s12599-017-0484-2 5. zubko, t., hanechko, i., trubei, o., & afanasyev, k. (2021). determining the impact of digitalization on the economic security of trade. eastern-european journal of enterprise technologies, 6(13 (114)), 60–71. https://doi.org/10.15587/1729-4061.2021.248230 6. shi, y., zhang, t., & jiang, y. (2023). digital economy, technological innovation and urban resilience. sustainability, 15(12), 9250. https://doi.org/10.3390/su15129250 7. omoush, k. a., lassala, c., & ribeiro-navarrete, s. (2023). the role of digital business transformation in frugal innovation and smes’ resilience in emerging markets. international journal of emerging markets. https://doi.org/10.1108/ijoem-12-2022-1937 8. samarakkody, a., amaratunga, d., & haigh, r. (2023). technological innovations for enhancing disaster resilience in smart cities: a comprehensive urban scholar’s analysis. sustainability, 15(15), 12036. https://doi.org/10.3390/su151512036 9. zinenko, k., & kobielieva, t. (2022). economic security of the enterprise: methodological essence and component forms. bulletin of the national technical university "kharkiv polytechnic institute" (economic sciences), (4), 9–16. https://doi.org/10.20998/25194461.2022.4.9 10. hrinkevich, s., kohut, m., & stankevych, m. (2023). evolution of theoretical concepts of enterprise economic security . economy and society, (50). https://doi.org/10.32782/25240072/2023-50-70 11. ohrenych, y., & dibrova, v. (2023). economic security of industrial enterprises in ukraine: state, problems and directions for improvement. taurida scientific herald. series: economics, (15), 180-191. https://doi.org/10.32782/2708-0366/2023.15.22 12. popelo, o., shaposhnykov, k., popelo, o., hrubliak, o., malysh, v., & lysenko, z. (2023). the influence of digitalization on the innovative strategy of the industrial enterprises development in the context of ensuring economic security. international journal of safety and security engineering, 13(1), 39– 49. https://doi.org/10.18280/ijsse.130105 13. kuzior, a., arefieva, o., vovk, o., & brożek, p. (2022). innovative development of circular systems while ensuring economic security in the industry. journal of open innovation: technology, market, and complexity, 8(3), 139. https://doi.org/10.3390/joitmc8030139 14. dubyna, m., verbivska, l., kalchenko, o., dmytrovska, v., pilevych, d., & lysohor, і. (2023). the role of digitalization in ensuring the financial and economic security of trading enterprises under the conditions of external shocks. international journal of safety and security engineering, 13(5), 821–833. https://doi.org/10.18280/ijsse.130506 15. website of the state statistics service of ukraine. available at: http://ukrstat.gov.ua 16. global innovation index (gii). (2022). global-innovation-index. https://www.wipo.int/web/global-innovation-index 17. frontier technology readiness index, annual. unctad. https://unctadstat.unctad.org/datacentre/dataviewer/us.ftri 18. artificial intelligence by size class of enterprise. eurostat. https://ec.europa.eu/eurostat/databrowser/view/isoc_eb_ai/default/bar?lang=en 19. serafimova, v., & vasilev, v. (2024). digital culture as a competitive advantage in the sustainable development of organizations. agora international journal of economical sciences, 18(1), 210–222. https://doi.org/10.15837/aijes.v18i1.6724 https://doi.org/10.1007/s12599-017-0484-2 https://doi.org/10.15587/1729-4061.2021.248230 https://doi.org/10.3390/su15129250 https://doi.org/10.1108/ijoem-12-2022-1937 https://doi.org/10.20998/2519-4461.2022.4.9 https://doi.org/10.20998/2519-4461.2022.4.9 https://doi.org/10.32782/2524-0072/2023-50-70 https://doi.org/10.32782/2524-0072/2023-50-70 https://doi.org/10.32782/2708-0366/2023.15.22 https://doi.org/10.3390/joitmc8030139 https://doi.org/10.18280/ijsse.130506 http://ukrstat.gov.ua/ https://unctadstat.unctad.org/datacentre/dataviewer/us.ftri https://ec.europa.eu/eurostat/databrowser/view/isoc_eb_ai/default/bar?lang=en agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 19, no. 1 (2025), pp. 15-36 15 green banking initiatives in azerbaijan: contribution of financial system n. akhundzada, i. rzayeva nazrin akhundzada¹, inara rzayeva² ¹ ²azerbaijan state university of economics, azerbaijan ¹ https://orcid.org/0000-0001-8049-0318, e-mail: axundzada.nazrin@unec.edu.az ²https://orcid.org/0000-0003-2122-0603, e-mail: inara_rzayeva@unec.edu.az abstract: based on existing academic literature, green banking can primarily evolve along three directions: green product development, green corporate social responsibility, and green internal processes this study qualitatively evaluates the commitment of seven topperforming banks in azerbaijan to green banking initiatives and categorizes their activities across these dimensions. the results of the content analysis illustrate that the banks under study demonstrated the strongest commitment in the areas of green products and corporate social responsibility. the adoption of green banking practices is anticipated to expand within the banking sector of azerbaijan in the foreseeable future. moreover, this article empirically examines the impact of environmental performance, primarily related to the internal processing category of business operations and assessed by resource consumption, on the profitability of the top two banks in azerbaijan. the results reveal that, after controlling for bank size, environmental indicators do not exert a statistically significant impact, either positive or negative, on the profitability of these banks. notably, energy consumption and ghg emissions exhibited the most considerable negative association, while only water consumption demonstrated a positive relationship with profitability. these findings support the tenets of legitimacy theory and align with the findings of previous studies. keywords: green banking, green finance, sustainable development, commercial banks, profitability. 1. introduction society is coping with the complex problems of climate change. nowadays, people are analysing global warming and its effects on humanity. reducing carbon emissions and dependence on hydrocarbon fuels, and ensuring an appropriate transition to renewable energy sources, are the main requirements. with this goal in mind, many countries and companies have declared their commitments to achieve zero carbon levels by 2050. however, given that the transition is not limited to the energy sector alone, but also covers agriculture, industry, tourism, and many other sectors, this approach emphasizes the need for systematic environmental management for sustainable and inclusive development. this goal serves the interests not only of society but also of many stakeholders, such as private companies responsible for pollution, financial institutions like banks, and policymakers. all parties play an important role in the development of society. although banking activities do not have a direct physical impact on the environment, the external impact of bank customers’ activities should be taken into account. therefore, there is a need for banks https://orcid.org/0000-0001-8049-0318 mailto:axundzada.nazrin@unec.edu.az https://orcid.org/0000-0003-2122-0603 mailto:inara_rzayeva@unec.edu.az green banking initiatives in azerbaijan: contribution of financial system 16 to follow the “green” trend in their development strategies. this strategy should be reflected in various banking operations, including investment and financing decisions. going green brings plenty of benefits to the community and nature. for example, the decline in paper waste due to switching many transactions to online channels helps reduce deforestation. digitalization, on the other hand, reduces the risk of errors (kesavan, 2018). environmental management in the banking sector is similar to risk management. environmental risk management can be organized according to relevant guidelines (hoque et al., 2019). with this method, banks take into account both investment and environmental risks in their decision-making processes. banks also intensively adopt in-house environmental management. the key aspects of these activities include:  reduction in utility, paper, and stationery consumption.  use of renewable energy.  waste management.  green travel for employees.  reference to ethical banking. the main objective of this study is to review the green banking practices implemented in commercial banks in azerbaijan, as well as green banking policies and practices observed across the globe, for comparative analysis. meanwhile, the research emphasizes the role of the financial system in the green transformation of banks. additionally, the article evaluates the environmental performance of banks. this study aims to contribute to academic literature by investigating how the environmental costs borne by banks affect their profitability in azerbaijan. 1.1 green banking: literature review the banking sector can enhance environmentally sustainable and socially responsible investment by performing an intermediary function between economic development and environmental protection (lalon, 2015). the key features of green banking include the implementation of online banking, reduction of costs and energy usage, and a subsequent increase in gdp. banks should adopt significant green banking policies to demonstrate their commitment. among various policies, one worth mentioning is the support of eco-friendly projects via green finance. the effectiveness of green finance initiatives across different regions—including europe, asia, and the americas—was discussed by sule et al. (2024). in the authors’ opinion, a combination of regulatory clarity, cross-sector collaboration, and technological advancements turns green finance into a powerful tool to address climate change and support sustainability. case studies included practical applications of green finance products, such as green bonds and sustainability-linked loans. for example, there was successful financing of clean energy projects, such as wind farms, through green bonds in mexico. nawaz, sirajudeen, and khan (2020) claim that providing loans to firms that care about the environment would ensure more appropriate use of natural resources. as a result, we could expect the emergence of a more socially responsible corporate world. by implementing this policy, banks can reject loan applications from businesses that seek high profits without nazrin akhundzada, inara rzayeva 17 considering environmental damage. on the contrary, banks can promote low-interest loans to environmentally friendly businesses. another external aspect of green banking is the issuance of eco-oriented banking products. for instance, implementing green card products driven by technological innovation can improve customer awareness of their ecological footprint. kondyukova, shershneva, and savchenko (2018) mentioned the case of russia's tinkoff bank, where a bank card helped collect over 500,000 rubles for environmental programs in 2017. using the card for daily purchases contributed to nature protection by transferring 0.75% of each purchase to the world wildlife fund. when it comes to internal processes, greening banks becomes possible through the establishment of “electronic branches” and “e-drive” technology. for example, the electronic document management system applied at sberbank resulted in annual savings of 40 tons of office paper. there are also many other green financial services emerging in the financial sector. joshi and jain (2024) discussed several offered in india, such as green bonds, green mortgages, and green car loans. these products can influence customer behavior by encouraging the purchase of energy-efficient homes and fuel-efficient vehicles. baicu (2021) noted that customers benefit from buying energy-efficient homes through lower interest rates, reduced heating/cooling costs, and higher market value. green banking practices also positively influence bank profitability (putri et al., 2022). by supporting green banking, banks demonstrate environmental commitment and enhance their public image. it is possible to reduce credit risk, improve asset quality, and increase enterprise value through environmental management. successful green banking implementation involves technological progress, operational improvements, and customer behaviour changes (nath et al., 2014). ozili (2023) tested the hypothesis that fulfilling sustainable development goals (sdgs) can improve bank profitability by enabling access to low-cost clean energy, healthy and well-educated employees, decent workplaces, good infrastructure, better equality, and a climate conducive to sustainable banking operations. the study found a statistically significant negative relationship between sdg 13 (climate action) and bank profitability, as measured by return on assets (roa). other studies also note a negative correlation between environmental impact and financial performance in banks (bressan, 2024). bătae et al. (2021) found a positive relationship between emission/waste reductions and the financial performance of 39 european banks from 2010 to 2019. these results support the basic principles of stakeholder theory and the resource-based view. environmental performance can be measured by both monetary and non-monetary indicators. dragomir et al. (2022) examined the impact of esg performance on the financial performance of 333 banks across different regions. the authors used roa and return on equity (roe) as financial indicators and the natural logarithm of total assets as a control variable for bank size. key environmental factors included resource usage, waste reduction, and emissions. the study found that environmental performance had a negative impact on roe, and the impact on roa was also negative, though statistically insignificant. 1.2. theoretical framework: financial system and green banking green banking initiatives in azerbaijan: contribution of financial system 18 organizations that embrace green banking often recognize their dependence on the social environment. this means their choices are not always driven by pure economic selfinterest but also by social norms and what is deemed acceptable within their context. from a theoretical perspective, scholars apply the ideas of institutional theory to the study of multinational corporations (mncs) (kostova, 2013). the implementation of green banking practices does not just represent a change in banking operations; it also involves a cultural shift within the bank. green banking necessitates the development of a distinct business ideology that emphasizes environmental issues and potential benefits. the study by bukhari, hashim, and amran (2019) contributes to the green banking literature by developing an institutional theory-based framework to evaluate how green banking is adopted. the framework proposes four determinants that impact the adoption of green banking:  top management pressure  customer pressure  competitor pressure  community pressure top management pressure and customer pressure are recognized as compulsory factors exhibited by banks in the adoption of green banking practices. the study by mishra (2023) highlights that stakeholder demand, environmental interest, and brand image are the major drivers for the adoption of green banking in nepal. legitimacy theory supports this argument by stating that organizations aim to operate within societal norms and expectations. particularly, as proposed by dowling and pfeffer (1975), it has a significant relationship with environmental performance. it implies that society expects organizations to operate in an environmentally responsible manner. this behaviour includes minimizing pollution, conserving resources, and engaging in sustainable practices. according to legitimacy theory, companies will pay attention to these evolving environmental norms to be accepted as legitimate. otherwise, refusal or avoidance of this strategy may lead to loss of the company's reputation, stakeholder relationships, and even cancellation of its license to operate. it implies that strong environmental performance can stand as a significant source of legitimacy. the sustainable banking network (sbn) represents a group of banking regulators and associations from 24 emerging markets and focuses on establishing frameworks for environmentally and socially sustainable lending (ifc, 2015). based on general experience, common barriers preventing sustainable banking have been identified in a survey by the ifc across 25 countries. these challenges include issues of definition and measurement for sustainable banking, implementation of sustainable banking practices in core business, creation of business drivers for sustainable banking, promotion of information flow, and building capacity among regulators and banks. a survey conducted by the ifc across 25 emerging markets indicates that the commitment of senior management is essential to provide companywide support and build robust frameworks for environmental and social risk management, as well as sustainable banking. the relevance of private investments in financing the transition to a green economy has also been emphasized after the paris agreement. the role of climate policy and regulations in enhancing green investments has become a subject of analysis. adequate assessment of climate nazrin akhundzada, inara rzayeva 19 risk is a major factor contributing to the attraction of private capital flows. more than a hundred financial supervisors, encompassing central banks and financial regulators, have recognized the importance of climate risk. consequently, after their involvement, investors are encouraged to disclose and evaluate climate-related risks. since the paris agreement (pa), there has been an expectation for the financial sector to play a significant role in the decarbonization of the economy. the green investment gap remains a decisive factor preventing the achievement of climate mitigation ambitions (monasterolo et al., 2024). this gap can be reduced by enacting green regulatory policies that include the macroprudential regulation of financial institutions. firstly, we distinguish between the green supporting factor (gsf) mechanism and the dirty penalizing factor (dpf) mechanism. according to the gsf, banks are allowed to lower risk weights assigned to assets under green projects. therefore, this mechanism fosters the transition to a sustainable economy as it requires banks to hold less capital for green loans. however, the absence of a standardized taxonomy for green activities represents a potential drawback to this mechanism, as it could lead to inaccurate assessments and the underestimation of the financial risks tied to green investments. as an example, the national bank of hungary set preferential green capital requirements in 2019 and 2020, offering the option to reduce capital requirements for certain categories of green assets, such as energy-efficient housing loans, loans to corporates or municipalities for renewable energy projects, electromobility, sustainable agriculture, or investments in green bonds. the second mechanism, called the dirty penalizing factor (dpf), is another policy tool used to increase green investments. compared to the gsf, the dpf requires financial institutions to hold more prudential capital for highcarbon assets exposed to climate transition risk. the next set of policies related to green financial systems are the green portfolio rewards (gpr) and green monetary policies (gmp). specifically, gmp can take two forms:  green collateral frameworks: through green collateral frameworks, the central bank establishes acceptable upper and lower bounds for the proportions of high-carbon and low-carbon assets in a portfolio.  green asset purchase program, also known as green quantitative easing (gqe), targets low-carbon assets. gqe can be classified as a tool that shifts the central bank’s balance sheet toward green bonds. vulnerability and sensitivity to climate change can also impact countries’ preferences for imposing green financial policies. this hypothesis was tested by gupta, cheng, and rajan (2022). the authors examined the determinants of green financial policy and found a positive and significant coefficient for climate vulnerability. furthermore, the research confirms the hypothesis that the financial independence of central banks matters for the intensity of green financial policy. according to statistical results, larger central banks are less likely to implement green financial policies, ceteris paribus. in contrast, smaller central banks, particularly in developing countries, devote more attention to green financial policies. the central bank of azerbaijan (cba) plays a key role in promoting sustainable finance in the economy. the cba developed the roadmap for sustainable finance for 20232026 to strengthen the contribution of the financial sector to the country’s sustainable development. this roadmap aims to encourage the provision of sustainable financial flows by considering climate-related and environmental risks alongside social and governance (esg) green banking initiatives in azerbaijan: contribution of financial system 20 factors. it supports the integration of climate-related and esg factors into the risk management and decision-making processes of financial institutions concerning finance and investments. the cba distinguishes four pillars for sustainable finance roadmap (sfr) and proposes relevant actions for each pillar. pillar 1 addresses the need to raise awareness about climaterelated and esg risks. pillar 2 involves relevant government agencies and stakeholders under the cba's leadership developing a taxonomy for sustainable finance. one benefit of establishing a taxonomy is the introduction of a standardized framework for organizations to develop sustainable finance policies. given the profound role of the financial sector in the transition to a sustainable economy, the cba recognizes the transformation of the financial sector toward sustainable finance as a strategic priority. in march 2025, the cba, in cooperation with the british embassy in azerbaijan, the british standards institution (bsi), and the azerbaijan banks association (aba), organized a training session on carbon accounting for the banking sector within the framework of the “carbon accounting and accountability in financial institutions” project. the primary goal of the event, held on march 3-6, was to facilitate the ability of banks to develop carbon accounting strategies for their financed emissions in accordance with international standards. the key challenges preventing long-term green financing include limited awareness, a shortage of policies and instruments, and insufficient capacity within financial institutions to manage climate-related risks (world bank, 2023). azerbaijan’s financial system is characterized as bank-based, with a small role for nonbank financial intermediation. according to the cba, the banking sector has demonstrated positive dynamics in profitability indicators (cba, 2024). in the first half of 2024, the banking industry generated a net profit of azn 614m. return on equity (roe) stood at 21.86% and return on assets (roa) reached 2.54% for the first quarter of 2024 (figure 1). the roa remained stable due to rising interest income. net interest income followed an upward trend, increasing by azn 145m from the first half of 2023 to azn 1,379m in the first half of 2024 (figure 2). despite the positive profitability across all banks in the sector, profitability was concentrated. three banks, which account for 63% of total assets, generated 68% of the sector’s net profit in the first half of 2024. a similar pattern was observed in 2023 when 71% of the sector’s net profit was concentrated in three banks, which together hold 63% of the sector’s assets. a detailed review of the loan portfolio of banks reveals that business loans were the prevailing type of loans issued, showing an increasing rate between march 2023 and march 2024 (figure 3). digitalization in the banking sector is another trend. currently, most banks have successfully transitioned to providing services through internet and mobile banking applications. the volume of transactions conducted via internet and mobile banking is growing rapidly (figure 4). nazrin akhundzada, inara rzayeva 21 figure 1. profitability indicators in the banking sector source: cba figure 2. net interest profit in the banking sector in 2024. source: cba 2.3% 2.5% 020% 2.4% 2.5% 2.5% 20.30% 21.30% 1.50% 20.30% 21.86% 21.37% 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 2023 q1 2023 q2 2023 q3 2023 q4 2024 q1 2024 q2 profitability ratios roa roe 227.2 456.5 685.0 920.7 1,150.1 1,379.4 1/31/24 2/29/24 3/31/24 4/30/24 5/31/24 6/30/24 net interest profit in the banking sector green banking initiatives in azerbaijan: contribution of financial system 22 figure 3. the structure of loan portfolio of banks source: cba figure 4. electronic banking in 2023 source : cba 10,971.4 11,108.0 11,170.8 11,650.5 11,622.7 11,821.8 12,078.7 12,246.4 12,421.2 12,616.8 12,912.9 13,063.7 13,201.5 5,942.4 6,072.3 6,224.5 6,324.7 6,376.0 6,532.5 6,680.1 6,751.3 6,869.7 6,937.0 7,008.0 7,077.3 7,141.9 3,124.8 3,199.3 3,264.0 3,321.0 3,373.3 3,459.9 3,523.1 3,462.0 3,590.3 3,629.2 3,645.5 3,692.0 3,759.2 business loans consumer loans mortgages 0 5000 10000 15000 20000 25000 30000 16749 16392 17252 16923 18036 16440 20023 19891 18778 21431 18785 26979 1997 24… 2956 2840 3110 3986 4154 4569 4211 5675 4694 5587 electronic banking in 2023: volume of transactions in million azn internet banking mobile banking nazrin akhundzada, inara rzayeva 23 2. methodology the banking sector of azerbaijan includes both public and private banks. as of december 31, 2024, there are a total of 22 banks, of which two are state-owned and the remaining twenty are private. a wide range of green initiatives can be observed among both state and private banks in azerbaijan. this study explores the green banking practices of seven banks, selected based on their net profits (table1). the initiatives undertaken are classified into three categories: green product development, corporate social responsibility internal processes. the research method employed for analysing green banking initiatives is content analysis. the primary purpose of this research is to review the adoption of green banking initiatives by commercial banks in azerbaijan. to assess the commitment of the banking sector to sustainable banking practices, we use various reports from the central bank of azerbaijan and other major commercial banks. the article uses secondary data from annual reports and sustainability reports published between 2021-2023, in addition to news and press releases uploaded from official websites within the date range of 2021 to 2025. table 1. net profit of banks ( in thousand azn) for 2023 name of bank net profit kapital bank 242 209 abb 358 399 pasha bank 225 712 xalq bank 64 641 464 (in azn) bank respublika 38 815 access bank 39 838 unibank 31 071 source: financial statements of banks note: for xalq bank it is shown in azn our research question focuses on the relationship between environmental performance and the profitability of banks, which will be investigated through multiple regression analysis. to address this, we utilized annual data from the financial statements of the two banks for the years 2021–2023, as well as the sustainability reports of these banks to collect data on their environmental indicators. the financial ratios used to measure profitability in the study were calculated based on data from the financial statements of relevant banks. the time span was selected based on the availability of data for environmental indicators. table 2 illustrates the variables with their symbols and descriptions applied in the study. green banking initiatives in azerbaijan: contribution of financial system 24 table 2 name of variable symbol description dependent variable roa net profit / total assets return on assets independent variables watercons waste energycons carbon logarithm of water consumption logarithm of generated waste logarithm of energy consumption logarithm of ghg emissions water consumption waste generated energy consumption total ghg emissions control variable size logarithm of total assets bank size source: design of authors despite being strongly balanced, panel data analysis does not provide reliable estimates due to scarcity of data. single-equation model was estimated using ordinary least squares (ols) method. to reduce omitted variable bias, we also incorporated additional control variable “bank size” that also affects financial performance. bank size is measured by the natural logarithm of the book value of total assets. the sample captured two best-performing banks, abb and kapital bank, based on their net profit for 2023. the regression model can be represented as follows in equation (1): 𝑅𝑂𝐴𝑖𝑡= 𝛽1𝑆𝑖𝑧𝑒 + 𝛽2𝑊𝑎𝑡𝑒𝑟𝑐𝑜𝑛𝑠 + 𝛽3𝑊𝑎𝑠𝑡𝑒 + 𝛽4𝐸𝑛𝑒𝑟𝑔𝑦𝑐𝑜𝑛𝑠 + 𝛽5𝐶𝑎𝑟𝑏𝑜𝑛 + 𝜀𝑖𝑡 (1), where irepresents the group ( i=1,2) and trepresent time (t = 1,2,3) , 𝜀𝑖𝑡idiosyncratic error term. 3. results first of all, we represent and summarize the results of content analysis for green banking initiatives held in azerbaijan. the list of conducted activities grouped for each bank separately in bullet points. i. kapital bank kapital bank represents one of the largest financial institutions in the country. the bank proactively demonstrates its environmental commitment through participation in various sustainability projects and promotes green banking initiatives in its business model. the statements below summarize these activities: 1. green corporate social responsibility  establishment of red hearts foundation: kapital bank targets to increase community and environmental wellbeing in the society by integrating corporate social responsibility (csr) principles into daily business operations. the red hearts foundation intends to focus on community engagement, animal welfare, and environmental protection. the bank arranges educational workshops, training sessions, and awareness campaigns for community engagement. investments in the community have grown steadily during recent years (figure 5). nazrin akhundzada, inara rzayeva 25  the next initiative of kapital bank in the field of environmental protection and environmental improvement was related to tree planting campaigns. birbank introduced the “green deposit” campaign in the year of solidarity for a greener world in october 2024. according to this campaign, anyone who places a deposit via the birbank app will have a chance not only to earn interest but also to contribute to environmental sustainability. for every customer aged 18 and above who applies for a digital deposit, a tree will be planted in their name, alongside that electronic certificate as a token of appreciation will be provided.  digital banking: kapital bank presented birbank digital centres that offer various advantages to customers such as elimination of paperwork and self-service mode. figure 5. community investments in kapital bank source : kapital bank annual sustainability report (2023) figure 6 source: aba (2023) 0 5,000 10,000 15,000 20,000 25,000 2021 2022 2023 15,077 23,571 20,081 community investments ( in thousand azn) 4 ,0 2 7 .4 9 9 .8 5 0 .1 2 3 2 .1 4 4 .1 7 .2 2 3 .6 1 6 5 .2 2 8 0 .0 6 .1 9 3 .1 6 ,1 4 2 .0 3 3 .0 5 5 5 .7 3 8 .8 2 9 5 .4 5 7 .5 1 ,8 5 5 .5 1 1 9 .0 4 9 .8 1 2 0 .1 2 4 .1 7 9 0 .5 2 .9 0 .2 1 .8 1 .3 0 .1 0 .1 1 2 1 .6 0 .8 1 7 .1 8 .2 8 8 8 .6 0 .0 9 .2 0 .1 1 1 .7 0 .4 3 3 2 .4 0 .4 2 5 .7 2 .3 0 .1 a bb a ccessba n k a fb b a n k a zer t u rk b a n k a zerba i j a n i n d u stry b a n k ba n k a v ra s i y a ba n k b tb ba n k o f b a ku ba n k r espu bl i k a ba n k v tb ( a zerba i j a n ) e xpressba n k ka p i t a l b a n k n a kch iv a n b a n k pa sh a b a n k prem iu m b a n k ra b it a ba n k tu ra n ba n k u n ib a n k xa lq b a n k ya p i kred i ba n k a zerba i j a n ye lo b a n k z i r a a t b a n k a zerba i j a n number of active plastic cards in 2023, thousand units debit cards, thousand units (including salary cards) credit cards, thousand units (including installment cards) green banking initiatives in azerbaijan: contribution of financial system 26 2. green product development  on june 8, 2023 kapital bank participated in syndicated loan project of türkiye i̇ş bankası with sustainability-linked objectives with total amount of $224 million to be used according to esg criteria.  in general, among the main strategic directions kapital bank recognizes financing of green projects, significant discounts on eco-friendly car loans, efficient use of ecoresources, and implementation of projects aimed at reducing waste.  the bank developed the “digital deposit” product, allowing customers to open and manage deposit accounts entirely online through the birbank mobile application. the bank also is a leader in the number of actively used plastic cards (figure 6). 3. green internal processing  the bank is successful in organizing internal process automation. there is a significant decline in the amount of paper waste and energy consumption generated from automating administrative processes. tough waste management practices help to reduce the environmental footprint linked to business operations. for instance, the archive department applies paper recycling while marketing and hr departments work closely with external stakeholders to ensure corporate social responsibility initiatives to give prompt waste management practices.  kapital bank reached the implementation of esg initiatives that represent part of green internal processing, such as applying 3r principles in waste management, implementing a discrimination-free workplace, and initiating inclusive education. ii. abb bank abb is one of the leading banks in the country. the bank puts effort to improve esg performance within the organization. the list of main achievements presented below according to classifications: 1. green corporate social responsibility  abb achieves enhancement of operational efficiency via technological advances. the bank pursues digitized accounting documents and paperless branch initiative which suggests digitized loan processing. moreover, the practice of digital id cards is also implemented.  to support environmental sustainability goal, the bank introduced tam digicard which is issued digitally. this card offers a wide range of transactions without commission.  the bank took part in several tree-planting campaigns. one of them was organized by idea public union and the ministry of ecology and natural resources. the trees were planted on a 51-hectare area allocated in mushfigabad settlement.  the bank while establishing the khankendi branch took into account the declaration of karabakh and east zangezur as a zone of green growth. the building of the khankendi branch was built according to green banking concept. solar panels were placed on the roof of the building and the facade and advertising boards of the khankendi branch are illuminated with renewable energy. nazrin akhundzada, inara rzayeva 27 2. green product development  the bank supports provision of financing for the sustainable projects. sustainable loan can be with 2 types of labels: green label and social label. green label projects should aim to support direct or indirect reduction in ghg emission, efficiency of energy/ resource consumption, transition to a circular economy and protection, restoration and promotion of natural resources and healthy ecosystems.  abb launched a new green product called the tameco card that was made from recycled plastic collected from the oceans in 2023. as a part of project, the bank committed to planting one tree for each order of tameco card. 3. green internal processing  the bank was successful in the reduction of total ghg emissions and electricity usage per employee approximately 5% and 10,6% respectively from 2022 to 2023 (figure 7). figure 7 source: abb sustainability report (2023) iii. pasha bank pasha bank is a leading corporate bank in azerbaijan with its strong capital base. the bank achieved total regulatory capital adequacy ratio of 20.41% in 2024 iv quarter. one of its strategic goals is to finance projects that promote environmental protection and energy efficiency. pasha bank implements an integrative sustainability strategy that consists of its economic, social and environmental activities. 1. green corporate responsibility  the bank joined the tree planting campaign organized by idea public union in collaboration with the ministry of ecology and natural resources. total emissions (tco2 eq) electricity usage per employee, kwh 0.00 1,000.00 2,000.00 3,000.00 4,000.00 5,000.00 6,000.00 7,000.00 8,000.00 2022 2023 7211,7 6833,5 3,291 2,941 abb total emissions (tco2 eq) electricity usage per employee, kwh green banking initiatives in azerbaijan: contribution of financial system 28  the bank offers digital loan products and sme customers can apply completely online, without submission of physical documents or visiting branches. this is a convenient and fast way for doing business that enhances flexibility and effectiveness. 2. green product development  the state oil company of the republic of azerbaijan (socar) successfully placed $200 million in “green” bonds with the support of pasha capital investment company. these bonds targeted developing renewable energy sources and supporting new "green" energy projects.  pasha bank also made investments in environmentally friendly modes of transport. within a joint project with “xaliq faiqoğlu” company, the bank financed the import of 50 compressed natural gas (cng) buses and 5 electric buses. moreover, the bank supported financing of many other green projects. 3. green internal processing  pasha bank effectively manages total electricity and water consumption by using an advanced technology infrastructure throughout its branch network and at headquarters.  the bank formed its own recycling infrastructure. initiatives include recycling vehicle batteries, in addition to collecting waste papers and disposing of electronic equipment.  the bank organizes special training for its staff members to increase environmental awareness among the workforce and other stakeholders.  pasha bank has joined the mastercard sustainable cards program to reduce plastic waste and restore environmental protection. the aim of program is to eliminate gradually the usage of polyvinyl chloride (pvc) in the production of payment cards and replace with recycled and bio-based materials for all newly issued cards for by 2028. iv. xalq bank xalq bank, founded in 2004, is one of the largest private banks in azerbaijan in terms of total assets (aba, 2023). 1. green corporate social responsibility  a tree planting campaign was held in the mushfigabad settlement of baku organized by xalq bank and supported by the ministry of ecology and natural resources.  support of online banking services via xalqonline app, implementation of digital card for free that allows the management and tracking of banking operations. the customers can also use cash in atms to top up the card. 2. . green product development  on april 06, 2023 xalq bank took part in sustainability-linked syndicated loan project with total amount $1.3 billion to be used according to esg criteria originated for ziraat bank. loans extended within the earthquake support packages to mitigate the effects of the earthquake in february. nazrin akhundzada, inara rzayeva 29  on may 13, 2024, xalq bank participated in the syndicated loan facility for türk eximbank (türkiye ihracat kredi bankası a.ş.) with total amount $728m equiv. this loan also will be used in accordance with esg standards, which refer to the principles of environmental, corporate governance and social responsibility. the bank highlights the significant role of participation in this syndicated loan project for enhancement of interbank relations with the banks of the republic of türkiye. v. bank respublika bank respublika, being one of the largest commercial banks in the country, attempted to promote sustainability through various initiatives. 1. green corporate social responsibility  bank respublika proactively supports provision of basic financial operations with help of mobile banking. it makes possible to activate virtual digital card via application.  the bank's employees planted about 100 trees around bank respublika arena with the players of "sabah" fk, one of the leading clubs in the national football championship. 2. green product development  the bank introduced "green loan" as new financial instrument for entrepreneurs, offered under the eu4business-ebrd credit line, which represents a combined effort of the eu and the european bank for reconstruction and development and aims to support environmentally sustainable projects and improve the energy efficiency of micro, small and medium-sized enterprises (msmes). this product proposes numerous benefits to entrepreneurs such as up to 15% cashback to reduce the financial burden on entrepreneurs, a decline in operational costs, quick processing and the usage of cleaner technologies for environmental protection. 3. green internal processing  the bank conducted several events for the "year of solidarity for a green world". there was held two-day seminar on green financing for employees with the dutch entrepreneurial development bank (fmo). specialists from fmo shared their experience in field of green financial projects and discussed possibility for development of such initiatives in the banking sector. vi. accessbank accessbank established since 2002 and serves azerbaijan msme and retail market with total assets of 1.5 bn azn. 66 % of loan portfolio is devoted to micro loans (accessbank, 2023). one of the strategic goals of accessbank is to ensure sustainable development and financial profitability for investors. 1. green corporate social responsibility green banking initiatives in azerbaijan: contribution of financial system 30  the bank participates in tree plantation campaigns. in 2024, for the sake of “year of solidarity for a green world”, a tree planting campaign was held with the support of accessbank with the participation of members of the baku port and the institute of internal auditors (iia azerbaijan chapter). during the campaign, 170 olive and pine trees were planted in the territory of the baku port.  the bank puts to use its digital platform myaccess for all customer segments. in 2023, accessbank successfully moved to the azericard processing center. this migration helps to expand payment tools by integrating its digital services with google pay and apple pay.  since 2022 after joining “collect batteries, protect nature” project, accessbank has collected used batteries at its headquarters and branches in other regions, then handled them over to a specialized waste management company for safe disposal. 2. green product development  in 2023, accessbank signed a senior unsecured loan agreement with the global climate partnership fund s.a. (gcpf) with first committed tranche of azn 8.5 million. the proceeds from loan will support initiatives for energy efficiency and renewable energy projects undertaken by msmes in azerbaijan. 3. green internal processing  accessbank carries out activities directed to minimize its carbon footprint. this target implies optimizing operations and investing in energy-efficient technologies. in 2023,the bank started tracking emissions with the goal to continuously reduce them. according to statistics, total emissions (tco2e) based on scope 1 reduced significantly from 2022 to first half of 2024 (figure 8). figure 8 accessbanktotal emissions based on scope 1 source: accessbank sustainability report 0 200 400 600 800 1000 1200 2022 2023 2024 1h 1029 989 501 total emissions (tco2e)scope 1 nazrin akhundzada, inara rzayeva 31 vii. unibank unibank represents one of the largest private banks founded in azerbaijan in july 1992 under the name of mbank. 1. green corporate social responsibility  the bank planted 500 trees in the mushfigabad area. bank employees planted eldar pine and olive seedlings on an area of about 1 hectare. the tree planting campaign was supported by the eco hub public union for support of ecological initiatives. 2. green product development  unibank issued securities that can be classified as green bonds in compliance with international green finance standards in october 2024. the nominal value of the bonds is set at 100 azn, with an annual interest rate of 11.5%.  unibank entered into a strategic partnership with one of the leading taxi companies yango azerbaijan. the aim of partnership is to provide financial support for increasing the number of eco-friendly hybrid cars in baku. as part of this partnership, the delivery of 500 new hybrid cars to four partner taxi fleets of yango azerbaijan was expected. the cars were offered under very favorable, preferential conditions. 3. green internal processing  the bank has launched its first digital branch, which offers access to services and products in a completely digital format. noticeably, unibank was ahead in the volume of cashless payments made with active plastic cards in 2023 (figure 9). figure 9 source: aba (2023) 1,000,000,000 2,000,000,000 3,000,000,000 4,000,000,000 5,000,000,000 6,000,000,000 7,000,000,000 8,000,000,000 9,000,000,000 10,000,000,000 volume of all cashless payments with plastic cards, manats in 2023 green banking initiatives in azerbaijan: contribution of financial system 32 results of regression analysis table 3: descriptive statistics variable obs mean std. dev. min max roa 6 2.12 1.29 .03 3.94 watercons 6 10.86 .31 10.53 11.28 size 6 16.11 .30 15.71 16.45 energycons 6 16.06 .06 15.97 16.14 waste 6 7.56 .92 6.56 8.51 carbon 6 8.87 .05 8.79 8.92 source: authors’ calculations table 3 above demonstrates the descriptive statistics of the data generated using stata software. the table summarizes the mean, maximum and minimum values, and standard deviation for the variables. in the following analysis, we examined the role of environmental impact on bank characteristics by using a set of resource-based environmental factors. the profitability of the banks was measured by return on assets (roa), which is derived as the total net income divided by the book value of assets. consequently, higher levels of roa indicate better performance for the bank. according to the obtained results, both banks in the sample showed positive performance in terms of profitability, with a positive mean of 2.12% for roa. typically, a desirable level of roa is above 1%. the low standard deviation observed for all independent variables and the control variable suggests small variability and homogeneity in the data. when it comes to environmental indicators, it is evident that the banks in the sample are primarily exposed to water and energy consumption. table 4 : regression output variable coefficient std.error p-value waste -.31 0.06 0.96 energycons -10.12 27.73 0.77 size 6.76 10.66 0.64 watercons 6.40 10.06 0.63 carbon -1.31 39.28 0.97 source: authors’ calculations nazrin akhundzada, inara rzayeva 33 table 4 illustrates regression output generated from regression analysis of equation (1). the results show that the coefficient of the waste, energy consumption and ghg emissions on roa is negative. however, we find a positive coefficient for water consumption among the environmental variables. notably, profitability is more severely affected by energy consumption and greenhouse gas emissions. conversely, the higher of water consumption is associated with increased profitability. as regards the control variable, we notice that profitability positively influenced with an increase of bank size as it was expected. these findings align with previous studies, including emmanuel et al. (2024). to sum up, all regressors are statistically insignificant as p-values are higher than 0.05. 4. conclusions this research discusses how the financial system contributes to the development of green banking. a large body of academic literature acknowledges that the enforcement of green regulatory policies is a key factor in promoting green investments in financial institutions. roadmap for sustainable finance for 2023-2026, introduced by the central bank of azerbaijan, supports the incorporation of esg factors into risk management policies. the present study analysed green banking initiatives implemented in azerbaijan, categorizing them according to the three categories used in the study by sharma and choubey (2022) for indian banks. the results indicate that the top-performing seven banks in azerbaijan have been quite successful in recent years in establishing and implementing green banking practices. notably, all the banks under review demonstrated a strong commitment to participating in activities linked to green corporate social responsibility. these banks have consistently engaged in important campaigns organized for environmental protection purposes. furthermore, all of them have adopted internet and mobile banking for a wide range of banking operations. the banks in the country also showed positive trends in the green product development dimension presented in the classification. despite being relatively new, several green financing products, such as green loans, green deposits, and green bonds, have been successfully introduced to the market. in terms of internal process improvements, it is clear that all the banks under consideration have made considerable efforts to ensure effective waste management and reduce their carbon footprint. trainings for employees, as well as initiatives aimed at saving water, paper, and electricity, are being intensively implemented. the introduction of fully digital branches is another initiative that has been successfully executed. however, there is still room for improvement. it is expected that the scope of these initiatives will continue to expand across various dimensions. in general, it is likely that largescale implementation of certified green buildings, the use of renewable energy through solarpowered atms, or the generation of wind power for branches will be pursued in the future. as a growing body of academic literature recognizes, we can infer that environmental management which became an important part of business regulation, facilitates efficiency and profitability of banks in azerbaijan. particularly, two major banks of the country showed consistency in terms of environmental performance. both banks proactively target to reduce their carbon footprint by implementing effective environmental management strategies. we observe a negative but not significant relationship between disclosures of environmental performance regarding energy consumption, carbon emissions, and waste, and financial green banking initiatives in azerbaijan: contribution of financial system 34 performance, even in the short term. our findings coincide with the study by dragomir et al. (2022). however, it is crucial to consider that other unobserved factors or additional variables that are not reflected in our model can also influence roa. in this case, further investigation might be necessary to attain a more complete model for the determinants of roa. references 1. aba. (2025). a carbon accounting and reporting project has been implemented in financial institutions. retrieved from https://bbn.az/maliyy%c9%99-institutlarindakarbon-ucotu-v%c9%99-hesabatliliq-layih%c9%99si-h%c9%99yata-kecirilib/ 2. abb. (2023). sustainability report 2023. retrieved from https://abbbank.az/en/dayaniqli 3. abb. (n.d.). abb participated in tree planting campaign. retrieved from https://abbbank.az/az/abb-agacekme-aksiyasinda-istirak-etdi-ksm 4. abb. (2024). abb's khankendi branch has started operations. retrieved from https://abb-bank.az/az/xeberler/abb-nin-xankendi-filiali-fealiyyete-basladi 5. accessbank. (2023). sustainability report 2023. 6. accessbank. (2024). accessbank has supported a tree planting campaign within the framework of the 'year of solidarity for a green world. retrieved from https://www.accessbank.az/az/private/news/969561 7. accessbank. (2023). accessbank and global climate partnership fund launch pioneering "green economy" initiative in azerbaijan. retrieved from https://www.accessbank.az/en/private/news/602706 8. bukhari, a. s., hashim, f., & amran, a. (2019). determinants of green banking adoption: a theoretical framework. kne social sciences, 3(22), 1–14. https://doi.org/10.18502/kss.v3i22.5041 9. baicu, c. g. (2021). towards better involvement in green banking practices: evidence from romania. management of sustainable development, 13(2), 65–72. https://doi.org/10.2478/msd-2021-0021 10. bank respublika. (2025). first green loan for entrepreneurs from bank respublika. retrieved from https://www.bankrespublika.az/az/news/ilk-defe-bank-respublikadansahibkarlara-yasil-kredit_4275 11. bătae, o. m., dragomir, v. d., & feleagă, l. (2021). the relationship between environmental, social, and financial performance in the banking sector: a european study. journal of cleaner production, 284, 124759. https://doi.org/10.1016/j.jclepro.2020.124759 12. bressan, s. (2024). does the environmental impact of banks affect their financial performance? journal of banking regulation. advance online publication. https://doi.org/10.1057/s41261-024-00257-8 13. central bank of azerbaijan. (2024). financial stability report. 14. dowling, j., pfeffer, j. (1975), organizational legitimacy: social values and organizational behavior. pacific sociological review, 18, 122-136. 15. dragomir, v. d., bătae, o. m., ionescu, b. ș., & ionescu-feleagă, l. (2022). the influence of esg factors on financial performance in the banking sector during the covid-19 pandemic. economic computation & economic cybernetics studies & research, 56(4). 16. emmanuel, y. l., doorasamy, m., kwarbai, j., otekunrin, a. o., & osakede, u. a. (2024). relationship of environmental disclosure of renewable energy, carbon emissions, waste management, water consumption, and banks’ financial performance. https://doi.org/10.1016/j.jclepro.2020.124759 nazrin akhundzada, inara rzayeva 35 waste management, water consumption, and banks’ financial performance (august 30, 2024). international journal of energy economics and policy, 14(2), 10-32479. 17. gupta, b., cheng, r., & rajan, r. s. (2022). green financial and regulatory policies: why are some central banks moving faster than others? global environmental politics, 23 (1), 73–93. https://doi.org/10.1162/glep_a_00577 18. hoque, n., mowla, m., uddin, m., mamun, a., & uddin, m. (2019). green banking practices in bangladesh: a critical investigation. international journal of economics and finance, 11 (10), 104–118. https://doi.org/10.5539/ijef.v11n10p104 19. international finance corporation (ifc). (2015). greening the banking system: experiences from the sustainable banking network (sbn). 20. joshi, a., & jain, d. v. (2024). analysis of green financing incentives in the indian banking sector from banks' viewpoint. journal of informatics education and research, 7 (2), 145–157. https://doi.org/10.1007/s40565-024-00123-0 21. kapital bank. (2023). annual sustainability report 2023. 22. kapital bank. (2023). syndicated loan. retrieved from https://www.kapitalbank.az/en/news/sindikat-kreditleshmesi 23. kapital bank. (2024). birbank green world, green deposit, tree planting. retrieved from https://www.kapitalbank.az/en/news/birbank-yasil-dunya-yasil-depozit-agacekilme 24. kapital bank. (2021). digital centers. retrieved from https://www.kapitalbank.az/en/news/reqemsalmerkezler 25. kesavan, c. (2018). green banking – an initiative towards sustainable economic and environmental development. international journal of advanced research in management and social sciences, 7 (9), 53–64. 26. khairunnessa, f., vazquez-brust, d. a., & yakovleva, n. (2021). a review of the recent developments of green banking in bangladesh. sustainability, 13(4), 1904. https://doi.org/10.3390/su13041904 27. kondyukova, e. s., shershneva, e. g., & savchenko, n. l. (2018). green banking as a progressive model of socially responsible business. управленец, 9 (6), 30–39. 28. kostova, t. (2013). institutional theory of multinational corporations. in encyclopedia of management theory (vol. 2, pp. 385–387). sage publications, ltd. https://doi.org/10.4135/9781452276090 29. lalon, r. m. (2015). green banking: going green. international journal of economics, finance and management sciences, 3, 34–42. 30. mishra, p. (2023). adaptation of green banking practices in commercial banks of nepal. apex journal of business and management (ajbm), 1 (1), 55–76. https://doi.org/10.5281/zenodo.8402617 31. sirajudeen, m., khan, a. a., & nawaz, m. (2020). green banking in india a review. international journal of trend in scientific research and development, 4*(4), 1–7. 32. monasterolo, i., mandel, a., battiston, s., mazzocchetti, a., oppermann, k., coony, j., stretton, s., stewart, f., & dunz, n. (2022). the role of green financial sector initiatives in the low-carbon transition: a theory of change. *policy research working papers, 10181*. https://doi.org/10.1596/1813-9450-10181 33. ozili, p. k. (2023). sustainable development goals and bank profitability: international evidence. international journal of economics and finance, 15 (3), 56–67. https://doi.org/10.5539/ijef.v15n3p56 34. pasha bank. (2020–2021). sustainability report 2020-2021. 35. pasha bank. (2025). novruz campaign on digital business loans from pasha bank. 36. retrieved from https://www.pashabank.az/bulletin,2063/lang,az/ https://doi.org/10.4135/9781452276090 green banking initiatives in azerbaijan: contribution of financial system 36 37. pasha bank. (2022). pasha bank has joined a tree planting campaign. retrieved from https://www.pashabank.az/press_centre,1790/lang,az/ 38. pasha bank. (2024). pasha bank has joined the 'sustainable cards program'. retrieved from https://www.pashabank.az/press_centre,2041/lang,az/ 39. pasha bank. (2024). support for the green transformation of the economy from pasha bank. retrieved from https://www.pashabank.az/press_centre,2047/lang,az/ 40. pasha bank. (2025). the circulation of socar's 'green bonds' has started with the support of pasha kapital. retrieved from https://www.pashabank.az/press_centre,2065/lang,az/ 41. putri, p., k, n., rahmayani, d., & siregar, m. e. (2022). the effect of green banking and financial performance on banking profitability. quality access to success, 23 (191), 38–44. https://doi.org/10.47750/qas/23.191.05 42. sule, a., eyo-udo, n., agho, m., & azubuike, c. (2024). green finance solutions for banking to combat climate change and promote sustainability. gulf journal of advanced business research, 3 (1), 1–12. 43. unibank. (2024). unibank, 500 trees planted to support the environment. retrieved from https://unibank.az/az/news/retail/1831/unibank_etraf_muhite_destek_meqsedi_ile_50 0_agac_ekib 44. unibank. (2024). unibank carries out another green financing project. retrieved from https://unibank.az/az/news/corporate/1673/unibank_novbeti_yashil_maliyyeleshmeni _heyata_kechirir 45. unibank. (2024). unibank signs a new milestone for the azerbaijani financial market. retrieved from https://unibank.az/az/news/retail/1629/unibank_azerbaycan_maliyye_bazari_uchun_b ir_ilke_imza_atib 46. unibank. (2022). unibank's first digital branch begins operations. retrieved from https://unibank.az/az/news/retail/786/unibankin_ilk_reqemsal_filiali_fealiyyete_bashl ayib 47. world bank group. (2023). azerbaijan country climate and development report (ccdr series). 48. xalq bank. (2024). xalq bank organizes tree planting campaign. retrieved from https://www.xalqbank.az/az/ferdi/bank/xeberler/xalq-bank-agacekme-aksiyasi-teskiletdi-az 49. xalq bank. (2023). xalq bank participates in the next large-scale international syndicated loan deal. retrieved from https://www.xalqbank.az/en/personal/banken/news/asc-xalq-banki-novbeti-defe-irihecmli-beynelxalq-sindikat-kreditlesmesisovdelesmesinde-istirak-edib-en 50. xalq bank. (2022). xalq bank introduced a digital card product. retrieved from https://www.xalqbank.az/en/personal/bank-en/news/xalq-bank-introduced-a-digitalcard-product?include=menu 51. xalq bank. (2024). xalq bank participated in the syndicated loan facility for türk eximbank. retrieved from https://www.xalqbank.az/en/personal/bank-en/news/xalqbank-turk-eximbankin-sindikat-kreditlesmesinde-istirak-edib-en https://unibank.az/az/news/retail/1831/unibank_etraf_muhite_destek_meqsedi_ile_500_agac_ekib https://unibank.az/az/news/retail/1831/unibank_etraf_muhite_destek_meqsedi_ile_500_agac_ekib https://unibank.az/az/news/corporate/1673/unibank_novbeti_yashil_maliyyeleshmeni_heyata_kechirir https://unibank.az/az/news/corporate/1673/unibank_novbeti_yashil_maliyyeleshmeni_heyata_kechirir https://unibank.az/az/news/retail/1629/unibank_azerbaycan_maliyye_bazari_uchun_bir_ilke_imza_atib https://unibank.az/az/news/retail/1629/unibank_azerbaycan_maliyye_bazari_uchun_bir_ilke_imza_atib https://unibank.az/az/news/retail/786/unibankin_ilk_reqemsal_filiali_fealiyyete_bashlayib https://unibank.az/az/news/retail/786/unibankin_ilk_reqemsal_filiali_fealiyyete_bashlayib https://www.xalqbank.az/az/ferdi/bank/xeberler/xalq-bank-agacekme-aksiyasi-teskil-etdi-az https://www.xalqbank.az/az/ferdi/bank/xeberler/xalq-bank-agacekme-aksiyasi-teskil-etdi-az https://www.xalqbank.az/en/personal/bank-en/news/asc-xalq-banki-novbeti-defe-irihecmli-beynelxalq-sindikat-kreditlesmesi-sovdelesmesinde-istirak-edib-en https://www.xalqbank.az/en/personal/bank-en/news/asc-xalq-banki-novbeti-defe-irihecmli-beynelxalq-sindikat-kreditlesmesi-sovdelesmesinde-istirak-edib-en https://www.xalqbank.az/en/personal/bank-en/news/asc-xalq-banki-novbeti-defe-irihecmli-beynelxalq-sindikat-kreditlesmesi-sovdelesmesinde-istirak-edib-en https://www.xalqbank.az/en/personal/bank-en/news/xalq-bank-introduced-a-digital-card-product?include=menu https://www.xalqbank.az/en/personal/bank-en/news/xalq-bank-introduced-a-digital-card-product?include=menu https://www.xalqbank.az/en/personal/bank-en/news/xalq-bank-turk-eximbankin-sindikat-kreditlesmesinde-istirak-edib-en https://www.xalqbank.az/en/personal/bank-en/news/xalq-bank-turk-eximbankin-sindikat-kreditlesmesinde-istirak-edib-en agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 19, no. 1 (2025), pp. 176-188 176 the impact of stablecoins on global finance j. lapuh bele, t. bele julija lapuh bele¹, tanja bele² ¹ ² b2 ljubljana school of business https://orcid.org/0000-0003-4573-5409, e-mail: julija.bele@vspv.si https://orcid.org/0009-0009-7644-1922, e-mail: tanja.bele@vspv.si abstract: stablecoins represent a rapidly growing segment of the cryptocurrency market, aiming to overcome the high volatility of cryptocurrencies. their primary goal is maintaining a stable value, usually pegged to fiat currencies (e.g., the us dollar), which facilitates their use in international payments, as assets within decentralized finance (defi), and as protection against inflation. this article explores blockchain technology, the development of stablecoins, methods of ensuring stability, and the reasons for their popularity among users. special emphasis is placed on regulation at both the eu and us levels, evaluating the compliance of the most widely used stablecoins within legal frameworks. this research investigates advantages and risks, including their use in criminal activities, legal ambiguities, and potential instability. quantitative and qualitative methods were utilized, including analysis of market capitalization, stability assurance mechanisms, and regulatory policies. findings reveal that investors trust stablecoins backed by fiat currency reserves (particularly usd) the most, with tether (usdt) holding the largest market share, despite its lack of full legislative compliance. the article highlights the key challenges and opportunities stablecoins present to individuals and financial markets. keywords: cryptocurrency, decentralised finance, stablecoin introduction in 2024, significant events occurred in the cryptocurrency market, including the emergence of financial products that mark the entry of cryptocurrencies into the traditional financial world. among these, it is important to highlight the option of trading exchangetraded funds (etfs), which enable the indirect purchase of cryptocurrencies on traditional securities exchanges. (lapuh bele, 2025). in this article, we focus on stablecoins, which also serve as a bridge between traditional and decentralized finance. decentralized finance (defi) refers to financial systems built on blockchain technology that facilitate transactions without intermediaries such as banks or traditional financial institutions. these systems leverage smart contracts and decentralized protocols to enable secure, transparent, and autonomous financial interactions, reducing reliance on centralized entities while enhancing accessibility and efficiency within the financial ecosystem. stablecoins are cryptocurrencies that maintain their value by being tied to a specific reference asset or value, such as the fiat currency usd. a key characteristic of cryptocurrencies is their volatility—their prices can fluctuate significantly, which enables investors to gain large https://orcid.org/0000-0003-4573-5409 mailto:julija.bele@vspv.si https://orcid.org/0009-0009-7644-1922 mailto:tanja.bele@vspv.si julija lapuh bele, tanja bele 177 profits or suffer major losses. as a result, cryptocurrencies have been popular among speculative investors. these are individuals or institutions willing to take on high levels of risk, aiming for significant returns due to short-term price movements. for cautious investors, cryptocurrencies were not appealing for a long time. they were primarily purchased by technology enthusiasts and speculative traders. as shown by cryptocurrency market capitalization data, the crypto market has expanded considerably over the past five years (figure 1). many new technological solutions and their associated offerings have attracted researchers, the interested public, and investors. we decided to study stablecoins because they represent a fascinating phenomenon whose growing popularity gives rise to numerous research questions. this article presents stablecoins and the technologies associated with them, legal considerations, and their usefulness in various contexts, including criminal activity. we formulated research questions and sought answers to them. crypto-assets the theoretical framework introduces blockchain technology and its practical relevance, placing a specific focus on stablecoins. it outlines the core concept of stablecoins, examines their regulatory treatment across major global economies, and investigates their links to illicit activities and the criminal underworld. blockchain technologies blockchain technology and the first associated cryptocurrency, bitcoin (btc), were introduced by an anonymous individual using the pseudonym satoshi nakamoto. he envisioned a digital means of payment and a secure technology that functions transparently and reliably without the need for central institutions such as banks. payments are made directly between users (nakamoto, 2008). blockchain technology represents a significant advancement in secure data storage and transfer. it establishes a decentralized digital ledger where data is organized into sequential blocks. this system is maintained by a distributed network of computers, called nodes, which collectively verify and preserve data integrity. since data is distributed across the network and the transaction ledger can be stored by any user, this architecture reduces the risk of cyberattacks and errors. before a new block is added to the chain, the network must reach consensus, typically ensured by verification algorithms. every transaction is publicly accessible and immutable, enabling high transparency and reliable traceability (nakamoto, 2008). the utility of blockchain technology the original purpose of blockchain technology was to create a digital medium of exchange. however, neither bitcoin nor any other cryptocurrency has succeeded in replacing traditional state-backed currencies, commonly referred to as fiat currencies (lapuh bele, 2025), despite the fact that numerous countries are in the process of developing their own official digital currencies. nakamoto (2008) did not foresee that bitcoin would evolve into a vehicle the impact of stablecoins on global finance 178 for speculative investment. due to its high volatility and substantial transaction fees, bitcoin has become impractical as a means of payment for small transactions. although bitcoin continues to hold a dominant share of the cryptocurrency market, other significant digital assets have emerged. as illustrated in figure 1, bitcoin accounts for the largest proportion of total market capitalization (approximately 51% when converted to usd), followed by ethereum (12%), stablecoins (10%), while the remaining 27% consists of other crypto-assets. research indicates that individuals invest in cryptocurrencies for a variety of reasons, with profit-seeking being the most prominent motivation (mitra, 2022). this profit-driven incentive, however, does not typically apply to investors in stablecoins. figure 1 source: charts (coinmarketcap, 2025d) ethereum, which ranks second to bitcoin in terms of market capitalization, was not designed as a means of payment. rather, it serves as a decentralized platform for the deployment of smart contracts—self-executing agreements in which the terms are directly written into code and automatically enforced once predefined conditions are met. the native cryptocurrency of this platform is ether, which functions as both a medium of exchange and a fuel for computational operations within the ethereum network. the versatility of blockchain-based technological solutions extends far beyond financial transactions. blockchain enables innovative applications in logistics, supply chain management, decentralized finance (defi), digital rights protection, legal processes, and other domains where transparency, reliability, security, immutability, and automatic enforceability of transactions are paramount (lapuh bele & turk, 2024). a particularly noteworthy application of smart contracts is the emergence of stablecoins. their increasing adoption and integration into financial systems have elevated their julija lapuh bele, tanja bele 179 presence in economic statistics and motivated further scholarly investigation. this growing relevance inspired us to conduct an in-depth exploration of stablecoins as a distinct phenomenon within the crypto ecosystem. while the term cryptocurrency has become widely used, it is increasingly seen as restrictive and insufficient in capturing the diversity of digital assets being developed. each new blockchain network inherently gives rise to its own native digital coin. in addition to these coins, tokens can also be created—typically on existing blockchains like ethereum—through the deployment of smart contracts. for instance, a project that issues a smart contract on ethereum will have its own token, even though it does not create a new blockchain. to more accurately describe this complex landscape, the term crypto-asset has emerged as the most inclusive and appropriate designation. this terminology has also been formally adopted by the european union in its regulation on markets in crypto-assets (mica) (eu, 2023). the regulation establishes a comprehensive legal framework for crypto-asset markets and is binding across all eu member states, marking a significant step toward regulatory harmonization and investor protection in the digital asset space. stablecoins stablecoins are a form of cryptocurrency whose value is pegged to an external reference, such as a fiat currency (e.g., the us dollar), a commodity (e.g., gold), or a financial instrument. their primary objective is to mitigate the high volatility associated with leading cryptocurrencies, such as bitcoin (btc), which renders many crypto assets unsuitable for everyday transactional use (hayes, 2024). the first stablecoin, bitusd, was introduced in 2014 and promised a one-to-one peg with the us dollar. this innovation marked a significant step toward expanding the cryptocurrency market to a broader user base (hayes, 2024). however, as illustrated in figure 1, significant interest in stablecoins only emerged around 2021, with market capitalization steadily growing since then. two prominent examples of usd-pegged stablecoins are tether (usdt) and usd coin (usdc). among them, usdt dominates the market share, followed by usdc (coinmarketcap, 2025b). most stablecoins are deployed on existing blockchain infrastructures. for instance, usdt was initially launched as an omni layer token on the bitcoin blockchain. today, it is available on several blockchains, including ethereum (as an erc-20 token), tron (trc-20), binance smart chain (bep-20), and others (coinmarketcap, 2024). usdt is issued by tether limited inc., while usdc is issued by circle. market data suggest that investors favor coins with a track record of price stability and institutional credibility. however, it is crucial to note that investor trust in stablecoins is largely based on confidence in the issuing entities, as there are no institutional guarantees akin to those backing sovereign currencies like the us dollar. the impact of stablecoins on global finance 180 typically, crypto coins and tokens are issued by individuals or companies, often accompanied by the publication of a white paper. a stablecoin white paper usually includes the following key components (mattos, 2023):  introduction – explanation of the coin’s purpose and an overview of the current cryptocurrency market landscape;  technical architecture – details of the technological implementation, including blockchain selection, smart contract frameworks, and algorithms used to maintain price stability;  stability mechanism – description of how price parity is maintained, whether through fiat reserves, crypto collateral, or algorithmic strategies;  use of funds – disclosure of how the funds raised through issuance will be utilized and managed;  regulatory framework – explanation of how the coin addresses legal compliance and potential regulatory challenges;  team and partners – introduction of core project contributors and strategic collaborators;  development roadmap – timeline for future development, expansion, and technical improvements. stablecoin issuers pursue price stability using different forms of backing (hayes, 2024), yet it is important to recognize that investors receive no guarantee for the preservation of their capital. for instance, purchasing a usd-pegged stablecoin does not entail any guarantee from the u.s. government, the federal reserve, or any other institutional authority. this raises a pertinent question: why would an investor choose to hold usdt instead of actual u.s. dollars? this issue will be examined in the empirical section of this article. fiat-backed stablecoins maintain value parity through reserves of fiat currency. in the case of tether, for each usdt in circulation, an equivalent amount of u.s. dollars is held in reserve at a financial institution (tether, 2025a). this model operates on a simple principle: each stablecoin must be redeemable at any time for its fiat equivalent (mattos, 2023). crypto-pegged stablecoins, such as dai, are collateralized by other cryptocurrencies, usually ethereum. despite ethereum’s robust infrastructure and history of successful smart contract deployments, assets on its network—including eth and tokens—remain highly susceptible to market fluctuations. consequently, crypto-backed models offer less reliability than fiat-backed alternatives. some stablecoins rely on algorithmic stabilization mechanisms. these do not involve backing by any tangible assets; instead, they utilize pre-programmed rules that automatically adjust coin supply in response to market demand, thereby maintaining a stable value (kwon, 2024). notable algorithmic stablecoins include usdd, ustc, usdx, cusd, and ampl (coinmarketcap, 2025c). beyond price stability, two additional dimensions are vital: liquidity and regulatory clarity. stablecoins offer high liquidity and can be swiftly converted into fiat or other assets, without the volatility experienced by most other cryptocurrencies. when issued in jurisdictions with comprehensive regulatory frameworks, the role of supervisory authorities becomes essential in ensuring transparency and investor protection. the utility of stablecoins is evident across various use cases (chainalysis, 2024): julija lapuh bele, tanja bele 181  payments – ideal for international transactions due to their low fees and fast processing;  inflation hedging – pegged stablecoins provide a store of value, especially in economies experiencing national official currency devaluation;  decentralized finance (defi) – foundational tools for lending, borrowing, and providing liquidity in blockchain-based financial systems. nevertheless, stablecoins have increasingly been exploited in organized crime. since 2021, law enforcement agencies have noted a declining use of bitcoin in illicit transactions, with a concurrent rise in the use of stablecoins (chainalysis, 2025; europol, 2024). given the exponential market growth, regulators are closely monitoring stablecoin issuers, recognizing their potential to impact global financial stability (hayes, 2024). however, regulation remains fragmented. many issuers operate from countries with underdeveloped or ambiguous legal frameworks. for investors, it is generally safer to opt for stablecoins issued under the legal oversight of economically and institutionally robust jurisdictions. investor motivations vary. some allocate portions of their portfolio to high-risk, speculative assets, including cryptocurrencies. others seek to preserve capital or pursue modest growth. in countries with chronic inflation and currency instability—such as turkey, venezuela, and argentina—citizens are increasingly turning to stable assets like the u.s. dollar and usd-pegged stablecoins to safeguard their wealth. interestingly, stablecoins are also widely used in countries like the united states, where currency devaluation is not a primary concern (chainalysis, 2024). the fundamental goal of stablecoins is value preservation. nevertheless, investors must remain aware that all cryptocurrencies are inherently risky, and no government or financial institution guarantees their value or offers protection against market losses. regulatory framework for stablecoins until recently, trading in crypto-assets was largely unregulated in most jurisdictions. however, as trading volumes and the share of household and institutional wealth allocated to crypto-assets increased, economically significant countries began introducing legal frameworks to govern this rapidly evolving domain. the use of cryptocurrencies is associated with several systemic risks, including money laundering, terrorist financing, illicit activities, and consumer protection issues. the international monetary fund (imf, 2021) has warned that the absence of adequate regulation may cause financial instability, disruptions to traditional banking systems, and difficulties in enforcing anti-money laundering and anti-terrorism financing laws. moreover, cryptocurrencies are frequently used as a payment method by criminal organizations. victims often pay ransoms in crypto-assets, and cryptocurrencies are widely accepted as a medium of exchange on the dark web (lapuh bele, 2021). different jurisdictions have taken markedly different approaches to these legal challenges. this article focuses on three of the world’s most influential economies—the european union (eu), the united states (us), and china—where regulatory strategies diverge significantly. the eu has introduced a comprehensive, unified regulatory framework via the markets in crypto-assets regulation (mica). in contrast, the us regulatory regime remains the impact of stablecoins on global finance 182 fragmented, with no single overarching federal law for crypto-assets. china has banned privately issued stablecoins altogether and is instead pursuing the development of its central bank digital currency (cbdc) (adejumo, 2024). interestingly, hong kong, a special administrative region of china, has adopted a more permissive stance and implemented its own crypto-asset trading regulations. the european union: a unified approach as of december 31, 2024, the markets in crypto-assets regulation (mica) is in force across the eu. it provides a standardized regulatory framework for all member states and introduces legal requirements for issuers of crypto-assets as well as service providers operating within the sector. while mica does not explicitly use the term stablecoins, it categorizes such instruments under two main classifications:  asset-referenced tokens (arts): tokens backed by a basket of assets, including fiat currencies, commodities, or other crypto-assets.  e-money tokens (emts): tokens pegged to a single fiat currency, such as the euro or us dollar, and functionally similar to electronic money. mica thereby covers both fiat-pegged stablecoins and those linked to other asset types. the regulation sets specific compliance requirements for both categories, including reserve backing, transparency standards, and regulatory oversight to ensure price stability and consumer protection. issuers must publish a white paper and comply with disclosure and governance obligations, under the supervision of the european banking authority (eba). according to mica, white papers for arts and emts must contain key investor protection information, including: 1. details about the issuer; 2. token characteristics – type, technical description, and total supply; 3. stability mechanisms and reserve management procedures;  for arts: a detailed description of the underlying assets or asset baskets (e.g., currencies, commodities) and the methods used to maintain price stability;  for emts: clear identification of the fiat currency peg (e.g., the euro) and an assurance of 1:1 convertibility; 4. holder rights and obligations; 5. risk disclosures; 6. governance and compliance policies – description of the issuer's internal policies on anti-money laundering and counter-terrorism financing; information on compliance with mica regulatory requirements, including permissions obtained from the competent authority. notably, mica prohibits algorithmic stabilization for both arts and emts. the stability of these tokens must be supported by real, liquid reserves, such as fiat currencies or other high-quality liquid assets. julija lapuh bele, tanja bele 183 the united states: a fragmented regulatory environment in the united states, the regulatory landscape for cryptocurrencies is highly fragmented, with different agencies overseeing distinct aspects of the crypto-asset market. the securities and exchange commission (sec) is currently the primary authority responsible for overseeing crypto-assets, asserting that many digital coins and tokens meet the legal definition of securities under the securities act. we asked chatgpt-4o how the u.s. currently regulates stablecoins and which agencies are involved. the model responded: the sec is actively evaluating whether stablecoins qualify as securities. if they do, the issuers must comply with the full scope of u.s. securities laws. the commodity futures trading commission (cftc) classifies certain crypto-assets as commodities or derivatives, and enforces regulatory actions where applicable. indeed, the cftc has already taken enforcement actions against stablecoin issuers. in october 2021, it fined tether holdings ltd. $41 million for misrepresenting that its stablecoin usdt was fully backed by u.s. dollar reserves (cftc, 2021). stablecoin regulation in the u.s. is still under active development, with multiple legislative initiatives and regulatory bodies seeking to address the complex challenges posed by these instruments. as of now, no unified federal statute exists that comprehensively governs stablecoins, although legislative efforts are underway. one key proposal is the clarity for payment stablecoins act, which aims to provide clear regulatory guidelines for stablecoin issuers (congress.gov, 2023). according to analysts, if enacted, the bill could curb the market dominance of non-compliant stablecoins (wynn, 2024). stablecoins and criminal activity cryptocurrencies have become both a target and a medium of exchange in various forms of cybercrime as well as broader criminal activity, including terrorist financing, sanction evasion, illicit trade, and money laundering (chainalysis, 2025). in 2023, a marked increase was observed in the use of cryptocurrency swapping services, which enable the conversion of one digital asset into another. these services are often exploited by criminal actors to obscure transaction trails and preserve the value of illicitly acquired funds. swaps are generally executed for two primary reasons: anonymity and stability. for anonymity, widely used cryptocurrencies such as bitcoin are exchanged for privacy coins, such as monero, which offer advanced obfuscation techniques. for price stability, criminals increasingly convert their holdings into stablecoins, such as usdt (tether) (europol, 2024). while the regulated financial system has significantly reduced the incidence of money laundering through stringent laws and robust enforcement, this success has prompted criminal networks to seek alternative financial channels. stablecoins are emerging as a preferred vehicle for laundering illicit proceeds. according to recent data, 63% of all cryptocurrency transactions linked to criminal activity involved stablecoins, making them the dominant instrument for illicit finance within the crypto ecosystem (chainalysis, 2025). the impact of stablecoins on global finance 184 research questions given the substantial market share and dynamic growth of stablecoins (chainalysis, 2024), this study aims to explore several key aspects of their development and usage. we therefore formulate the following research questions: 1. which stablecoins have the highest market capitalization, and what share of the total stablecoin market do they represent? 2. to what extent are the most capitalized stablecoins compliant with relevant regulatory frameworks? 3. what are the main motivations for consumers to purchase a usd-pegged stablecoin instead of holding actual usd? 4. which factors most significantly contribute to the volatility of stablecoins? 5. does the mechanism of value stabilization influence consumers’ choice of stablecoin? research methodology we applied the following quantitative methods:  analysis of market capitalization data for major stablecoins;  evaluation of market share data for stablecoins across global regions and individual countries;  comparative analysis of inflation rates in countries where stablecoin-based saving holds a significant market share. additionally, we employed a qualitative document analysis method, examining regulatory frameworks and whitepapers of selected stablecoins. for this purpose, we used the grok 3 artificial intelligence model to support our analytical process. all data on market capitalization were collected on march 13, 2025, which is also the date on which grok 3 was prompted to generate regulatory and whitepaper analyses. analysis and results due to the methodological challenge of acquiring a representative global sample of stablecoin users, we were unable to conduct an empirical survey. instead, we addressed the research questions using publicly available statistical data and qualitative analyses relevant to our study objectives. stablecoins by market capitalization and market share as of march 13, 2025, data retrieved from coinmarketcap indicate that the four largest stablecoins by market capitalization were:  tether (usdt): 64.90%  usd coin (usdc): 26.87%  ethena (usde): 2.51%  dai (dai): 2.47% all other stablecoins combined accounted for only 3.25% of the market. these proportions are calculated after excluding data marked as self-reported and potentially unreliable, in accordance with the platform’s data transparency notices. julija lapuh bele, tanja bele 185 regulatory compliance of leading stablecoins on february 20, 2025, the european securities and markets authority (esma) published a list of ten entities authorized under the mica regulation, collectively issuing 15 mica-compliant stablecoins (coinspaidmedia, 2025). among the top four stablecoins by market capitalization, only usdc, issued by circle, meets mica compliance requirements. tether (usdt) has faced regulatory challenges in the united states, including fines and trading restrictions on platforms like coinbase and crypto.com due to non-compliance with mica (adejumo, 2024b). furthermore, tether’s involvement in high-risk jurisdictions (e.g., iran, venezuela, russia) has attracted scrutiny for facilitating transactions outside traditional financial oversight. despite lacking full regulatory approval in both the u.s. and eu, tether claims to actively cooperate with regulators to enhance compliance (tether, 2025b). investor confidence remains disproportionately concentrated in tether and circle, suggesting either a lack of awareness regarding regulatory risks or trust in issuer assurances. this concentrated exposure increases systemic risk and underscores the need for greater transparency. motivations for purchasing usd-pegged stablecoins over usd using grok 3, chatgpt-4o, and microsoft copilot, we conducted a qualitative inquiry into consumer motivations for choosing usd-pegged stablecoins over fiat usd. sources cited by ai models were cross-verified for accuracy and relevance. the key motivations include:  international payments: stablecoins facilitate fast, low-cost cross-border transactions, especially in countries with limited access to stable currencies (e.g., ethiopia, nigeria).  accessibility: they are globally accessible, even in jurisdictions with restricted access to usd (e.g., venezuela, nigeria).  decentralized finance (defi): stablecoins enable access to defi services in regions with advanced crypto infrastructure (e.g., u.s., u.k., vietnam, india).  anonymity: they offer higher transactional privacy compared to traditional banking systems, appealing to privacy-conscious individuals, businesses in sensitive sectors, users in sanctioned economies, crypto advocates, and illicit actors. factors influencing the instability of stablecoins we conducted a qualitative study using chatgpt-4. we posed the following query: "what factors most significantly influence the instability of stablecoins?" we requested sources in apa7 format and specific examples for each factor. we utilized the deep research function and received a comprehensive response, which we have summarized for this report. stablecoins have experienced sudden value losses or deviations from their target value in practice. in recent years, several high-profile cases have revealed various causes for this phenomenon. according to moody's analysts (2023), the factors contributing to instability include technical, financial, legal, and other issues, such as governance problems or unexpected events within the crypto ecosystem. the impact of stablecoins on global finance 186 technical factors software bugs, algorithmic flaws, or protocol vulnerabilities can cause de-pegging. for instance, the dai stablecoin faced a crisis in 2020 due to an ethereum crash and smart contract malfunction. terrausd (ust) collapsed due to inherent design weaknesses in its algorithmic stabilization. financial and economic factors instability may result from:  inadequate or illiquid reserve assets  insufficient collateralization  exposure to volatile macroeconomic conditions a notable example occurred in march 2023, when usdc briefly de-pegged following the collapse of silicon valley bank, which held ~8% of circle’s reserves (howcroft & jaiswal, 2023). although circle rapidly restored confidence, the event highlighted even fully collateralized stablecoins’ exposure to systemic banking risks. similar concerns have affected tether (usdt) due to doubts over reserve transparency, as in the october 2018 noble bank incident. legal and regulatory factors the lack of legal clarity and supervision has led to instability. regulatory crackdowns, such as the sec’s 2023 action against binance usd (busd), caused sharp declines in market capitalization. investigations into tether and bitfinex revealed periods of insufficient fiat backing, further affecting trust. external ecosystem shocks contagion from broader crypto market events, such as the collapse of ftx in 2022, impacted stablecoin prices, including usdt. mass redemptions and fear-based sell-offs led to temporary de-pegging. governance and market psychology poor issuer governance and delayed responses can erode market confidence. fearinduced sell-offs may lead to self-fulfilling devaluation spirals. effective communication and credible reserve audits are thus essential for maintaining peg stability. impact of collateralization mechanism on investor choice due to the lack of global survey data, we assessed investor preferences through market capitalization and the nature of reserve backing. our findings indicate that the most popular stablecoins—usdt and usdc—are fully backed by fiat usd reserves. these two coins jointly control over 90% of the market, suggesting a strong investor preference for fiat-collateralized coins over crypto-backed or algorithmically stabilized alternatives. algorithmic stablecoins attract the least trust due to their instability history. julija lapuh bele, tanja bele 187 conclusions stablecoins serve as a bridge between traditional and decentralized finance, playing an increasingly vital role in global financial systems. their use in inflation-prone economies and international payments demonstrates their practical utility and potential for financial inclusion. however, stablecoins also present significant risks, particularly in the realms of regulatory uncertainty, technical flaws, reserve opacity, and market vulnerabilities. the dominant market share of usdt, despite its incomplete regulatory alignment, underscores either user misinformation or complacency about legal compliance. the mica regulatory framework introduces greater safeguards and could enhance investor trust, although it may also constrain innovation. the future of stablecoins will depend on a delicate balance between technological advancement, legal clarity, and user confidence. further empirical research is essential to uncover user perceptions and attitudes toward different stabilization mechanisms, which will likely shape the trajectory of stablecoins and the broader digital asset ecosystem. references 1. adejumo, o. (2024a). cryptocurrency clarified to be personal property in china, remains barred for businesses. cryptoslate. https://cryptoslate.com/crypto-clarified-as-personal-property-in-chinaremains-barred-for-businesses/ 2. adejumo, o. (2024b). coinbase’s mica alignment in europe to cause controversial delisting of major stablecoins like tether’s usdt. cryptoslate. https://cryptoslate.com/coinbases-micaalignment-in-europe-to-delist-major-stablecoins-like-tethers-usdt/ 3. amberdata. (2023). moody's investors service interactive stablecoin data story powered by amberdata. https://blog.amberdata.io/moodys-stablecoin-data-story-powered-by-amberdata 4. cftc. (2021, cftc orders tether and bitfinex to pay fines totaling $42.5 million. commodity futures trading commission. https://www.cftc.gov/pressroom/pressreleases/8450-21 5. chainalysis. (2024). the 2024 geography of crypto report. chainalysis: the blockchain data platform. https://www.chainalysis.com/ 6. chainalysis. (2025). the 2025 crypto crime report. chainalysis: the blockchain data platform. https://www.chainalysis.com/wp-content/uploads/2025/02/the-2025-crypto-crime-reportrelease.pdf 7. circle. (2024). usd coin (usdc). circle. https://www.circle.com/usdc 8. coincheckup. (2025). total crypto market capitalization, volume charts and global cryptocurrency overview. https://coincheckup.com/global 9. coingecko. (2024). state of stablecoins: 2024. coingecko. https://www.coingecko.com/research/publications/state-of-stablecoins-2024 10. coinmarketcap. (2024). tether (usdt). coinmarketcap. https://coinmarketcap.com/currencies/tether/ 11. coinmarketcap. (2025a). crypto market overview. coinmarketcap. https://coinmarketcap.com/charts/ 12. coinmarketcap. (2025b). top stablecoin tokens by market capitalization. coinmarketcap. https://coinmarketcap.com/view/stablecoin/ 13. coinmarketcap. (2025c). top algorithmic stablecoin tokens by market capitalization. coinmarketcap. https://coinmarketcap.com/view/algorithmic-stablecoin/ 14. coinmarketcap. (2025d). charts. coinmarketcap. https://coinmarketcap.com/charts/ 15. coinspaidmedia. (2025). eu approves 15 stablecoins under mica regulations. coinspaid. https://coinspaidmedia.com/news/15-stablecoins-comply-mica-regulations-eu/ 16. congress.gov. (2023). h.r.4766 clarity for payment stablecoins act of 2023. https://www.congress.gov/bill/118th-congress/house-bill/4766 https://cryptoslate.com/crypto-clarified-as-personal-property-in-china-remains-barred-for-businesses/ https://cryptoslate.com/crypto-clarified-as-personal-property-in-china-remains-barred-for-businesses/ https://cryptoslate.com/coinbases-mica-alignment-in-europe-to-delist-major-stablecoins-like-tethers-usdt/ https://cryptoslate.com/coinbases-mica-alignment-in-europe-to-delist-major-stablecoins-like-tethers-usdt/ https://blog.amberdata.io/moodys-stablecoin-data-story-powered-by-amberdata https://www.cftc.gov/pressroom/pressreleases/8450-21 https://www.chainalysis.com/ https://www.chainalysis.com/wp-content/uploads/2025/02/the-2025-crypto-crime-report-release.pdf https://www.chainalysis.com/wp-content/uploads/2025/02/the-2025-crypto-crime-report-release.pdf https://coincheckup.com/global https://www.coingecko.com/research/publications/state-of-stablecoins-2024 https://coinmarketcap.com/currencies/tether/ https://coinmarketcap.com/charts/ https://coinmarketcap.com/view/stablecoin/ https://coinmarketcap.com/view/algorithmic-stablecoin/ https://coinmarketcap.com/charts/ https://coinspaidmedia.com/news/15-stablecoins-comply-mica-regulations-eu/ https://www.congress.gov/bill/118th-congress/house-bill/4766 the impact of stablecoins on global finance 188 17. evropski parlament. (2023). regulation on markets in crypto-assets (mica). https://eurlex.europa.eu/legal-content/sl/txt/pdf/?uri=celex:32023r1114 18. europol. (2024). internet organised crime threat assessment (iocta) 2024. https://www.europol.europa.eu/cms/sites/default/files/documents/internet%20organised%20crim e%20threat%20assessment%20iocta%202024.pdf 19. hayes, a. (2024). stablecoins: definition, how they work, and types. investopedia. https://www.investopedia.com/terms/s/stablecoin.asp 20. howcroft, e., & jaiswal, r. (2023). circle assures market after stablecoin usdc breaks dollar peg. reuters. https://www.reuters.com/business/crypto-firm-circle-reveals-33-bln-exposuresilicon-valley-bank-2023-03-11 21. imf (2021). covid-19, crypto, and climate, navigating challenging transitions. https://www.imf.org/en/publications/gfsr/issues/2021/10/12/global-financial-stability-reportoctober-2021 22. kwon, j. h., & kim, s. h. (2024). algorithmic stablecoins: mechanisms and market impact. journal of financial stability, 58, 100-115. https://doi.org/10.1016/j.jfs.2024.100115 23. lang, h., wilson, t., howcroft, elizabeth. (2023). binance stablecoin backer says u.s. sec has labeled token an unregistered security. reuters. https://www.reuters.com/technology/binancestablecoin-backer-ordered-stop-issuing-token-binance-ceo-2023-02-13 24. lapuh bele, julija. (2021). temna stran digitalizacije. v: devjak, tatjana (ur.). pravo in management v pogojih digitalnega poslovanja i. elektronska izd. ljubljana: mlc fakulteta za management in pravo, 2021. str. 125-144. 25. lapuh bele, julija, turk, boštjan j. (2024). pametne pogodbe. v: devjak, tatjana (ur.), bohinc, rado. pravo in management v pogojih digitalnega poslovanja iii. ljubljana: mlc fakulteta za management in pravo, 2024. str. 146-170. 26. lapuh bele, julija (2025). evolucija kriptovalut v zakonite finančne instrumente. v: devjak, tatjana (ur.). pravo in management v pogojih digitalnega poslovanja iv. elektronska izd. ljubljana: mlc fakulteta za management in pravo, 2021. str. 39-54. 27. malwa, shaurya. (2022). tether's usdt stablecoin drops 3% below $1 peg. coindesk. https://www.coindesk.com/markets/2022/11/10/tethers-usdt-stablecoin-slips-from-1-peg 28. mattos, k. (2023). explaining stablecoins: the holy grail of cryptocurrency. getwox. https://www.getwox.com/sl/explaining-stablecoins-the-holy-grail-of-cryptocurrency/ 29. mcmahon, t. (2023). worldwide inflation by country in 2023. inflationdata. https://inflationdata.com/articles/2023/12/19/worldwide-inflation-by-country-in-2023/ 30. moody's. (2023). stablecoins have been unstable. why? moody’s. https://www.moodys.com/web/en/us/about/insights/data-stories/stablecoins-instability.html 31. mitra, m. (2022). crypto might be the future of finance. but that's not why most people buy it. money. https://money.com/why-buy-crypto-survey/ 32. nakamoto, s. (2008). bitcoin: a peer-to-peer electronic cash system. https://bitcoin.org/bitcoin.pdf 33. sharma, r. (2024). what is decentralized finance (defi) and how does it work?. investopedia. https://www.investopedia.com/decentralized-finance-defi-5113835 34. tether. (2025a). why use tether. tether. https://tether.to/en/why-tether 35. tether. (2025b). tether token. tether. https://tether.to/en/ 36. wynn, s. (2024). banks are in and tether could fade if latest stablecoin bill passes: s&p global. the block. https://www.theblock.co/post/290706/banks-are-in-and-tether-could-fade-if-lateststablecoin-bill-passes-sp-global?utm_source=chatgpt.com https://eur-lex.europa.eu/legal-content/sl/txt/pdf/?uri=celex:32023r1114 https://eur-lex.europa.eu/legal-content/sl/txt/pdf/?uri=celex:32023r1114 https://www.europol.europa.eu/cms/sites/default/files/documents/internet%20organised%20crime%20threat%20assessment%20iocta%202024.pdf https://www.europol.europa.eu/cms/sites/default/files/documents/internet%20organised%20crime%20threat%20assessment%20iocta%202024.pdf https://www.investopedia.com/terms/s/stablecoin.asp https://www.reuters.com/business/crypto-firm-circle-reveals-33-bln-exposure-silicon-valley-bank-2023-03-11 https://www.reuters.com/business/crypto-firm-circle-reveals-33-bln-exposure-silicon-valley-bank-2023-03-11 https://www.imf.org/en/publications/gfsr/issues/2021/10/12/global-financial-stability-report-october-2021 https://www.imf.org/en/publications/gfsr/issues/2021/10/12/global-financial-stability-report-october-2021 https://doi.org/10.1016/j.jfs.2024.100115 https://www.reuters.com/technology/binance-stablecoin-backer-ordered-stop-issuing-token-binance-ceo-2023-02-13 https://www.reuters.com/technology/binance-stablecoin-backer-ordered-stop-issuing-token-binance-ceo-2023-02-13 https://www.coindesk.com/markets/2022/11/10/tethers-usdt-stablecoin-slips-from-1-peg https://www.getwox.com/sl/explaining-stablecoins-the-holy-grail-of-cryptocurrency/ https://inflationdata.com/articles/2023/12/19/worldwide-inflation-by-country-in-2023/ https://www.moodys.com/web/en/us/about/insights/data-stories/stablecoins-instability.html https://money.com/why-buy-crypto-survey/ https://bitcoin.org/bitcoin.pdf https://www.investopedia.com/decentralized-finance-defi-5113835 https://tether.to/en/why-tether https://tether.to/en/ https://www.theblock.co/post/290706/banks-are-in-and-tether-could-fade-if-latest-stablecoin-bill-passes-sp-global?utm_source=chatgpt.com https://www.theblock.co/post/290706/banks-are-in-and-tether-could-fade-if-latest-stablecoin-bill-passes-sp-global?utm_source=chatgpt.com agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 19, no. 1 (2025), pp. 293-302 293 the process of formation of the metaverse a new stage in the cyclical development of society v. podliesna vasylyna podliesna institute for economics and forecasting of the nas of ukraine, ukraine https://orcid.org/0000-0002-8435-1013, e-mail: podlesnw2019@gmail.com abstract: the purpose of this study to study the essence of the metaverse in the context of its role in the cyclical development of society as a new stage. this article substantiates that, in terms of dynamism and influence on societal development, the processes of metaverse formation represent a new stage of cyclical development of society. the development of metaverse has the potential to overcome the long crisis-depressive dynamics of the global economy and the deployment of an upward wave of the 6th kondratiev cycle. it has been established that the technologies of the metaverse contribute to transhumanism, the development of the metaverse poses threats and challenges to the most important component of society's productive forces people, as well as has eco-destructive consequences. it is shown that, the formation of the metaverse plays a significant role in the transformation of the geopolitical system, providing more and more advanced tools of "soft power", as well as technologies for information and cognitive warfare and technologies for the development of "military metaverses". thus, the technologies of the metaverse radically change the technicaltechnological, socio-economic, institutional, military, biological components of societal development, and thus the formation of the metaverse is a new stage in the cyclical development of human civilization. keywords: metaverse, "military metaverses", world-system, cyclical development, threats. 1. introduction cyclical societal development has a spiral form, which is formed on he basis of cyclic repetition of phases of formation, development and decomposition of economic systems of particular historical forms of society. today capitalist society enters the phase of decomposition, in other words, its deep internal contradictions are aggravated and not properly resolved, so the world-system plunges into a deep crisis. the way out of the crisis in historical retrospect was the "great transformations" forming a new techno-economic and institutional paradigms of the world being. in modern conditions, large-scale ("great transformations") technological and societal can give rise to a new form of capitalism information-network capitalism or lead to the emergence of new forms of society neo-feudalism or posthuman society. the scientific and technological basis of such transformations is the fourth industrial revolution; its scale, dynamism and orientation will largely determine the future path of capitalism. the development of artificial intelligence, one of the basic technologies of the metaverse, plays a leading role in the formation of the prerequisites of posthuman society. https://orcid.org/0000-0002-8435-1013 mailto:podlesnw2019@gmail.com the process of formation of the metaverse a new stage in the cyclical development of society 294 the most relevant in terms of the degree of dynamism and impact on societal development, the emergence of the fourth industrial revolution is a metaverse a threedimensional virtual world in which all actions can be performed with the help of augmented and virtual reality services (damar, 2021). the metaverse exists and is evolving, including social networks, video game worlds, and interactive online practices, primarily through the internet. in the course of its evolution, the metaverse creates more and more opportunities for users to actively create "information", experience it, and perhaps even live in this created reality without needing a significant physical world (talin, 2024), which contributes to the escapism of an increasing number of people, especially in the context of the current complex crisis of capitalist society. the development of the metaverse contributes to overcoming the protracted crisisdepressive dynamics of the global economy, which began in 2008, and also stimulates the upward wave of the new 6th kondratiev cycle. at the same time, the rapid development of the metaverse creates threats and challenges to the most important component of society's productive forces people, and also has ecodestructive consequences. the basic technologies of the metaverse are becoming a driver of transhumanist processes, and they also play a significant role in the transformation of the geopolitical system. in the cyclical development of the world-system, today there is a period of aggravation of geopolitical contradictions and their military resolution (in the form of local-global conflicts) has begun. the metaverse is also becoming a space for the resolution of geopolitical contradictions. the purpose of this study to study the essence of the metaverse in the context of its role in the cyclical development of society as a new stage, to identify the main challenges and threats posed by the technologies of the metaverse, to determine the main directions of overcoming these threats. 2. literature review the most relevant in the context of the cyclical development of the capitalist worldsystem today are studies devoted to global cycles, first of all, the scientific works of n. kondratiev (kondratieff,1926), g. modelski (modelski, 1995). and i. wallerstein (wallerstein, 1983). today, the formation of the metaverse corresponds to the logic of the development of the sixth kondratiev cycle, namely, its upward wave, the essence of the concept of the metaverse is revealed in scientific publications of m. damar (damar, 2021), b. talin (talin, 2024)., g. wang (wang g. et al., 2022). 3. methodology in this research we applied primarily logical and historical methods, as well as dialectical ascent from the abstract to the concrete, including general scientific methods of analysis and synthesis, induction and deduction, data from un, unctad, world bank were used. 4. results vasylyna podliesna 295 the activation of the processes of metaverse formation corresponds to the logic and chronology of the deployment of large kondratiev cycles. according to n. kondratiev's theory, before the beginning and at the beginning of the upward wave of each major cycle, profound changes occur in the conditions of economic life of society, one of the most important manifestations of which are significant changes in technology, preceded by significant technical discoveries and inventions (kondratieff, 1926). the modern world-system is on the threshold of the 6th kondratiev cycle, and metaverse technologies are one of the types of basic innovations that are necessary to start the deployment of the upward wave of the next kondratiev cycle. the development of the upward wave of the 6th kondratiev cycle will occur on the basis of the fourth industrial revolution the scientific and technological basis of the coming "great transformations". the fourth industrial revolution: began at the beginning of the 21st century, is based on the digital revolution, its main features "ubiquitous" and mobile internet, miniature manufacturing devices (which are constantly getting cheaper), artificial intelligence and learning machines, at the center of the fourth industrial revolution is the convergence of the physical, digital and biological worlds (schwab, 2016). the unfolding of the fourth industrial revolution has led to the emergence of a new form of existence the metaverse that combines physical and virtual realities, allowing people and their avatars to interact in an environment supported by technologies such as: high-speed internet, virtual reality, augmented reality, mixed and augmented reality, blockchain, digital twins, and artificial intelligence (ai) (wang g. et al., 2022). and it also led to the growth of the digital economy. today the digital economy is already booming, according to unctad estimates: annual smartphone shipments have more than doubled since 2010, reaching 1.2 billion in 2023, the number of internet of things (iot) devices is projected to grow 2.5 times from 2023 to 39 billion by 2029, new data from 43 countries, representing about three-quarters of global gdp, shows that business e-commerce sales grew by nearly 60% from 2016 to 2022 to reach $27 trillion (unctad, (2024). the world bank estimates that the digital sector has been a source of innovation, economic growth, and job creation: value added in the it services sector grew at 8 percent per year from 2000 to 2022, almost twice as fast as the global economy, it services employment growth reached 7 percent per year, six times faster than overall employment growth, digital adoption accelerated after the covid-19 pandemic, adding 1.5 billion new internet users from 2018 to 2022, the share of companies investing in digital solutions globally more than doubles from 2020 to 2022 (world bank, 2024). the un predicts that the total artificial intelligence market will reach $4.8 trillion by 2033, making it one of the key drivers of digital transformation (un, 2025а). the implementation of technologies of the fourth industrial revolution, including military technologies, is changing the structure of the economy, moving more and more of it the process of formation of the metaverse a new stage in the cyclical development of society 296 into the metaverse space, as well as radically changing the military sphere through the increasing use of artificial intelligence and strengthening the role of information-psychological warfare. recently, leading technology corporations have intensified their activities on the development of sectoral metaverses focused on further digitalization of political and military spheres of societal life. distributed interactive modeling and high-level architecture have facilitated the integration of disparate training simulators, allowing the military to train in a virtual space, simulating a new concept of military operations and testing new types of ai-based weapons. the armed forces of the world's technological leaders have been using effective simulation for basic military training and the development of advanced ai-based tactical weapons for several years. thus, ai wargames, an algorithm capable of accurately simulating real-world combat operations, have been introduced into regular military training. the rapid and all-encompassing spread of metaverse technologies poses threats and challenges to the most important component of society's productive forces people, and also has eco-destructive consequences. the challenges of transhumanism also deserve special attention. regarding the impact on humans, the major threats posed by the rapid development of the metaverse occur in three main directions: 1) influence on consciousness threatening to destroy the integrity and identity of the individual, 2) impact on economic activity the threat of increasing displacement of people from the process of societal reproduction, especially the loss of their ability to set goals, 3) increasing social inequality, in particular digital inequality, as a component of social inequality. the metaverse has the potential to augment the physical world with augmented and virtual reality technologies that allow users to interact seamlessly in real and simulated environments through avatars and holograms. as the metaverse evolves, the clear boundaries between the physical and digital are likely to be somewhat blurred compared to today's perception. however, the interaction of avatars in the metaverse even if they look real cannot replace real human interaction (european parliament, 2022), so the deeper immersion of humans in the metaverse space leads to deformation of their social interaction skills and an increased tendency to escapism. according to the resolution of the conference of the european trade union committee for education (etuce), ai poses a real threat to humans. from an ethical point of view, the ability of a machine to influence human choices can hinder the independence, freedom and creativity of humanity (etuce, 2021). in the historical retrospective of pre-industrial, industrial and the initial stage of postindustrial epochs of societal development, the main productive force of society was a human a carrier of knowledge, innovative ideas, skills and abilities for their realization. the uniqueness of the modern stage of cyclic societal development lies in the fact that scientific and technological progress displaces a human from the system of societal production, and most importantly, the development of artificial intelligence creates a threat of depriving a human of an active role in goal-setting and decision-making in the most important spheres of societal existence. vasylyna podliesna 297 the emergence of artificial superintelligence, which is developed to the point where it is able to make decisions based on its own motivation, while being qualitatively different from human intelligence, can lead to an intellectual explosion, which is closely related to the technological singularity, the essence of which is superhumanity (superhuman intelligence) (vinge, 1993). the benefits of automation often benefit owners of capital rather than workers, which could increase social inequality and weaken the competitive advantage of cheap labor in developing countries. the un predicts that artificial intelligence will affect 40 percent of jobs worldwide and help increase productivity. while the technology brings new opportunities, especially through productivity gains and new industries, it also raises serious concerns about automation and job displacement – especially in economies where low-cost labour has been a competitive advantage (un, 2025). the metaverse creates new employment opportunities (primarily in areas such as virtual commerce and services, content creation and curation, virtual events and entertainment). at the same time, it generates increased unemployment routine tasks and services can be automated (carenina, 2023). in the context of the formation of the metaverse, such a component of social inequality as digital inequality has become relevant. according to un secretary-general a. guterres, “digital inequalities exacerbate social, economic and gender inequalities, affecting both urban and rural populations, children and the elderly, and affecting everything from education to health care” (un, 2022). the digital inequality manifests itself primarily at the cross-country level: today, access to ai infrastructure and expertise remains concentrated in a few countries. just 100 companies, predominantly from the us and china, account for 40 percent of global corporate r&d spending. major tech giants such as apple, nvidia and microsoft are valued at $3 trillion each comparable to the combined gdp of the entire continent of africa. this market dominance could deepen the technological divide, leaving many developing countries without the benefits of ai (un, 2025а). digital innovation such as artificial intelligence (ai) is accelerating in high-income countries, while low-income countries are lagging behind. while more than 90 percent of people in highincome countries were online in 2022, only one in four people in low-income countries used the internet, and their connection speeds were typically a fraction of those in wealthier countries. the growing digital divide exacerbates the poverty and productivity gap between richer and poorer economies (world bank, 2024). artificial intelligence is emerging as a critical driver of the economic future, yet according to unctad, 118 countries, mostly from the global south, remain outside key international discussions on its regulation (un, 2025а). many developing countries face digital infrastructure deficits, data shortages and skills shortages (un, 2025а). unctad has developed the advanced technology readiness index, which takes into account ict penetration, skills, r&d activity, industrial capacity and access to finance. the leading positions in the ranking are occupied by developed countries of europe and north the process of formation of the metaverse a new stage in the cyclical development of society 298 america, as well as singapore. among the brics countries, china (21st), russia (33rd), india (36th), brazil (38th) and south africa (52nd) have high positions. only a limited number of developing countries, including brazil, china, india and russia, have supercomputers and large data centers. in terms of data, china stands out in terms of both quantity and availability. in addition, countries such as germany, the uk, russia, the us and hong kong, china have significant data sets that can be used for ai development (un, 2025а). as the digital economy grows, its eco-destructive effects and resource intensity increase. digital technologies and infrastructure are highly dependent on raw materials, and the production and disposal of more and more devices, along with growing water and energy demands, are increasingly damaging to the planet. the production and use of digital devices, data centers and information and communication technology (ict) networks account for between 6% and 12% of global electricity consumption. this growth is taking an increasingly heavy toll on the environment. environmental damage occurs throughout the lifecycle of ict devices and infrastructure, including through e-commerce. digital waste is growing faster than the rate of collection. waste from screens and small it equipment grew 30% between 2010 and 2022, reaching 10.5 million tons the growing demand for data transmission, processing and storage for new technologies such as blockchain, artificial intelligence, fifth-generation (5g) mobile networks and the internet of things is increasing emissions. for example, the ict sector emitted between 0.69 and 1.6 gigatonnes of co2 equivalent in 2020, corresponding to 1.5% to 3.2% of global greenhouse gas emissions (unctad, 2024). as digital devices become more sophisticated, they require more mineral resources. in 1960, phones used 10 elements from the periodic table, in 1990 they used 27, and in 2021 they will use 63. as a result, the demand for critical minerals needed for both digital and low-carbon technologies is rising sharply. for example, according to the world bank, demand for cobalt, graphite and lithium is expected to increase by 500% by 2050. the access to critical minerals is becoming an increasingly strategic priority for many countries, increasing global competition and the risk of geopolitical challenges (unctad, 2024). the main difference between the current stage of the cyclical development of the capitalist world-system and all previous stages is that scientific and technological progress influences man not only through the transformation of the material conditions of life, but is increasingly acquiring the ability to radically transform the biological body of man, his cognitive abilities. transhumanism in the simplest sense is the process of improving the cognitive and physical abilities of a man by integrating technology into the human body. transhumanism and the metaverse are closely connected, because on the one hand the technologies of the metaverse are able to provide opportunities for human improvement, on the other hand the metaverse needs a cyborgized person, a person maximally immersed in the space of the metaverse (in work, recreation, hobbies, communication), in other words, a person for whom virtual reality becomes equivalent or even more important than material reality. vasylyna podliesna 299 the fourth industrial revolution envisages the mass introduction of cyber-physical systems into production and servicing of everyday human needs. the development of "web 4.0" (predicted to replace "web 3.0" in the 2040s), "university 4.0" (digital university), the internet of things, big data, artificial intelligence, global robotization are radically changing the living space and a human himself/herself, bringing closer the posthuman existence, in which there will be a comprehensive fusion of a human with new technologies. three main model variants of posthumanity can be distinguished: 1) homo genetically transformed, 2) nano-cybernetic homo organism, 3) homo virtualis (belyaev, 2017). transhumanist technologies are one of the components of the technological basis of the fourth industrial revolution and, consequently, of the metaverse. their development generates threats of destroying the integrity of the biosocial essence of a human and establishing such a form of social inequality as biosocial inequality, in other words, the inequality of "improved" and "unimproved" people. 5. discussions in order to overcome the threats posed by the rapid development of the metaverse, it is necessary to: 1. to neutralize the threat of destruction of the integrity and identity of the individual: development and implementation of ethical norms in the practice of institutional regulation of public life, which should be followed by all developers of technologies that form the metaverse and users of these technologies, reaching an institutional consensus between corporations, governments and civil society on the need to adhere to ethical norms that should regulate the development of metaverse technologies in order to prevent destructive effects on human consciousness pausing the training of artificial intelligence systems more powerful than chatgpt 4 for at least six months to develop appropriate security protocols during this time, as suggested by scientists and representatives of the it industry (future of life institute, 2023), the creation of special agencies for licensing metaverse technologies, especially artificial intelligence. 2. to neutralize the threat of human displacement from societal reproduction: development of skills relevant to the digital sphere, including virtual collaboration, digital marketing and content creation; retraining and professional development; cooperation between sectors: governments, educational institutions and industries should collaborate to develop effective training programs and policies (carenina, 2023). transitioning to a circular and inclusive digital economy that promotes economic opportunity and job creation while addressing environmental challenges (unctad, 2024). 3. to neutralize the threat of growing digital inequality: ensuring opportunities for developing countries to participate in shaping norms to regulate the development of meta-intelligence technologies, especially artificial intelligence, so that technologies serve the interests of all humanity and not just a narrow circle of states (strengthening international cooperation will create a global regulatory system based on the principles of fairness, transparency and universal benefit) (un, 2025а), the process of formation of the metaverse a new stage in the cyclical development of society 300 the signing of a global societal contract on digital technologies, which includes the principles of avoiding digital colonization (when residents of less developed countries are able to connect, but only as participants providing data to monopolies located in other countries, and never as entities able to independently derive economic and social benefits) and inequality (mulligan, 2025), developing public-private cooperation to reduce the digital divide, increasing public investment in digital literacy, private companies introducing digital literacy programs for their employees, making digital literacy programs accessible to all segments of society, including users from rural areas, from marginalized communities, from countries where access to the internet is difficult. bioethics is becoming increasingly important to prevent threats associated with the use of transhumanist technologies. the development of bioethics contributes to the formation of institutional foundations for preserving the integrity of the biosocial essence of the human being, as well as guarantees of the rights and freedoms of an "unimproved" human being in a possible posthuman future. widely recognized are the principles of biomedical ethics developed by t. beauchamp and j. childress, namely: respect for autonomy; nonmaleficence; beneficence; justice. complementing these principles are veracity, privacy, confidentiality, and fidelity (beauchamp & childress, 2019). the implementation of these principles is aimed at avoiding interventions that harm the individual patient. many modern transhumanists avoid radical approaches, take into account the risks generated by human enhancement technologies, and move from the concept of "posthumanity" to the idea of "humanity+". the application of human enhancement technologies should take place within the limits delineated by the norms of bioethics. bioethics itself is in urgent need of normative support and the development of bioethics law. to reduce the eco-destructive impact and resource intensity of the digital economy, it is necessary to: implementing sustainable practices throughout the entire digitalization lifecycle from design and production to use and recycling, encouraging the development of a circular economy (one of the components of the fourth industrial revolution) that minimizes waste and maximizes resource use through reuse, recovery, recycling and product life extension (only 7.2% of today's global economy is circular, and this share is declining due to increased extraction and use of materials, however, the global electronics recycling market is expected to grow from usd 37 billion in 2022 to approximately usd 108 billion by 2030, led by the u.s. and china) (unctad, 2024), improving data collection and transparency of ict companies' energy consumption implementing energy efficiency policies in data networks, offering companies tools for customers to measure, report and reduce greenhouse gas emissions from their cloud services, encouragement of companies developing devices using environmentally friendly materials, promoting longer product life cycles and supporting the "right to repair" by providing third parties with access to spare parts and repair information, vasylyna podliesna 301 using environmentally friendly or reusable packaging materials and automated packaging systems to adapt box sizes to the contents, improving supply chains and delivery logistics and promoting cycling (unctad, 2023). 6. conclusions in the cyclical development of human civilization today, the prerequisites for the transition from a deep complex crisis to a phase of comprehensive transformations of the world-system have matured. the fourth industrial revolution and the development of the network economy are one of the most important foundations of such transformations. these processes form a new component of existence the metauniverse, which inevitably affects production relations and productive forces of society, primarily people as the main productive force. the uniqueness of the modern stage of societal development lies in the fact that scientific and technological progress is displacing man from the system of societal production, and most importantly, the development of artificial intelligence creates the threat of depriving man of an active role in goal-setting and decision-making in the most important spheres of public life. the expansion of the metaverse creates such threats the threat of destruction of the integrity and identity of the individual, the displacement of the individual from the process of societal reproduction, the increasing scale of social, in particular digital inequality, the emergence of bioinequality due to the use of transhumanist technologies, and has ecodestructive consequences. today, the growing instability in the capitalist world-system due to the aggravation of geopolitical contradictions indicates the beginning of crisis-militaristic phases of global cycles (long cycles of world politics, cycles of hegemony, kondratiev cycles). the unfolding of such forms of global cycles as long cycles of world politics, substantiated by g. modelski and w. thompson (modelski, 1995), cycles of hegemony, proved by i. wallerstein (wallerstein, 1983), are cyclical processes of struggle of the leading actors of geopolitics for the status of hegemon. the unfolding of the crisis-militaristic stage of the cyclical development of the world system has accelerated the formation of military metaverses and the use of new types of weapons based on the use of artificial intelligence and advanced vr-technologies; competition between leading states in the development and application of information and cognitive practices in the military sphere has intensified. certain areas of application of artificial intelligence in military operations are of concern from a humanitarian point of view. according to the position of the international committee of the red cross, these are, first of all: the integration of artificial intelligence into weapons systems, in particular, into autonomous weapons systems; the use of artificial intelligence in cyber and information operations; military systems for supporting the decisionmaking process based on artificial intelligence (icrc, 2023). the current geopolitical situation prevents full and effective institutional regulation of the development of the metaverse, primarily the regulation of the use of artificial intelligence for military purposes. therefore, all constructive societal forces, primarily the scientific community, should direct their efforts to create institutional practices for regulating the development of the metaverse. the process of formation of the metaverse a new stage in the cyclical development of society 302 references 1. beauchamp, t., childress, j. (2019) principles of biomedical ethics: marking its fortieth anniversary, the american journal of bioethics, 19:11, 9-12. doi:10.1080/15265161.2019.1665402 2. belyaev, d.a. (2017). the concept of "posthuman": the development of the idea of the superman by modern philosophy and technoculture. https://iphras.ru/uplfile/humexp/school.pdf 3. carenina, e. (2023). can the metaverse truly reduce unemployment? https://ie.binus.ac.id/2023/08/22/can-the-metaverse-truly-reduce-unemployment/ 4. damar, m. (2021). metaverse shape of your life for future: a bibliometric snapshot. journal of metaverse, 1(1), 1–8. 5. etuce. (2021). resolution «artificial intelligence in the education sector». adopted by the etuce conference, the regional conference of education international, on 5-6 july 2021. https://www.cseeetuce.org/images/resolutions/rs_2021_artificial_intelligence_in_edu 6. european parliament. (2022). metaverse: opportunities, risks and policy implications.https://www.europarl.europa.eu/thinktank/en/document/eprs_bri(2022)733557 7. future of life institute. (2023). pause giant ai experiments: an open letter. https://futureoflife.org/open-letter/pause-giant-ai-experiments 8. icrc. (2023). what you need to know about artificial intelligence in armed conflict. https://www.icrc.org/en/document/what-you-need-know-about-artificial-intelligence-armedconflict 9. kondratieff, n. (1926). die langen wellen der konjunktur, archiv für sozialwissenschaft und sozialpolitik, 56 (3), 573–609. 10. modelski, g. (1995). the evolution of global politics. journal of world-systems research, 1.(7), 424-467. https://doi.org/10.5195/jwsr.1995.38 11. mulligan, c. (2025). tackling digital inequality together. |https://www.boschstiftung.de/en/story/tackling-digital-inequality-together 12. schwab, k. (2016). the fourth industrial revolution. top business awards. isbn 978-5699-90556-0 13. talin, b. (2024). history and evolution of the metaverse concept. https://morethandigital.info/en/history-evolution-of-metaverse-concept/ 14. un. (2022). nearly a third of the world's population does not have access to the internet. https://news.un.org/ru/story/2022/06/1425242 15. un. (2025). ai’s $4.8 trillion future: un warns of widening digital divide without urgent action. https://news.un.org/en/story/2025/04/1161826 16. un. (2025а). un report: adoption of artificial intelligence will affect 40 percent of jobs. https://news.un.org/ru/story/2025/04/1462941 17. unctad. (2023). curbing the digital economy’s growing environmental footprint. https://unctad.org/news/curbing-digital-economys-growing-environmental-footprint 18. unctad. (2024). digital economy report 2024: shaping an environmentally sustainable and inclusive digital future. 252 р. https://unctad.org/publication/digital-economy-report-2024 19. vinge, v. (1993). «technological singularity». https://ru.scribd.com/document/225604613/vinge-vernon-the-coming-technological singularity 20. wallerstein, i. (1983). the three instances of hegemony in the history of the capitalist world-economy. international journal of comparative sociology, 24 (1-2), 100-108. doi:10.1177/002071528302400107 21. wang, g. et al. (2022). development of metaverse for intelligent healthcare. nature machine intelligence, 4, 922–929. https://doi.org/10.1038/s42256-022-00549-6 22. world bank. (2024). digital progress and trends report 2023. https://openknowledge.worldbank.org/entities/publication/7617f89d-2276-413d-b0a7e31e7527d6af https://ie.binus.ac.id/2023/08/22/can-the-metaverse-truly-reduce-unemployment/ https://www.cseeetuce.org/images/resolutions/rs_2021_artificial_intelligence_in_edu https://futureoflife.org/open-letter/pause-giant-ai-experiments https://doi.org/10.5195/jwsr.1995.38 https://morethandigital.info/en/history-evolution-of-metaverse-concept/ https://news.un.org/ru/story/2022/06/1425242 https://news.un.org/en/story/2025/04/1161826 https://news.un.org/ru/story/2025/04/1462941 https://unctad.org/news/curbing-digital-economys-growing-environmental-footprint https://unctad.org/publication/digital-economy-report-2024 https://doi.org/10.1038/s42256-022-00549-6 agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 19, no. 1 (2025), pp. 329-340 329 exchange-traded funds (etfs) optimization with risk parity strategies d. veliu denis veliu universiteti metropolitan tirana, albania https://orcid.org/0000-0002-6930-7292, e-mail: dveliu@umt.edu.al abstract: this paper explores the application of the risk parity methodology to portfolios constructed using exchange-traded funds (etfs). in the world where the market is becoming more and more global, it is becoming more dynamic in terms of portoflio recalibrations, bringing resilience in terms of values. in other words, is it important to consider only a short holding period, and adapt the asset allocationn. in opposition to typical capital-weighted techniques, risk parity reallocates portfolio weights to ensure that each asset contributes an equal amount of risk. the study builds and assesses risk parity portfolios using ten assets that comprise the majority of the ea bridgeway blue chip etf (bblu). the process entails assessing the volatilities and correlations of specific etfs, adjusting portfolio weights to balance risk contributions, and back testing performance under different market scenarios. empirical data shows that risk parity portfolios outperform standard allocation approaches in terms of diversification, drawdowns, and the stability of risk-adjusted returns. this research illustrates risk parity's potential as a strong framework for managing etf portfolios in both institutional and individual investing settings. keywords: risk parity, etf, portfolio optimization, asset allocation, risk. introduction modern finance focuses on risk management and portfolio development. traditional portfolio allocation approaches, such as the 60/40 equity-bond split, prioritize capital allocation, which frequently results in an imbalance in risk contributions across asset classes (maillard et al., 2010, pp.2). this strategy can lead to an overreliance on more volatile assets, such as stocks, while undervaluing the potential diversification benefits of less volatile asset classes, such as bonds or commodities. risk parity (rp) provides an alternative paradigm that reallocates weights to ensure that each asset contributes equally to overall portfolio risk, resulting in a more balanced and diversified portfolio structure (qian, 2011, pp.2). the application of risk parity to portfolios built with exchange-traded funds (etfs) is a significant step toward implementing advanced portfolio methods. etfs are well-known for their cost-effectiveness, liquidity, and accessibility, making them an excellent vehicle for adopting systematic approaches such as risk parity. etfs also give exposure to a diverse variety of asset classes, such as stocks, bonds, commodities, and real estate, which is critical for attaining broad diversification (hill et al., 2015, pp.6). this article brings at the practical use of the risk parity technique using etfs.it focus es on creating portfolios that balance risk contributions across specific etfs while taking into https://orcid.org/0000-0002-6930-7292 mailto:dveliu@umt.edu.al exchange-traded funds (etfs) optimization with risk parity strategies 330 account real world restrictions such as transaction costs and leverage requirements. the conditional value at risk (rockfellar & uryasev, 2000), or the expected shortfall (artzner & delbaen, 1999) and the traditional mean-variance (markowitz, 1952), will result in a strong concentration on a limited number of assets and poor performance during the out-ofsample period. these models also rely on predicted returns (markowitz, 1978, pp.2), which are usually calculated using financial models or historical data. these projections are not without uncertainty, though, and can be impacted by a number of variables, including shifts in investor mood, market circumstances, and economic developments. suboptimal portfolio allocations and performance may result if the predicted returns utilized in the portfolio model prove to be incorrect. according to merton (1980, pp.2), portfolio models that mainly depend on expected returns may be extremely vulnerable to shifts in those assumptions. the ten biggest blue chip stock part of ea bridgeway blue chip etf (bblu) are selected and optimized in the risk parity model using 𝐶𝑉𝑎𝑅𝛼(𝑥) as a risk measure. the partial derivatives of the conditional value at risk can be calculated using approximation techniques (tasche, 2000, pp.3). the comparison using risk parity methods is made with several risk measurements (conditional value at risk and standard deviation) in order to obtain a comprehensive pattern. although the findings are quite similar, it takes a lot less time to calculate risk parity with conditional value at risk. research methodology this section outlines the empirical framework for evaluating the six portfolio strategies for the ten biggest blue-chip stocks comprising the ea bridgeway blue chip etf (bblu). the goal is to compare their risk-adjusted performance, diversification benefits, and robustness. to provide a complete framework for the portfolio models, the following are considered: 1. 1/n naïve portfolio with the same weight for each asset (10% of each asset); 2. mean variance without the expected return constrain (mv); 3. minimum cvar (andersson et al., 2000) without the expected return constrain; 4. risk parity with standard deviation (rp-std); 5. risk parity with expected shortfall or cvar (rp-cvar); 6. worst case risk parity cvar (rp-cvar naïve); the last one is a special case for the worst-case scenario (highest cvar), useful as an upper bound (colucci, 2013). a similar study was conducted with cryptocurrencies (veliu & aranitasi, 2024). in all these models, the constraint of expected returns is removed, so the minimum variance mv and minimum cvar are at the smallest possible value of the risk measure. for a portfolio with n assets, each weight xi and ℛ(𝑥) as a risk measure for the portfolio, the vector of the weights is given by: x = (x1, x2,.....,xn). in the literature (maillard et al., 2010 p.1), the use of risk parity is the case with the standard deviation as risk measure. for a portfolio with n assets and weights x = (x1, x2,.....,xn), the standard deviation is: denis veliu 331 ℛ(𝑥) = 𝜎𝑃(𝑥) = √∑ ∑ 𝑥𝑖𝑥𝑗𝜎𝑖𝑗 𝑛 𝑗=1 𝑛 𝑖=1 = √𝑥′ω𝑥 where ω is the covariance matrix. the marginal risk contribution of the i asset: 𝑀𝑅𝐶𝑖(𝑥) = 𝜕𝜎𝑃(𝑥) 𝜕𝑥𝑖 = 𝜕𝜎𝑖 2 + ∑ 𝑥𝑖𝜎𝑖𝑗 𝑛 𝑗=1 𝜎𝑃(𝑥) = (ω𝑥)𝑖 √𝑥′ω𝑥 and the total risk contribution: 𝑇𝑅𝐶𝑖(𝑥) = 𝑥𝑖 𝜕𝜎𝑃(𝑥) 𝜕𝑥𝑖 = 𝑥𝑖 𝜕𝜎𝑖 2 + ∑ 𝑥𝑖𝜎𝑖𝑗 𝑛 𝑗=1 𝜎𝑃(𝑥) = 𝑥𝑖 (ω𝑥)𝑖 √𝑥′ω𝑥 the following optimization problem can be used to construct the risk parity model: 𝑥∗ = arg min ∑ ∑ (𝑇𝑅𝐶𝑖(𝑥) − 𝑇𝑅𝐶𝑗(𝑥)) 2 𝑛 𝑗=1 𝑛 𝑖=1 ∑ 𝑥𝑖 = 1 𝑛 𝑖=1 𝑥 ≥ 0 to guarantee the existence of the partial derivatives of 𝐶𝑉𝑎𝑅𝛼(𝑥) some assumptions are needed on the distribution of the random vector r = (r1, r2,.....,rn) . the conditions for quantile of the portfolio return 𝑋 = 𝑅′𝑥 = ∑ 𝑥𝑖𝑟𝑖 𝑛 𝑖=1 should be differentiable respect to the weights 𝑥𝑖. these i-th asset return 𝑟𝑖 given the others is measured as follow: 𝑟𝑖,𝑡+1 = 𝑃𝑖,𝑡+1 − 𝑃𝑖,𝑡 𝑃𝑖,𝑡 from the definition of 𝐶𝑉𝑎𝑅𝛼(𝑥) (rockfellar & uryasev, 2000, pp.2) is as follow: 𝐶𝑉𝑎𝑅𝛼(𝑥) = 1 α ∫ 𝑉𝑎𝑅𝑣(𝑥)d𝑣 α 0 thus, partial derivatives are calculated as follow: 𝜕𝐶𝑉𝑎𝑅𝛼(𝑥) 𝜕𝑥𝑖 = 1 α ∫ 𝜕𝐶𝑉𝑎𝑅𝛼(𝑥) 𝜕𝑥𝑖 d𝑣 α 0 = − 1 α ∫ 𝐸[𝑟𝑖|−𝑅′𝑥 = 𝑉𝑎𝑅𝛼(𝑥)]d𝑣 = α 0 − 1 α ∫ 𝐸[𝑟𝑖|𝑋 = 𝑞𝛼(𝑋)]d𝑣 = α 0 − 𝐸[𝑟𝑖|𝑋 ≤ −𝑉𝑎𝑅𝛼(𝑥)] the total risk contribution for each asset i of a portfolio is given from the following expression: 𝑇𝑅𝐶𝑖 𝐶𝑉𝑎𝑅𝛼(𝑥) (𝑥) = 𝑥𝑖 𝜕𝐶𝑉𝑎𝑅𝛼(𝑥) 𝜕𝑥𝑖 the expression in case of continuous returns distribution is the following: 𝑇𝑅𝐶𝑖 𝐶𝑉𝑎𝑅𝛼(𝑥) (𝑥) = −𝑥𝑖𝐸[𝑟𝑖|𝑋 ≤ −𝑉𝑎𝑅𝛼(𝑥)] 𝐶𝑉𝑎𝑅𝛼(𝑥) = ∑ 𝑇𝑅𝐶𝑖 𝐶𝑉𝑎𝑅𝛼(𝑥) (𝑥) 𝑛 𝑖=1 = − ∑ 𝑥𝑖𝐸[𝑟𝑖|𝑋 ≤ −𝑉𝑎𝑅𝛼(𝑥)] 𝑛 𝑖=1 exchange-traded funds (etfs) optimization with risk parity strategies 332 numerical approximation for estimating 𝑉𝑎𝑅𝛼(𝑥) and 𝐶𝑉𝑎𝑅𝛼(𝑥) risk parity using historical data the following assumption are neccessary. the calculation of 𝑉𝑎𝑅𝛼(𝑥) and 𝐶𝑉𝑎𝑅𝛼(𝑥) of portfolio returns as follows: 𝑉𝑎𝑅𝛼(𝑥) ≈ −𝑟p⌊αt⌋ sorted 𝐶𝑉𝑎𝑅𝛼(𝑥) ≈ − 1 αt ∑ 𝑟p j sorted ⌊αt⌋ j=1 where the i-th asset return ri consist of t number outcomes rji with i=1,.....,n and j=1,...,t. the vector of the observed portfolio returns is 𝑅𝑃 = (𝑟𝑝1, … . . , 𝑟𝑝𝑇) where: 𝑟𝑝𝑗 = 𝑥′𝑟𝑗 with j=1,....,t where 𝑟𝑗 = (𝑟𝑗1, … . . , 𝑟𝑗𝑇). where α is level of significance and rp j sortedare the sorted portfolio returns such as 𝑟𝑝 1 𝑠𝑜𝑟𝑡𝑒𝑑 ≤ 𝑟𝑝 2 𝑠𝑜𝑟𝑡𝑒𝑑 ≤ ⋯ 𝑟𝑝 𝑗 𝑠𝑜𝑟𝑡𝑒𝑑 ≤ ⋯ ≤ 𝑟𝑝 𝑗 𝑠𝑜𝑟𝑡𝑒𝑑 with the time series observation, the approximation of the partial derivatives 𝐶𝑉𝑎𝑅𝛼(𝑥) for each asst i becomes: 𝜕𝐶𝑉𝑎𝑅𝛼(𝑥) 𝜕𝑥𝑖 ≈ − 1 αt ∑ 𝑟k i sorted⌊αt⌋ k=1  i=1,...,n and then the total risk contribution of asset i is 𝑇𝑅𝐶𝑖 𝐶𝑉𝑎𝑅𝛼(𝑥) (𝑥) = 𝑥𝑖 𝜕𝐶𝑉𝑎𝑅𝛼(𝑥) 𝜕𝑥𝑖 ≈ − 1 ⌊αt⌋ 𝑥𝑖 ∑ 𝑟k i sorted ⌊αt⌋ k=1 where 𝑟k i sorted are the corresponding returns of asset i to the sorted portfolio returns. in the rolling windows, in order to the measure the performance the following calculation 𝜇𝑇 𝑐 (𝑅𝑃) is the compounded return over the whole period (terminal compound return) (bacon, 2008, pp.130). 𝜇𝑘 𝑐 (𝑅𝑃) = ∏(1 + 𝑟𝑝𝑗) 𝑘 𝑗=1 − 1 to check if the portfolios are well diversified, three diversification measures are considered (caporin et al., 2012). if the allocation is as follows, x = (x1, x2,.....,xn) with the constraint ∑ 𝑥𝑖 𝑛 𝑖=1 = 1 in case short sales not allowed (𝑥𝑖 ≥ 0) . the diversification measure is the herfindal index: 𝐷𝐻𝑒𝑟 = 1 − 𝑥𝑥′ in the same way, the diversification measure is given by (bera & park, 2004 p.2). 𝐷𝐵𝑃 = − ∑ 𝑥𝑖log (𝑥𝑖) 𝑛 𝑖=1 = ∑ 𝑥𝑖log ( 1 𝑥𝑖 ) 𝑛 𝑖=1 the 𝐷𝐵𝑃 takes value between 0 (fully concentrated in one asset) and log(n) for the naïve portfolio. another important aspect is the consideration of the transaction costs, and for that, the estimation of the turnover of the portfolio: 𝑇𝑂 = ∑ |𝑥𝑖 𝑡+1 − 𝑥𝑖 𝑡|𝑛 𝑖=1 , where 𝑥𝑖 𝑡 denotes the weight of asset i at time t. denis veliu 333 results in this study, the dataset covers the period from january 9, 2024 to january 8, 2025 with daily frequency. the data is available at nasdaq.com. table 1. top ea bridgeway blue chip etf (bblu) 1 meta platforms, inc. class a common stock (meta) 2 nvidia corporation common stock (nvda) 3 jp morgan chase & co. common stock (jpm) 4 broadcom inc. common stock (avgo) 5 tesla, inc. common stock (tsla) 6 apple inc. common stock (aapl) 7 visa inc. (v) 8 microsoft corporation common stock (msft) 9 eli lilly and company common stock (lly) 10 wells fargo & company common stock (wfc) source: nasdaq.com the reason these stocks are selected is because they comprise the top components of the ea bridgeway blue chip etf (bblu). in this way, it will be interesting to allocate the optimal weights using different strategies and compare their performance among them. figure 1. the heatmap of the correlation matrix figure 1 presents a heatmap-style correlation matrix where each cell contains a numerical value representing the correlation between two variables. all diagonal values are 100% (in red), which reflects perfect correlation of each variable with itself. red: represents the highest positive correlation (close to 100%). green: represents weaker or negative correlations. yellow/orange: represents moderate positive correlations. the heatmap suggests a symmetric matrix (correlation matrices are symmetric by definition). the variables are represented both horizontally and vertically, indicating the relationship between the same set of items. many variables exhibit strong positive correlations (>80%) as indicated by the red and orange cells. clusters of high correlation suggest that certain variables behave similarly or share strong linear relationships. yellow cells indicate moderate correlations (40%–70%). these relationships are still positive but weaker than the stronger clusters. moderate correlations could imply indirect relationships or shared dependence on other factors. the -12.8% correlation stands out as a clear example of an inverse relationship between two variables. this suggests that as one variable increases, the other tends to decrease. negative correlations, though rare in this matrix, might signal opposing behavior or complementary roles like in the case of eli with visa. meta nvidia jpm avgo tesla apple visa micro eli wfc meta 100.0% nvidia 83.9% 100.0% jpm 84.7% 88.8% 100.0% avgo 81.8% 82.1% 80.0% 100.0% tesla 68.7% 62.3% 79.3% 81.5% 100.0% apple 71.7% 83.5% 81.6% 85.7% 78.7% 100.0% visa 67.6% 48.8% 71.0% 60.9% 80.0% 47.5% 100.0% micro 50.1% 61.3% 43.7% 56.2% 36.8% 50.2% 22.0% 100.0% eli 50.3% 66.1% 41.7% 44.1% 4.1% 53.3% -12.8% 53.2% 100.0% wfc 71.9% 73.7% 87.9% 65.7% 73.3% 56.2% 78.8% 39.8% 11.1% 100.0% exchange-traded funds (etfs) optimization with risk parity strategies 334 figure 2. the graph of the returns of the ten assets the figure 2 represents the daily returns of 10 assets plotted over a time period of approximately 251 days. the daily returns fluctuate around zero, with the majority of returns falling within the range of -0.15 to 0.25. the spikes indicate days with significant movements in returns, likely driven by market events. from a visual inspection, there are some similar patterns across the lines, suggesting potential correlation between certain assets. before creating a rolling window, in table 2 are showed the first iteration using 125 observations: table 2. the allocation in % in of each of assets optimization model meta nvidia jpm avgo tesla apple visa micro eli wfc total r.p. with std 6.17% 5.17% 13.93% 5.27% 5.83% 12.19% 13.36% 11.39% 12.45% 14.24% 1 minimum variance 0.00% 0.06% 14.35% 0.02% 0.07% 14.41% 31.43% 10.41% 15.48% 13.78% 1 r.p. with cvar 7.62% 5.65% 12.04% 6.60% 4.92% 11.63% 16.18% 11.68% 10.69% 12.98% 1 minimum cvar 0.65% 4.44% 3.41% 0.00% 0.00% 15.25% 27.27% 9.06% 14.71% 25.20% 1 naïve 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 1 r.p. cvar naïve 7.94% 4.19% 13.70% 4.29% 6.06% 13.29% 13.75% 10.49% 13.49% 12.81% 1 table 2 represents the portfolio weights for 10 assets under different optimization models. the risk parity (r.p. with std) with standard deviation, which aims to balance risk contribution across assets using standard deviation as the risk metric, is heavily weighted on jpm (13.93%), apple (13.36%), and eli (12.45%). minimum variance focuses heavily on apple (31.43%) and jpm (14.35%), with near-zero weights for meta and others. risk parity with cvar (conditional value-at-risk) is similar to r.p. but uses cvar to account for tail risk. jpm (12.04%) and visa (16.18%) have higher weights, reflecting their perceived stability under extreme conditions. minimum cvar minimizes portfolio tail risk. visa (27.27%) and wfc (25.20%) dominate the allocation, likely reflecting their low downside risk. naïve (equal allocation) assigns an equal 10% weight to all assets, disregarding risk or return considerations. r.p. cvar naïve is a special case in which has the worst-case scenario (highest cvar, useful as an upper bound (colucci, 2013). jpm (13.7%) and visa (13.75%) maintain higher weights but are more evenly distributed compared to other r.p. models. denis veliu 335 naïve allocation provides the most diversified portfolio, while others heavily concentrate on specific assets. minimum variance and minimum cvar models allocate significant weights to assets with perceived lower risk. the jpm & visa dominance consistently receives higher weights in most models, indicating their importance in minimizing risk or balancing contributions. tesla and avgo tend to receive lower weights, likely due to higher volatility or correlation with other assets. in order to keep the portfolio updated, the calculation is made each week, based on the past 25 weeks, the asset allocation. the rolling window is made with l=125 days (6 months) and h=5 days, where l are the daily observations used to estimate the weights and h is the holding period for the performance of the portfolio using the compound return. the performance is given by the following graph 1. graph 1. the performance of the portfolios in etf fund using the compound return. source: computed with matlab graph 2. the performance of ea bridgeway blue chip etf (bblu) source: nasdaq.com exchange-traded funds (etfs) optimization with risk parity strategies 336 graph 1 aims to evaluate how different portfolio optimization strategies perform over a rolling half-year period, with a five-day investment horizon, highlighting the trade-offs between return and risk for each strategy. graph 1 presents a detailed comparison of the performance of different portfolio optimization strategies over time. most strategies show similar patterns with noticeable ups and downs, reflecting market dynamics, for which are represented using the graph 2. by the end of the time period, some strategies (e.g., "risk parity cvar" and "m-v") outperform others, reaching higher compound returns. the "uniform" strategy (black) generally underperforms compared to other approaches. the first graph uses compound returns as the performance metric, whereas the second graph uses the etf price. graph 3. the riskiness of the portfolios measured by the standard deviation (volatility) source: computed with matlab graph 4. the riskiness of the portfolios measured by the cvar source: computed with matlab denis veliu 337 the cvar graph focuses on extreme downside risks, while the volatility graph examines total risk. if a strategy shows lower volatility (graph 3), it may also show lower cvar (graph 4), but this is not always guaranteed. for instance, strategies designed to reduce overall risk (e.g., risk parity) might perform differently in tail-risk scenarios. the cvar values are higher than volatility values, consistent with cvar capturing extreme losses beyond a certain threshold, whereas volatility reflects average dispersion. comparing the two graphs can reveal how a strategy balances overall risk (volatility) with tail risk (cvar). a strategy with low cvar but higher volatility may be suitable for risk-averse investors, while others might prefere strategies with low volatility for consistent returns. the patterns in the two graphs are likely similar in overall behavior, as both measure aspects of risk across time and are influenced by the same portfolio strategies. however, there may be some nuanced differences depending on how each metric reacts to market changes. graph 5. the turnover of the portolios source: computed with matlab turnover measures the amount of trading required to rebalance a portfolio to align with a given strategy. higher turnover generally implies higher transaction costs and more frequent portfolio adjustments. mean variance and cvar are focused in a smaller number of stocks, thus the portfolio turnover will be higher. graph 6. the number of assets focused source: computed with matlab exchange-traded funds (etfs) optimization with risk parity strategies 338 risk parity, being less sensitive to extreme market events or return estimates, generally has the lowest turnover. another way to check the diversification is using the herfindal and bera park indexes. graph 7. the herfindal index source: computed with matlab graph 8. the bera park index source: computed with matlab the herfindal (graph 7) and the bera park (graph 8) have the same traits with the highest value in the uniform portfolio and closer values with risk parity strategies. this means that these portfolios are well diversified. the cvar and mean variance focus on less assets that have the same traits. all the algorithms are made coding in matlab without using ai. today there are several articles that compare the ai role (tirana & bejleri, 2024, p.2). denis veliu 339 conclusions this study demonstrates the effectiveness of applying the risk parity methodology to optimize etf portfolios, offering a compelling alternative to traditional portfolio allocation techniques. by focusing on balancing risk contributions rather than capital weights, risk parity provides a more diversified and stable investment framework. using ten assets that comprise the ea bridgeway blue chip etf (bblu), the research compared various optimization strategies, including risk parity with standard deviation, risk parity with cvar, minimum variance, minimum cvar, and naïve allocation. the results highlight the advantages of risk parity strategies in achieving superior diversification and risk-adjusted returns. specifically, risk parity with cvar proved particularly effective in managing tail risks, showcasing robust performance under different market scenarios. unlike traditional methods such as minimum variance, which tend to concentrate heavily on a few low-risk assets, risk parity models distribute risk more evenly across the portfolio, mitigating the impact of extreme market events and ensuring a more stable return profile. the rolling window analysis confirmed that dynamic reallocation based on recent data enhances the responsiveness of portfolios to changing market conditions. while the naïve strategy provides the highest diversification, it lacks risk considerations, leading to suboptimal outcomes in volatile markets. in contrast, risk parity strategies consistently achieved a balance between risk management and return optimization. this research underscores the utility of etfs as cost-effective and accessible instruments for implementing sophisticated portfolio optimization techniques like risk parity. by addressing practical constraints such as transaction costs and turnover, the study bridges the gap between theoretical portfolio models and their real-world application. this emphasizes also the dynamic of the markets. it is important to note that in these strategies, the resilience of risk management is also evident in terms of cost-effectiveness, particularly when faced with transaction costs during portfolio calibration. also, the financial resilience in these models applied to etf funds is important in terms of downturns of the markets to mitigate the number of losses of values. future research could explore extending this framework to broader datasets, including alternative asset classes and global markets. additionally, integrating machine learning techniques to forecast risk and enhance allocation models could further improve portfolio performance. overall, risk parity offers a strong foundation for managing etf portfolios in both institutional and individual investing contexts, providing a pathway for more resilient and diversified investments. references 1. artzner, p., delbaen, f.(1999).coherent measures of risk. journal of mathematical finance 9:203-228. 2. andersson, f., mausser, h., uryasev s.(2000) credit risk optimization with conditional value at risk criterion. journal of mathematical programming. exchange-traded funds (etfs) optimization with risk parity strategies 340 3. bacon, c.r.(2008), practical portfolio performance measurement and attribution, vol. 546, wiley,. 4. caporin, m., lisi, f., janin, m.,(june 2012). a survey on four families of perfomance measures. working papers series. 5. colucci, s.,(2013). a quick introduction to quantitative models that discard estimation of expected returns for portfolio construction. working paper. 6. hill, j., nadig, d., & hougan, m. (2015). a comprehensive guide to exchangetraded funds (etfs). wiley. 7. maillard, s., roncalli, t., & teiletche, j. (2010). the properties of equally weighted risk contribution portfolios. journal of portfolio management, 36(4), 60–70. 8. markowitz, h.m.(1952), portfolio selection. journal of finance, 7:77.91,. 9. markowitz, h., (1987). mean-variance analysis in portfolio choice and capital markets, basil blackwell 10. merton r.c., (1980) on estimating the expected return on the market", journal of financial economics, 8(4):323.361,. 11. qian, e. (2011). risk parity portfolios: efficient portfolios through true diversification. panagora asset management. 12. rockfellar, r.t., uryasev, s., (2010).optimization of conditional value ar risk, the journal of risk. 13. stefanovits, d.(2010).equal contributions to risk and portfolio construction. master thesis, eth zurich, 33. 14. tasche, d.(2000), conditional expectation as quantile derivative. risk contributions and performance measurement. preprint, department of mathematics, tu-munchen, 15. tirana, k., & bejleri, e. (2024). from origins to innovations: ai's role and the cost impact on computer vision. agora international journal of economical sciences, 18(2), 320-333. 16. veliu, d., & aranitasi, m. (2024). small portfolio construction with cryptocurrencies. wseas transactions on business and economics, 21, 686-693. agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 19, no. 1 (2025), pp. 263-272 263 the importance of professional ethics for accountants in the digital age a. osmanović, d. šarić azira osmanović¹, damir šarić² ¹ university of tuzla, bosnia and herzegovina https://orcid.org/0009-0005-1012-8950, e-mail: azira.osmanovic1@gmail.com ² institute for health insurance of tuzla canton, bosnia and herzegovina https://orcid.org/0009-0009-9141-4586, e-mail: damir-saric@hotmail.com abstract: the digital age brings many challenges to the modern business world. due to these significant challenges, the issue of ethics is gaining increasing attention. ethics focuses on making moral decisions and acting upon them. both in private and professional life, it is important to be honest, fair, and a good person. ethics and ethical behavior are extremely important in the work of accountants, and they should apply the code of professional ethics for accountants. proper application of professional ethics, rules, norms, laws, principles, and ethical codes significantly contributes to a positive work environment. the fundamental beliefs and value systems that accountants apply affect their work and, consequently, influence the trust in the results of their work. financial statements provide information about an organization’s operations, and accountants are responsible for ensuring that this information is accurate and reliable. nowadays, trust in financial statements has been significantly damaged, but when ethical norms are visibly applied in the behavior of accountants, it greatly influences the trust in their work and the accuracy of the data presented in financial reports. the subject of this research is to determine how significant the application of professional ethics of accountants is in the digital age. the goal is to identify how applying the international code of ethics for professional accountants contributes to the quality of accountants’ work. the paper presents the most important results of empirical research related to accountants’ perceptions of the importance of applying ethical principles in the accounting profession. the results show a high level of awareness among accountants regarding the importance of applying the highest ethical standards, which is encouraging and instills confidence in strengthening the integrity of the accounting profession in the future. keywords: ethics, professional ethics of accountants, accounting profession, financial reports introduction accountants perform their work by respecting the employer’s requirements on one hand, while on the other hand, they bear the responsibility to carry out their duties professionally and to protect the reputation of the accounting profession. in the era of digitalized business, it is increasingly being discovered that financial statements do not reflect the true state of business operations, which raises the need for further consideration of business ethics. one of the measures for preventing fraud in financial statements is the establishment of internal company procedures through which internal control is implemented with the aim of identifying which actions and transactions are unethical (osmanović & jusupović, 2019, p. 293). https://orcid.org/0009-0005-1012-8950 mailto:azira.osmanovic1@gmail.com https://orcid.org/0009-0009-9141-4586 mailto:damir-saric@hotmail.com the importance of professional ethics for accountants in the digital age 264 serious disruptions in economic processes and human relations indicate the importance of applying ethics in business practices. in order to ensure dignity and restore trust in the accounting profession, accountants are required to behave in accordance with specific rules defined in codes of ethics, which primarily emphasize moral norms in behavior. in addition to professional ethics, accountants are also obligated to comply with applicable legal regulations. the code of ethics for professional accountants aims for accountants to carry out their professional duties with integrity, objectivity, professional competence and due care, confidentiality, and professional behavior. segregation of duties is one of the fundamental control procedures that reduces the likelihood of an employee being able to commit and conceal errors, irregularities, or fraud (osmanović & šarić, 2024, p. 306). this paper presents the basic characteristics and principles of professional ethics for accountants, as well as how professional ethics contribute to the reliability of financial reporting. in relation to the above, an empirical study was conducted on the impact of applying the international code of professional ethics on the quality performance of accounting work. i. theoretical basis of the research i.1. the term of creative accounting the word ethics originates from the latin word meaning morality. ethics is “a philosophical discipline that examines the goals and meaning of moral desires, the fundamental criteria for evaluating moral acts, as well as the basis and source of morality in general” (sever, tušek & žager, 2012, p. 164). the results show that companies where organizational culture and work climate are ethically oriented, and where written codes of ethics exist, are more successful in raising employees' awareness of appropriate ethical behavior (gibson et al., 2009, p. 467). the system of moral values of every individual is developed and acquired from early childhood within the family, but under the influence of the environment and the society in which the individual lives, changes to the acquired moral values can occur. ethics as a scientific discipline studies the principles of proper, good, and moral action, and ethical principles determine what is acceptable and unacceptable behavior. in the digital age, ethics in business is given special importance and attention. business ethics can be defined as 'the ability to reflect on values in the decision-making process in corporations, in order to determine how these values and decisions affect different stakeholder groups and to identify how managers can use these insights' (certo & certo, 2006, p. 66). every organization strives to have employees who are professional and competent, but in addition, it is especially important that employees possess certain moral qualities and adhere to the rules and norms of ethical behavior. the application of ethical behavior in an organization depends on the individual, but it also largely depends on whether the organization has established written rules of ethical conduct. internal control plays an increasingly important role and is reflected in the protection of assets, and in the prevention and detection of fraud and irregularities that may occur during business operations (osmanović & šarić, 2023, p. 95). business ethics is a system of business principles or values aimed at harmonizing business efficiency with the ethical dimension of operations (hunjet & kozina, 2014, p. 192). business ethics represents a code of conduct accepted in the business world, which protects azira osmanović, damir šarić 265 both the organization and its employees, and has therefore become an integral part of the modern business environment. accounting ethics is defined as a set of generally accepted moral norms based on ethical values required when preparing and presenting financial information related to a specific institution or company (bedeković, 2013, p. 103). i.2. fundamental principles of the code of ethics for professional accountants the code of ethics for professional accountants, issued by the international federation of accountants (ifac), is the most well-known and most widely applied code in the accounting profession. the international federation of accountants was founded in 1977 with the aim of serving the public interest and strengthening the accounting profession, through the adoption of various professional standards and written rules of conduct for accountants, as well as through numerous other forms of professional activity. within ifac, there is a special board for the development of international ethics standards for accountants (iesba – international ethics standards board for accountants), which developed the code of ethics for accountants. this code consists of three parts: the first part refers to the general section, the second part refers to accountants in public practice, and the third part refers to accountants in business. the code contains the following material (iesba, 2023, p. 8–9):  part 1 – complying with the code, fundamental principles, and the conceptual framework, which includes the fundamental principles and the conceptual framework, and applies to all professional accountants.  part 2 – professional accountants in business, which includes additional material relevant to professional accountants working in business entities while performing professional activities. professional accountants in business include those who are employed, engaged, or contracted in executive or non-executive positions in, for example: commerce, industry, or service sectors; public sector; education; non-profit sector; regulatory or professional bodies. part 2 also applies to individuals who are professional accountants in public practice when performing professional activities within the context of their relationship with the firm, whether as contractors, employees, or owners.  part 3 – professional accountants in public practice, which includes additional material applicable to professional accountants in public practice when providing professional services. international independence standards, which contain additional material applicable to professional accountants in public practice when performing assurance services, and include:  part 4a – independence for audit and review engagements, which applies when conducting audit or review engagements  part 4b – independence for assurance engagements other than audit and review engagements, which applies when performing assurance engagements that are not audits or reviews glossary, which contains defined terms (along with additional explanations where appropriate) and described terms that have a specific meaning in certain parts of the code. for example, as stated in the glossary, in part 4a, the term “audit engagement” applies the importance of professional ethics for accountants in the digital age 266 equally to both audit and review engagements. the glossary also includes lists of abbreviations used in the code and in other standards referenced by the code. due to the complex political system in bosnia and herzegovina, there are two professional organizations whose aim is to develop the accounting profession. they are responsible for organizing the acquisition of professional titles in the field of accounting and auditing, providing education in the accounting profession, ensuring compliance with the code of ethics, translating international accounting standards, and maintaining a certain level of quality within the accounting profession (osmanović, šarić & čanić, 2023, p. 18). in bosnia and herzegovina, the law on accounting and auditing prescribes the obligation to apply accounting and ethical standards; however, practice shows non-compliance with these regulations. ii. methodology ii.1. population and sample the conducted empirical research aimed to demonstrate the importance of professional ethics for the accounting profession. the target population in this research consisted of employees in accounting and finance departments within the territory of bosnia and herzegovina. scientific research on the impact of professional ethics of accountants on the accounting profession was carried out through a survey questionnaire. a total of 44 employees returned duly completed questionnaires. the objective of the research was to determine the significance of professional ethics in the field of accounting. accordingly, the paper sets forth one main and one auxiliary scientific hypothesis: h1: accountants’ attitudes towards ethical behavior are related to their knowledge of the code of ethics for professional accountants. ph1: the application of the code of ethics for professional accountants in the digital age has a positive impact on reducing fraud. ii.2. statistical analysis the conducted scientific research included the collection of primary data using the survey method, through a questionnaire intended for accounting employees. out of a total of 66 questionnaires sent via email between december 1, 2024, and december 31, 2024, 44 were returned duly completed, representing a response rate of 66.66% of the total sample. this response rate is considered acceptable for this type of research. however, it should be emphasized that the results of this research do not represent a rule, but can serve as a useful guideline for future research. iii. results the code of ethics for professional accountants requires professional accountants to adhere to fundamental ethical principles. it also mandates the use of a conceptual framework to identify, evaluate, and address threats to compliance with those principles. this research aimed to examine whether accountants consider professional ethics to be significant for the accounting profession. azira osmanović, damir šarić 267 the code of ethics for professional accountants should be known and understood by every accountant in order to perform accounting activities as effectively as possible. based on the conducted research, 41% of respondents are fully familiar with the provisions of the code, 4% are not familiar at all, 16% are slightly familiar, while 39% are partially familiar with its provisions. figure 1. familiarity of respondents with the provisions of the code of ethics for professional accountants although professional ethics implies that accountants should perform their duties objectively, the research results provide insight into how this expectation is perceived in practice. according to the data, 33 respondents (75%) believe it is fully justified to expect accountants to carry out their work objectively. an additional 6 respondents (14%) consider this expectation to be quite justified, while 5 respondents (11%) believe it is only partially justified. notably, none of the respondents indicated that such an expectation is unjustified or only slightly justified. based on the collected responses, it can be concluded that there is a clear understanding that accountants are expected to perform their duties with a high degree of objectivity, independence, and impartiality. figure 2. respondents’ perceptions of how justified it is to expect accountants to perform their work objectively the accountant's code of ethics prescribes honesty in performing the job. the conducted scientific research led to the realization that 39 respondents (89%) believe that accountants can be expected to perform their work confidentially, 4 respondents (9%) believe it is quite justified to expect accountants to perform their work confidentially, and only 1 respondent (2%) believes it is partially reasonable to expect honest performance of accounting duties. 41% 39% 16% 4% completely partially a little not at all 11% 14% 75% partially quite completely the importance of professional ethics for accountants in the digital age 268 figure 3. respondents' opinions on how reasonable it is to expect accountants to perform their work confidentially based on the code of ethics for professional accountants, which requires professional competence, the research showed how many respondents believe it is reasonable to expect accountants to acquire and maintain professional competence. out of the total number of respondents, 26 (59%) think it is completely justified to expect accountants to acquire and maintain professional competence, 16 respondents (36%) think it is quite reasonable to expect it, and 2 respondents (5%) think it is partially justified to have such an expectation, as shown in the following graph. figure 4. respondents' opinions on how reasonable it is to expect accountants to acquire and maintain professional competence the code of ethics for professional accountants requires accountants to perform their work with due professional care, thoroughly, and in a timely manner. in bosnia and herzegovina, in practice, accountants, in addition to their accounting duties, often perform other tasks that are not part of their job description. because of this, due to their workload and other tasks, the question of whether accounting tasks are being performed appropriately arises. in this regard, according to the research conducted, 86% (38 respondents) believe that it is completely justified to expect accounting tasks to be performed with due professional care, thoroughly, and on time, while 14% (6 respondents) believe that it is quite justified to expect the work to be performed carefully, thoroughly, and on time. 2% 9% 89% partially quite completely 5% 36% 59% partially quite completely azira osmanović, damir šarić 269 figure 5. respondents' views on how reasonable it is to expect accountants to perform their work with due diligence (thoroughly, on time) it is extremely important for accountants to maintain the confidentiality of the information they obtain while performing accounting work. the conducted research shows that 91% of the respondents believe it is fully justified to expect accountants to keep business information confidential, while 9% of the respondents believe it is quite justified to expect confidentiality. figure 6. respondents' views on how reasonable it is to expect accountants to keep business information confidential the work of an accountant is almost unimaginable without adhering to and working in accordance with legal regulations. work in which rules and regulations are not applied leads to numerous consequences, ranging from financial to criminal. information about accounting and financial frauds discovered by auditors and inspectors is often disclosed to the public. the opinion of respondents in the conducted survey is that 96% of them believe it is reasonable to expect accountants to act in accordance with all applicable accounting and other regulations, while only 4% of respondents believe that partial expectations are justified. 0% 14% 86% 0% partially quite completely not justified 0% 9% 91% partially quite completely the importance of professional ethics for accountants in the digital age 270 figure 7. respondents' views on how reasonable it is to expect accountants to act in compliance with applicable accounting and other regulations by applying spearman's correlation coefficient, the basic research hypothesis that accountants' attitudes towards ethical behavior are related to knowledge of the code of ethics for professional accountants was not verified in the research. table 1. statistical presentation of the rank correlation coefficient between accountants' attitudes towards ethical behavior and their knowledge of the code of ethics for professional accountants accountants' familiarity with the code of ethics for professional accountants attitudes of accountants towards ethical behavior spearman’s accountants' familiarity with the code of ethics for professional accountants correlation coefficient sig.(1tailed) n 1,000 . 44 ,105 ,136 44 attitudes of accountants towards ethical behavior correlation coefficient sig.(1tailed) n ,105 ,136 44 1,000 . 44 spearman's rank correlation coefficient (rs) is 0.105, while the empirical significance of the correlation coefficient is 0.136, which means that α* > 0.05. therefore, it can be concluded that the relationship between the movement of knowledge of the code of ethics for professional accountants and the attitudes of accountants toward ethical behavior is not statistically significant. thus, the movement of knowledge of the code of ethics for 0% 4% 96% partially quite completely azira osmanović, damir šarić 271 professional accountants is not related to the movement in the attitudes of accountants toward ethical behavior. to test hypothesis ph1, a one-tailed test for proportion was used at the lower limit with a significance level of 95%. the proportion among the respondents is p = 0.56. table 2. statistical presentation of the interval assessment values proportion between respondents p 0,56 sample size (n) 44 reliability 0,95 lower limit 0,5035 with a confidence level of 95%, it can be concluded that the proportion of accountants who believe that the implementation of the code of ethics for accountants in the digital age has a positive impact on reducing fraud is 50.35%, which is greater than 50%, thus supporting the acceptance of hypothesis ph1. discussions the application of ethical principles in an organization depends not only on the moral values of individuals but also on written rules of conduct. these written rules define unacceptable behaviors within the organization, significantly contributing to the creation of a positive working environment for all employees. written codes of ethics developed by international professional associations hold particular value within an organization. the environment in which accountants operate should uphold ethical values, especially today, when accountants face numerous challenges and accounting fraud is increasingly prevalent. the goal of the accounting profession is to establish high-quality work and professional behavior. if this is achieved, the profession will surely earn the respect and trust of the environment in which it works and operates. although international accounting standards are respected, the accounting profession in bosnia and herzegovina is still not fully regulated. the results of the research confirm the respondents' awareness of the importance of professional ethics for accountants and the critical role these ethics play in the business world. accountants in bosnia and herzegovina are aware that they must perform their duties objectively, confidentially, and honestly, with due professional care, while acquiring and maintaining professional competence and adhering to all legal rules and regulations. the research also revealed that accountants are familiar with the code of ethics for professional accountants, and the vast majority believe that the principles of the code are applied by accountants. a potential limitation of this study is the relatively small sample size, so it is recommended that future researchers expand the study with a larger sample. the application of the code of ethics for professional accountants helps reduce accounting fraud, and all professional accountants should strive to apply the code in their work. however, despite the knowledge of the code of ethics and awareness of professional conduct, the hypothesis the importance of professional ethics for accountants in the digital age 272 that accountants’ attitudes are related to their knowledge of the code of ethics cannot be confirmed. one possible reason for rejecting this hypothesis could be external influences, such as profit, personal income, and intense pressure for positive business results, which may outweigh ethics and morality for accountants. references 1. bedeković, m. (2013). accounting ethics and its importance in the accounting profession. practical management, 4. https://hrcak.srce.hr/index.php?id_clanak_jezik=175439& show=clanak 2. certo, s. c., & certo, s. t. (2006). modern management (10th ed.). mate. 3. gibson, j. l., ivancevich, j. m., donnelly, j. h., & konopaske, r. (2009). organizations: behavior, structure, processes. mcgraw-hill irwin. 4. hunjet, a., & kozina, g. (2014). fundamentals of entrepreneurship. university north. 5. international ethics standards board for accountants (iesba). (2023). handbook of the international code of ethics for professional accountants. https://www.ifac.org/ethics/iesba-code 6. international federation of accountants. (2018). international code of ethics for professional accountants. https://www.ifac.org/knowledgegateway/discussion/international-code-ethicsprofessional-accountants-key-areas-focussmes-and-smps 7. osmanović, a., & jusupović, m. (2019). detection and prevention of manipulation of financial statements. finconsult. business consultant, 82. 8. osmanović, a., & šarić, d. (2023). importance of internal control for creative accounting. agora international journal of economical sciences, 17(1). https://doi.org/10.15837/aijes.v17i1.5766 9. osmanović, a., šarić, d., & čanić, a. (2023). challenges facing the accounting profession. finconsult. business consultant, 131. 10. osmanović, a., šarić, d., & čanić, a. (2024). implementation of accounting controls in organizations. finconsult. 12th international symposium. 11. savez računovođa, revizora i finansijskih radnika federacije bosne i hercegovine (srrfbih). (2022). international code of ethics for professional accountants. https://www.srr-fbih.org/medunarodni-kodeks-etike-za-profesionalne-racunovodeizdanje-2022-697 12. sever, m., tušek, b., & žager, l. (2012). audit – principles, standards, procedures. croatian association of accountants and financial employers. https://hrcak.srce.hr/index.php?id_clanak_jezik=175439&%20show=clanak https://hrcak.srce.hr/index.php?id_clanak_jezik=175439&%20show=clanak https://www.ifac.org/ethics/iesba-code https://doi.org/10.15837/aijes.v17i1.5766 agora international journal of economical sciences, http://univagora.ro/jour/index.php/aijes issn 2067-3310, e-issn 2067-7669 vol. 19, no. 1 (2025), pp. 386-398 386 professional growth through short-term international mobility: a qualitative study based on student reflections v. berandze, m. khelashvili, l. chichua, k. aškerc zadravec veriko berandze¹, mirian khelashvili², levan chichua³, katarina aškerc zadravec⁴ ¹ ² ³ business and technology university, georgia ¹ e-mail: veriko.berandze.1@btu.edu.ge ² e-mail: mirian.khelashvili.1@btu.edu.ge ³ e-mail: levan.chichua.1@btu.edu.ge ⁴ b2 ljubljana school of business, slovenia https://orcid.org/0000-0003-4710-2066, e-mail: katarina.askerc@b2.eu abstract: in response to the evolving demands of globalised labour markets, higher education institutions are integrating international and intercultural perspectives into the curriculum to foster students’ professional growth by developing core employability skills. this study explores the development of soft and transferable competences through students’ participation in a one-week, project-based international mobility programme. using a structured reflection framework and qualitative content analysis, the article examines 29 student reflections guided by a set of thematically aligned prompts and reflective questions. the findings indicate that even short-term international collaboration can lead to meaningful development of key professional competences, including intercultural communication, adaptability, teamwork, and digital literacy, as shaped by the designed pedagogical activities. students also reported increased global awareness, clearer career orientation, and enhanced goal clarity in relation to future professional pathways, alongside the practical application of skills in authentic contexts. the results underscore reflective writing as an effective pedagogical strategy in international learning environments, helping students to recognise and articulate otherwise hidden competences. while the study’s small sample size presents limitations, the findings support the integration of short, intensive, and internationally diverse learning formats into higher education curriculum to foster employability-relevant skills. keywords: professional growth, intercultural competence, short-term mobility, international project collaboration, student reflections, employability skills introduction globalisation, the digital transformation of economies, and other contemporary trends require higher education institutions to move beyond the mere transmission of academic knowledge and instead foster the development of competencies essential for professional growth, employability, international engagement, and responsiveness to rapidly changing realworld conditions. in addition to disciplinary expertise, today’s graduates must acquire adaptability, flexibility, critical and analytical thinking, technological proficiency, sustainability awareness, and the capacity to clearly communicate and present ideas and innovations (world economic forum, 2025). these capabilities are vital for navigating complex, uncertain, and rapidly evolving environments. as a result, higher education institutions are increasingly called upon to adopt flexible, inclusive, and interculturally responsive teaching and learning approaches that support the comprehensive development of students. international learning experiences—regardless of their duration or modality— mailto:veriko.berandze.1@btu.edu.ge mailto:mirian.khelashvili.1@btu.edu.ge mailto:levan.chichua.1@btu.edu.ge https://orcid.org/0000-0003-4710-2066 mailto:katarina.askerc@b2.eu professional growth through short-term international mobility: a qualitative study based on student reflections 387 provide a critical role in students’ professional growth, enhancing their preparedness for effective participation in globally interconnected professional and societal environments. the objective of this article is to analyse the dimensions of professional growth perceived by students following their participation in a one-week international project-based mobility abroad. this short-term mobility experience was embedded in an innovative teaching and learning framework, where international student teams collaboratively developed project ideas, identified solutions under time constraints, and presented their outcomes. structured, question-guided student reflections—submitted upon completion of the mobility—were systematically and qualitatively analysed to explore the development of students’ experiences, skills, and competencies. the analysis aims to provide insights into how international project collaboration fosters professional growth in a short-term, high-impact learning environment. the demand for trend-responsive teaching methods in international learning settings innovative, trend-responsive teaching methodologies have proven effective in fostering interactive and student-centered learning environments. these approaches enhance student engagement, performance, and the development of relevant competencies (al mamun & lawrie, 2023; herodotou et al., 2019; malekigorji & hatahet, 2020; mustafa, 2024; safapour & kermanshachi, 2018; zettinig et al., 2021). in contrast, although traditional teaching methods may deliver content efficiently, they often lack the capacity to promote dynamic engagement and the cultivation of essential higher-order skills such as creativity, critical thinking, and problem-solving (puranik, 2020). contemporary education increasingly prioritizes the development of transversal and soft skills—competencies crucial for both societal progress and professional success in today’s complex and interconnected world. competence-based education reorients learning toward the demonstrable acquisition of skills, moving beyond rote memorization and time-based metrics. unlike traditional systems that emphasize standardized testing, competence-based education prioritizes mastery of specific competencies—such as problem-solving and technical expertise—while allowing learners the flexibility to progress at an individualized pace (catacutan et al., 2024; kleincollins, 2013). competence development has emerged as a cornerstone of contemporary pedagogy, aligning educational outcomes with the evolving demands of society and the global labor market. within this framework, internationally composed classrooms play a critical role in advancing competence development by purposefully integrating global and intercultural dimensions into both formal and informal curriculum. this includes embedding international and intercultural perspectives into the curriculum, such as internationalised learning outcomes, inclusive teaching approaches, culturally diverse study materials, and assessment strategies (beelen & jones, 2015; leask, 2015) that support the development of intercultural competence and other employability skills (aškerc zadravec, 2024, 2025).when combined with innovative and trend-responsive teaching methods, such learning environments provide a powerful platform for fostering essential soft skills needed for students' professional growth in international and intercultural settings. international learning environments—whether facilitated through physical mobility programs, international collaborative projects, virtual mobility (o’dowd, 2021), or other formats, both shortand long-term—encourage students to step outside their comfort zones. these experiences enable them to navigate unfamiliar contexts, communicate across cultures, and approach challenges from multiple perspectives. in doing so, students develop key competencies such as adaptability, critical thinking, teamwork, digital literacy, and intercultural communication. one of the most prominent european programmes supporting a wide range of international mobility formats is the erasmus programme, which offers numerous benefits and exerts long-term impacts at the international, national, institutional, and veriko berandze, mirian khelashvili, levan chichua, katarina aškerc zadravec 388 individual levels, often surpassing the scope of national or regional initiatives (braček lalić, 2024). students participating in erasmus exchanges consistently report enhanced intercultural openness, personal growth, social engagement, and the development of academic and employability-related skills. furthermore, they frequently indicate increased european identity, improved communication abilities, strengthened intercultural competence, and a greater capacity to act effectively in unfamiliar situations. these students also describe becoming more open-minded, resilient, and curious (dolga et al., 2015; european commission, 2019; hossain et al., 2022; rai et al., 2022). the competencies and experiences acquired through such international engagements have also been shown to positively influence students' future employability prospects and career aspirations (alamo-vera et al., 2019). universities are increasingly skilled in managing internationalisation and providing structured support for the implementation of an internationalised home curriculum (aškerc zadravec, 2023). this approach plays a crucial role in enhancing the quality of students’ international and intercultural experiences, enabling them to engage with diverse teaching methodologies and learning practices comparable to those encountered during physical study abroad (beelen & jones, 2015; leask, 2015; aškerc zadravec, 2024, 2025). in a global context where labour markets are becoming more international, interdisciplinary, and dynamic, universities are compelled to adapt their curricula to ensure that graduates are capable of applying their knowledge in diverse, real-world contexts—including international and intercultural settings (european commission, 2019; franzenburg, 2017; marinoni, bartolomé, & cardona, 2024; rumbley & hoekstra-selten, 2024). however, the development of soft skills—and, more importantly, learners’ awareness of those skills—often presents a challenge not only for educators but also for students themselves. learners frequently struggle to recognize the soft skills they have acquired, particularly when such competencies emerge spontaneously or informally. this issue is especially pronounced in intercultural and international learning environments, where competencies developed through cross-cultural collaboration and engagement are often unacknowledged or undervalued by the learners. as a result, these are frequently referred to as “hidden competences” (finnish national agency, 2019). evidencing professional growth through student reflections on international project collaboration graduates who participate in international exchange programmes often become more confident in competing in the labour market and functioning effectively in everyday life, as such experiences play a significant role in the development of soft skills (hossain et al., 2022). however, it is essential to raise students’ awareness of the specific soft competences they have acquired. facilitators and lecturers teaching in international or intercultural classrooms should recognise the soft skills students develop in these environments—beyond the acquisition of academic content. educators can adopt a variety of strategies to enhance students’ selfawareness regarding their soft skill development, thereby reinforcing the long-term value of international learning experiences. tools for assessing the development of soft skills and professional competences often rely on qualitative methods, such as open-ended survey responses, interviews, or reflective journals. these approaches offer deeper insights into how communication strategies and leadership practices are applied and perceived within academic settings. in particular, the ability to lead and engage students in discussions, collaborative projects, and cross-cultural teamwork requires a nuanced understanding of leadership dynamics in diverse learning environments (deardorff, 2006). reflective instruments can be used to evaluate leadership development, not only from the perspective of students but also in terms of how academics professional growth through short-term international mobility: a qualitative study based on student reflections 389 perceive their own growth and apply leadership practices in both classroom and extracurricular contexts (mestenhauser & ellingboe, 2011). pedagogical tools such as teaching or learning portfolios and reflective assessments allow individuals to systematically track their development over time, offering valuable evidence of how their instructional practices adapt to meet the needs of diverse student populations and align with international learning-teaching standards (marginson, 2011). according to daff, tame, and sands (2024), reflective practice skills represent a valuable tool for students and graduates in enhancing their self-awareness regarding improved performance and professional development, particularly in relation to critical thinking and the skills and habits acquired through various academic courses. the oxford english dictionary (2012) defines reflection as “the action or process of thinking carefully or deeply about a particular subject, typically involving influence from one’s past life and experiences.” reflecting on past experiences fosters both personal growth and deeper learning by enabling individuals to extract meaningful lessons and apply them in future contexts. while oral reflection can be insightful, reflective writing offers a more structured and enduring form, allowing individuals to organise their thoughts and explicitly connect personal experiences with academic theory. this process contributes to deeper understanding and supports the development of transferable and professional competences (beaven & borghetti, 2015). the use of reflection significantly influences and supports learning in higher education by emphasizing student-centred and experiential learning approaches and fostering the development of self-directed learners (chen, jones, & xu, 2018). as a pedagogical strategy, reflection enables students to become aware of the competencies they have acquired through engagement with various experiences, emotions, and actions. experiences alone do not necessarily result in learning or competence development; rather, it is the learner’s response— through processes of thinking, evaluating, and making meaning of those experiences—that leads to growth, including planning for future actions (chan & lee, 2021; loughran, 2002). multiple forms of reflection can be implemented as learning or assessment tools, including blogs, journals, videos, and both in-class and out-of-class reflective assignments. these approaches help students better understand themselves by allowing them to express thoughts, experiences, and knowledge in a structured manner. through this process, students connect new knowledge with prior understanding, enhancing self-awareness of their actions, strengths, and areas for improvement (chan & lee, 2021). reflective writing is a valuable pedagogical tool for fostering the development of intercultural competence, as it enables students to critically examine their experiences abroad or in international classrooms and articulate the outcomes of those experiences. this process allows learners not only to gain intercultural awareness but also to demonstrate it through specific instances and examples. providing students with multiple modes of reflection supports diverse learning styles and facilitates deeper engagement with their study abroad experiences (nardon, 2019). furthermore, matthews (2020) emphasizes the importance of reflexivity in understanding intercultural communication, particularly in enhancing individuals' ability to interpret and adapt to new cultural contexts. reflexivity serves as a mediating mechanism between intercultural experiences and individual behaviour, supporting the transition from awareness to action. to assist students in recognising and articulating these often-overlooked competences, the finnish national agency developed a toolkit for recognizing international competences for students in higher education (2019). this resource provides guiding questions and examples that help students describe the competences developed through international experiences, making them more visible and applicable in the context of employability—where such skills often remain hidden during the job application process. veriko berandze, mirian khelashvili, levan chichua, katarina aškerc zadravec 390 the framework of the research the significance of developing soft competences through participation in international and intercultural settings has been emphasized in the theoretical framework of this article. carefully structured student reflections, guided by systematically developed prompts, can play a crucial role in enhancing students’ awareness of the soft or hidden competences they acquire in such environments. despite numerous studies in this field, a research gap persists in the analysis of student reflections that are elicited through specifically designed guiding questions. in this study, international students were asked to reflect—using a structured format—on the soft competences they developed during a one-week international mobility experience, which involved intensive, project-based collaboration in diverse student teams. to address the identified research gap, the following research question is posed: what types of soft skills, competences, and impacts are identified in students’ reflection essays following their one-week stay abroad and intensive participation in international project week activities within internationally diverse student teams? methodology context of the short-term mobility abroad the reflections analysed in this study were written by international students—most during their erasmus semester abroad—following their participation in a one-week, intensive, international project-based mobility abroad (with one domestic student included). the programme was preceded by an initial online meeting held one week prior to the on-site activities. this preparatory session introduced the structure and goals of the international project week and covered the basics of intercultural communication. the mobility initiative was organised through a collaboration between b2 ljubljana school of business (slovenia) and nhl stenden university of applied sciences (netherlands), although it was not formally implemented as a blended intensive programme under the erasmus+ framework. the project week took place in spring 2024 in ljubljana, slovenia, and was structured as an innovative teaching and learning model based on experiential, project-based methodology. during the project week, students were assigned to internationally mixed teams and tasked with developing original project ideas related to international trade, with a specific focus on the slovenian market context. they engaged in intensive group work, conducted field research and interviews in public spaces and organisations, studied relevant literature, attended facilitators’ sessions, and gradually refined their project solutions. each team presented their progress through daily pitches, guided by clear instructions and mentorship from three experienced international facilitators. the final outcomes were presented to an external panel of professional evaluators and showcased at the international student business fair. there, teams prepared and presented their business stands to an external audience comprising students, faculty, institutional staff, and representatives from industry and the labour market. the event culminated in the selection of a winning team, based on the quality and innovation of their project. the international project week was formally recognised as part of the regular or elective curriculum, integrated within an existing course structure. upon completion of the programme, students were required to submit structured, question-guided reflections. these reflections were thoughtfully structured to capture evidence of hidden competencies, soft skills, and to highlight students’ professional growth and development pathways gained through the intensive, facilitated teamwork experience in an international setting. structure of the population and data collection toolkit the international student project week involved 33 participants, primarily undergraduate (first-cycle) students, with one student from the second-cycle level. the group professional growth through short-term international mobility: a qualitative study based on student reflections 391 represented 13 different nationalities—albanian, american, bosnian, bulgarian, dutch, georgian, moldovan, serbian, slovenian, south african, syrian, italian, and ukrainian. upon completion of the international project week, all students were required to submit individual reflections. for the purpose of this study, 29 reflections were analysed, provided by students who consented to the use of their reflections for research purposes in anonymous way. each reflection was approximately 1,250 words in length and written in essay format. the reflection form consisted of three main sections. the first section collected basic demographic information, including the student’s name, home university, country of the home institution, and nationality. the second section focused on competence development and guided students through structured reflection using specific prompts across the following thematic areas: general and networking skills; communication and interpersonal skills; teamwork, leadership, and project-related skills; field-specific competences; and digital skills. the third section of the form included appendices with guidelines for reflective writing. these materials provided students with a brief theoretical background on reflection, sample reflections, writing instructions, and an overview of transferable skills and personal qualities valued by employers. these guidelines were also introduced to students during a plenary session. the reflection form was adapted from the toolkit for recognising international competences (finnish national agency, 2019) and was tailored to the specific structure and pedagogical objectives of the international student project week. method used – qualitative content analysis approach a qualitative content analysis was conducted to examine students’ reflective writings, drawing on the methodological frameworks of elo and kyngäs (2008) and cohen, manion, and morrison (2007), with adaptations to suit the specific objectives of this study. the data were inductively coded using a modified interpretative approach based on the work of glaser and strauss (as cited in kordeš & smrdu, 2015, p. 53; see also mayring, 2014). coding units— ranging from individual words and short phrases to complete statements—were identified to capture key ideas and underlying meanings. these units were then grouped into lower-level categories, which were subsequently abstracted into higher-order conceptual themes. to support the categorisation process, the ai language model chatgpt was employed as a supplementary analytical tool. its use facilitated the initial organisation of content into thematic clusters, which was then refined through manual coding and validation. this hybrid approach enabled more efficient pattern recognition while ensuring that analytical rigor and authors’ judgment remained central to the interpretative process. the analytic process involved both segmentation and synthesis of the reflection texts, ensuring that interpretations were grounded in the empirical material. through iterative linking of coded content to broader conceptual abstractions, the analysis facilitated the identification of semantic patterns and trajectories of intercultural and professional learning emerging from authentic student reflections. illustrative excerpts from the students’ texts were included to support the interpretation of key findings. results students’ reflections were analysed ranging from individual words and word combinations to partial and complete statements in order to identify key ideas, competences, and perceived impacts. in this section, the identified high-level categories are supported by concrete examples drawn from the data, thereby illustrating the core findings and addressing the research question. veriko berandze, mirian khelashvili, levan chichua, katarina aškerc zadravec 392 it is acknowledged that the categorisation of reflections could be further refined or articulated with greater specificity. given the complexity and richness of the open-ended essay responses, the statements could have been organised using alternative frameworks or more nuanced structural layers. nevertheless, for the purposes of this study and in response to the research question, the current structure is considered sufficiently robust to offer meaningful insights. furthermore, to ensure participant anonymity, individual excerpts have not been attributed to specific students, nationalities, or home institutions. table 1 presents the range of competences developed by students through international project collaboration, with particular emphasis on intercultural, communication, and global awareness competencies. the higher-order categories include developing intercultural communication and teamwork skills, which is further subdivided into the first-order categories: flexible communication across cultures, developing intercultural teamwork skills, and adapting to cultural differences. another higher-order category, expanding global and regional perspectives, comprises the subcategories: exploring diverse regional perspectives and staying ahead with global trends in the discipline. each category is illustrated with representative examples drawn from students' reflective responses, offering insight into the perceived outcomes and professional growth experienced during the short-term mobility programme. table 1. development of intercultural, communication, and global awareness competences higherorder category first-order categories respondents' statements – representative examples d ev elo p in g in tercu ltu ral c o m m u n icatio n an d t eam w o rk s k ills flexible communication across cultures  ‘through projects and teamwork, i honed my ability to adapt my communication to different cultural contexts, fostering understanding.’  ‘the bootcamp experience taught me the importance of flexibility in communication, […] and understand non-verbal cues in a dynamic international environment.’  ‘through the bootcamp, i learned to [adapt communication], enhancing my ability to […] collaborate harmoniously across diverse teams.’  ‘[i gained] valuable skills in cross-lingual communication.’  ‘i focused on improving my real-life communication […], project presentation skills […].’  ‘i needed to communicate in a different way than i normally would […] due to the different levels of english and the different ways of communication.’  ‘[i am] able to listen carefully, to be patient and to be able to find a common language even when there are language or cultural barriers.’ developing intercultural teamwork skills  ‘[international collaboration] enabled me to develop the ability for effective teamwork […].’  ‘if there are problems, i know that we can solve them as a team. [group work] helped me improve my communication and interpersonal skills cross cultures […].’  ‘communication was the key to a nicely done group project […]. we all had to practice it through this international project […].’  ‘we had to collaborate as a group to solve the problem […]. i see i am able to work effectively in international group.’  ‘working with new team members from different nationalities and being able to work together […] is already a skill.’ adapting to cultural differences  ‘i feel that this experience has led me to really adapt to other cultures when it comes to being direct […].’  ‘my groupmates were shocked at first by my directness, but they didn’t think it was a problem and enjoyed [directness].’ professional growth through short-term international mobility: a qualitative study based on student reflections 393  ‘[i] enhanced my adaptability, allowing me to better engage with diverse people and perspectives […].’  ‘i learned what it feels like to work in a [foreign environment]. but if i want to learn and explore new experiences then i must [feel] uncomfortable.’  ‘[i] enhanced my cultural proficiency and [now have] more inclusive and empathetic approach when working with people from diverse backgrounds.’ e x p an d in g g lo b al an d r eg io n al p ersp ectiv es exploring diverse regional perspectives  ‘i strongly feel that my experience during this project has helped me establish very strong connections within the balkan region and the caucasus region.’  ‘[the bootcamp] truly opened my eyes to a completely different europe than i was used to.’  ‘looking for specialist inspiration in different nations and their markets, this project made me look at everything from a different point of view.’  ‘[i] gained insights into global markets and trends in different countries.’ staying ahead with global trends in the discipline  ‘now that i made such a diverse group of friends that i can call my friends, following global trends and markets is going to be much easier.’  ‘i consulted with my peers on which channels could be useful for staying informed on future global trends, […] ensuring i can adapt to and leverage these trends for professional growth.’  ‘keeping up with global trends […] helps me anticipate market shifts in various regions, identify opportunities, and mitigate risks.’ table 2 presents an overview of the career-related skills, goal clarity, and applied learning outcomes that students reported gaining through international project-based collaboration. the higher-order category shaping professional identity and career direction is further subdivided into the following subcategories: boosting career opportunities, clarifying goals, and building essential transferable skills. the second higher-order category, applying practical skills for the workplace, includes the subcategories applying skills to real work and advancing digital and tech skills. each category is supported by representative excerpts from students’ written reflections, providing qualitative justification for the identified competence areas. table 2. career skills, goal clarity, and applied learning higherorder category first-order categories respondents' statements – representative examples s h ap in g p ro fessio n al id en tity an d c areer d irectio n boosting career opportunities  ‘[these skills are] highly valued by employers, […] a very high competency. […] i significantly improved my soft and hard skills, which i will not forget to mention in my resume.’  ‘the skills i learned […] will make me stand out.’  ‘[it] can greatly benefit my future employer by improving overall efficiency and problem-solving capabilities within the organization.’  ‘[this] will be useful not only for me and my future job, but even now, it will make my studies at university a lot easier.’  ‘these networks can provide valuable resources, mentoring opportunities, career connections, and collaborative partnerships.’  ‘i underwent a transformative journey where i realized the critical significance of [international impact]. this awareness extends beyond mere curiosity […].’  ‘i have created more connections with incredibly talented and experienced people, which can be very useful in the future.’ clarifying goals  ‘this week was instrumental in helping me identify my true passion and what i aspire to become.’  ‘i started to make clearer steps towards my goal, […] clearly understanding […] and finding ideas that would help me achieve it.’ veriko berandze, mirian khelashvili, levan chichua, katarina aškerc zadravec 394  ‘in a fairly short time, i understood myself better and decided on the profession i want to combine my life with in the future […].’ building essential transferable skills  ‘some specialist skills that i acquired [are] creativity, resilience and complex problem-solving. these skills are easily transferable from/to any job.’  ‘[…] this project made me look at everything from a different point of view, thinking all the time: 'what would my friend from georgia say to this?' or 'how would [colleague] from cyprus solve this problem?’  ‘the time pressure that was on this project has taught me that you can still have a result you can be proud of despite having little time.’  ‘strong attention to detail and problem-solving allows me to tackle challenges creatively and adapt to dynamic environments.’  ‘i learned new best practices […] such as setting clear communication protocols, establishing deadlines, and utilizing tools effectively.’  ‘conflict resolution and finding compromises – i am ready to quickly respond to problems and find constructive solutions.’  ‘i learned the importance of quick decision-making and thinking outside the box […].’  ‘the qualities i developed were the ability to control the project and bring all processes to completion, to write concisely and listen actively, the ability to interview people and speak on the go, i […] learned to be more emotionally stable.’ a p p ly in g p ractical s k ills fo r th e w o rk p lace applying skills to real work  ‘[…] during the bootcamp, i focused on digital marketing and video editing, successfully applying my skills in product promotion.’  ‘i developed expertise in data analysis, project management, and strategic planning, […] directly applicable to my desired job.’  ‘[…] specialist competencies in project management, data analysis, and strategic planning, directly applicable to my job application.’  ‘[it] helped in gaining insights, easily look into financial trends, come up with different marketing strategies and investment plans.’ advancing digital and tech skills  ‘i have developed a hidden competence in working with text-generative ai models. i have gained high-quality skills in prompting these models […].’  ‘i enhanced my skills in web development, canva design, and digital marketing, learning best practices in coding and data visualization.’  ‘i used microsoft excel to analyse data and create reports. advanced powerpoint for creating presentations and graphic materials.’  ‘i now have knowledge of adobe express, wix, and excel. i can express my creativity and do projects quicker […].’ discussions international student collaboration presents numerous opportunities for learners to develop soft and transversal competencies essential for effective participation in today’s unpredictable, fast-changing, and globally interconnected world and labour market. this article investigates how a short-term mobility experience abroad—specifically, an intensive, oneweek, project-based collaboration within internationally diverse teams—can meaningfully contribute to students’ professional development. the programme applied interactive, trendresponsive pedagogical approaches, with students intentionally placed in culturally diverse teams. within this framework, students’ professional growth was assessed through the analysis of their written reflections. the primary aim of this study was to explore the perceived impact of the international project experience and to identify the competencies students reported developing, thereby addressing the research question of what types of soft skills and outcomes are reflected in students’ reflective essays. professional growth through short-term international mobility: a qualitative study based on student reflections 395 although the reflection form toolkit covered a broad range of focus areas—including general and networking skills, communication and interpersonal skills, teamwork, leadership and project-related skills, field-specific competencies, and digital skills—this article deliberately focuses on selected sections of the reflections most relevant to the research objective. based on the analysis, and supported by illustrative examples, our findings indicate that students demonstrated notable development in intercultural, communication, and global awareness competences, particularly in the areas of flexible communication, adaptation to intercultural settings, and teamwork within diverse environments. students also broadened their global and regional perspectives, showing an enhanced capacity to engage with global trends within their respective disciplines. furthermore, they reported greater career orientation and professional goal clarity, reflecting a strengthened sense of professional identity. these findings align with the erasmus+ higher education impact study (european commission, 2019), which similarly highlights the development of soft skills and career-related benefits— despite the erasmus study focusing on long-term physical mobility, whereas our findings suggest comparable impacts arising from short-term mobility experiences. these outcomes were frequently linked to applied learning opportunities that supported the development of essential transferable skills applicable across diverse professional contexts. in this regard, it is also relevant to consider the future of jobs report by the world economic forum (2025), which identifies international mobility as a key driver in cultivating emerging core skills expected to be in high demand by 2030, including resilience, empathy, social influence, curiosity, flexibility, leadership, etc. moreover, students described the application of practical skills in real-world settings, with particular emphasis on the advancement of digital and technological competences. based on the results obtained from students’ reflections, the authors support the view that trend-responsive teaching methods in international learning settings represent a valuable approach for fostering key competences required in today’s globalised world—competences that are increasingly sought after by employers. in this regard, various international learning environments, including physical mobility programmes, online international collaborative projects, or virtual mobility, play a critical role in soft and transversal competence development (o’dowd, 2021). it is equally important to ensure that students become aware of the soft skills and competences they acquire in international and intercultural contexts, as these often remain unrecognised or are referred to as hidden competences. structured reflective writing, guided by appropriately designed prompts or guiding questions, can enhance students’ awareness and articulation of these skills. our findings align with those of daff, tame, and sands (2024), as well as beaven and borghetti (2015), who argue that structured written reflections are an effective means of helping students and graduates become critically self-aware of their professional development and of the skills and habits cultivated through diverse academic experiences, including those in international settings. educators facilitating international modules or initiatives should recognise the importance of structured reflective writing as a highly effective pedagogical approach across all forms of international teaching and learning—whether delivered physically or virtually, at home or abroad. this form of reflection enables students to critically process and articulate the international and intercultural perspectives and competences they have acquired, ensuring that these do not remain unrecognised or hidden. at the same time, it is essential to acknowledge the inherently subjective nature of reflective writing and the potential for bias in students’ selfreported experiences. this study has certain limitations, most notably the relatively small sample size of student reflections analysed (29), which restricts the generalisability of the findings. future research should therefore explore other forms of international collaboration and activities— veriko berandze, mirian khelashvili, levan chichua, katarina aškerc zadravec 396 whether physical or virtual, conducted abroad or embedded within an internationalised home curriculum. further investigations could employ alternative qualitative research designs or be complemented by mixed-method approaches. in particular, follow-up studies incorporating quantitative surveys could offer additional empirical support and enable longitudinal tracking of the impact of international learning experiences on students’ professional development. recognising the added value of even short-term international project-based activities— whether conducted in physical or virtual formats—the integration of brief, diverse, and intensive international projects into the regular higher education curriculum is strongly recommended. such integration provides students with enriched opportunities to develop competencies that are increasingly valued by employers in today’s globally interconnected and rapidly changing world. acknowledgement: sincere thanks to all the international, erasmus, and home students who consented to the analysis of their reflections, as well as to the international facilitators who actively contributed to the international project week and approved the use of these reflections for research purposes. references 1. al mamun, m. a., & lawrie, g. (2023). student-content interactions: exploring behavioural engagement with self-regulated inquiry-based online learning modules. smart learning environments, 10(1). https://doi.org/10.1186/s40561-022-00221-x 2. alamo-vera, d., hernandez-lopez, a., rodriguez, l., & saa-perez, p. (2019). competence development and employability expectations: a gender perspective of mobility programmes in higher education. education sciences, 9(3), 1–17. 3. aškerc zadravec, k. (2023). managing internationalization at higher education institutions: assigned drivers and perceived importance. agora international journal of economical sciences, 17(2), 17–26. http://univagora.ro/jour/index.php/aijesissn 4. aškerc zadravec, k. (2025). internationalisation at home and internationalisation of the curriculum in higher education – conceptual demarcations and implementation practice. sodobna pedagogika/journal of contemporary educational studies, 76(1), 141–158. 5. aškerc zadravec, k., & kočar, s. (2023). the impact of academic disciplines on a constructively aligned internationalised curriculum. higher education, 87, 305–324. https://doi.org/10.1007/s10734-023-01008-w 6. beaven, a., & borghetti, c. (2015). ierest intercultural education resources for erasmus students and their teachers. koper, slovenia. 7. beelen, j., & jones, e. (2015). redefining internationalization at home. in a. curaj, l. matei, r. pricopie, j. salmi, & p. scott (eds.), the european higher education area: between critical reflections and future policies (pp. 59–72). springer. 8. braček lalić, a. (ed.). (2024). erasmus programme evaluation for the period 2014– 2023: national report of the republic of slovenia. cmepius. 9. catacutan, a. b., kilag, o. k. t., diano, f. m., jr., tiongzon, b. d., malbas, m. h., & abendan, c. f. k. (2024). competence-based curriculum development in a globalized education landscape. excellencia international multi-disciplinary journal of education, 1(4). 10. chan, c. k. y., & lee, k. k. w. (2021). reflection literacy: a multilevel perspective on the challenges of using reflections in higher education through a comprehensive literature review. educational research review, 32, 100376. https://doi.org/10.1016/j.edurev.2020.100376 https://doi.org/10.1186/s40561-022-00221-x http://univagora.ro/jour/index.php/aijesissn https://doi.org/10.1007/s10734-023-01008-w https://doi.org/10.1016/j.edurev.2020.100376 professional growth through short-term international mobility: a qualitative study based on student reflections 397 11. chen, c., jones, k. t., & xu, s. (2018). the association between students’ style of learning preferences, social presence, collaborative learning and learning outcomes. journal of educators online, 15(1). https://doi.org/10.9743/jeo2018.15.1.3 12. cohen, l., manion, l., & morrison, k. (2007). research methods in education (6th ed.). routledge. 13. daff, l., tame, c., & sands, j. (2024). a course design approach that encourages reflective practice habits. the international journal of management education, 22, 100990. https://doi.org/10.1016/j.ijme.2024.100990 14. deardorff, d. k. (2006). the identification and assessment of intercultural competence as a student outcome of internationalization. journal of studies in international education, 10(3), 241–266. https://doi.org/10.1177/1028315306287002 15. dolga, l., filipescu, h., popescu-mitroi, m. m., & mazilescu, c. a. (2015). erasmus mobility impact on professional training and personal development of student beneficiaries. procedia social and behavioral sciences, 191, 1006–1013. 16. elo, s., & kyngäs, h. (2008). the qualitative content analysis process. journal of advanced nursing, 62(1), 107–115. https://doi.org/10.1111/j.1365-2648.2007.04569.x 17. european commission. (2019). erasmus+ higher education impact study. https://op.europa.eu/en/publication-detail/-/publication/94d97f5c-7ae2-11e9-9f0501aa75ed71a1/language-en 18. finnish national agency for education. (2019). a toolkit for recognizing international competences for students in higher education. finnish national agency for education. https://www.oph.fi/en/statistics-and-publications/publications/toolkit-recognizinginternational-competences-students-1 19. franzenburg, g. (2017). learning from the past for the future: how to make adult education sustainable. in s. l. roberson & a. b. novikov (eds.), icemst 2017: international conference on education in mathematics, science & technology (pp. 57–64). isres publishing. 20. herodotou, c., sharples, m., gaved, m., kukulska-hulme, a., rienties, b., scanlon, e., & whitelock, d. (2019). innovative pedagogies of the future: an evidence-based selection. frontiers in education, 4, article 113. https://doi.org/10.3389/feduc.2019.00113 21. hossain, m. k., hossain, m. f., hossain, m. e., hoque, a. k. m. f., khan, n. m., & kamil, a. a. (2022). skill development of undergraduate students through international exchange program. journal of educational and social research, 12(2), 40–48. https://doi.org/10.36941/jesr-2022-0033 22. klein-collins, r. (2013). sharpening our focus on learning: the rise of competencybased approaches to degree completion. national institute for learning outcomes assessment. 23. kordeš, u., & smrdu, m. (2015). osnove kvalitativnega raziskovanja [foundations of qualitative research]. založba univerze na primorskem. https://www.hippocampus.si/isbn/978-961-6963-98-5.pdf 24. leask, b. (2015). internationalizing the curriculum. routledge. 25. loughran, j. (2002). effective reflective practice: in search of meaning in learning about teaching. journal of teacher education, 53(1), 33–43. https://doi.org/10.1177/0022487102053001004 26. malekigorji, m., & hatahet, t. (2020). classroom response system in a super-blended learning and teaching model: individual or team-based learning? pharmacy, 8(4), 197. https://doi.org/10.3390/pharmacy8040197 https://doi.org/10.9743/jeo2018.15.1.3 https://doi.org/10.1016/j.ijme.2024.100990 https://doi.org/10.1177/1028315306287002 https://doi.org/10.1111/j.1365-2648.2007.04569.x https://op.europa.eu/en/publication-detail/-/publication/94d97f5c-7ae2-11e9-9f05-01aa75ed71a1/language-en https://op.europa.eu/en/publication-detail/-/publication/94d97f5c-7ae2-11e9-9f05-01aa75ed71a1/language-en https://www.oph.fi/en/statistics-and-publications/publications/toolkit-recognizing-international-competences-students-1 https://www.oph.fi/en/statistics-and-publications/publications/toolkit-recognizing-international-competences-students-1 https://doi.org/10.3389/feduc.2019.00113 https://doi.org/10.36941/jesr-2022-0033 https://www.hippocampus.si/isbn/978-961-6963-98-5.pdf https://doi.org/10.3390/pharmacy8040197 veriko berandze, mirian khelashvili, levan chichua, katarina aškerc zadravec 398 27. marginson, s. (2011). higher education and the common good. melbourne university publishing. 28. marinoni, g., bartolome, s., & cardona, p. (eds.). (2024). internationalization of higher education: current trends and future scenarios – 6th iau global survey report. international association of universities. 29. matthews, b. (2020). the role of reflexive thought in the achievement of intercultural competence. intercultural education, 31(3), 330–344. https://doi.org/10.1080/14675986.2020.1728093 30. mayring, p. (2014). qualitative content analysis: theoretical foundation, basic procedures and software solution. klagenfurt, austria. https://www.ssoar.info/ssoar/bitstream/handle/document/39517/ssoar-2014-mayringqualitative_content_analysis_theoretical_foundation.pdf 31. mestenhauser, j. a., & ellingboe, b. j. (2011). leadership in international education. the journal of higher education, 82(1), 44–66. https://doi.org/10.1353/jhe.2011.0007 32. nardon, l. (2019, february 25). reflection and intercultural competence development. in oxford research encyclopedia of business and management. oxford university press. https://oxfordre.com/business/view/10.1093/acrefore/9780190224851.001.0001/acref ore-9780190224851-e-64 33. o'dowd, r. (2021). what do students learn in virtual exchange? a qualitative content analysis of learning outcomes across multiple exchanges. international journal of educational research, 109, 101804. https://doi.org/10.1016/j.ijer.2021.101804 34. oxford english dictionary. (2012). oxford english dictionary. https://www.oed.com/ 35. puranik, s. (2020). innovative teaching methods in higher education. bsss journal of education, 9(7), 45–49. 36. rai, b., koirala, i., zangmo, y., & aškerc zadravec, k. (2022). intercultural and transversal competence development among erasmus students. in k. aškerc zadravec (ed.), eastern european conference of management and economics – eecme 2022: knowledge transfer for sustainable development in digital global societies: proceedings of the 4th international scientific conference (pp. 223–235). ljubljana school of business. 37. rumbley, l. e., & hoekstra-selten, j. (eds.). (2024). eaie barometer – internationalisation in europe (3rd ed.). european association for international education. 38. safapour, e., kermanshachi, s., & taneja, p. (2019). a review of nontraditional teaching methods: flipped classroom, gamification, case study, self-learning, and social media. education sciences, 9(4), article 273. https://doi.org/10.3390/educsci9040273 39. world economic forum. (2025). the future of jobs report 2025. https://www.weforum.org/publications/the-future-of-jobs-report-2025/ 40. zettinig, p., aleem, m., majdenic, d., & berry, m. (2021). learning laboratory: an integrative learning design for international business in a complex dynamic world. journal of management education, 46(3), 531–557. (original work published 2022). https://doi.org/10.1177/10525629211029630 https://doi.org/10.1080/14675986.2020.1728093 https://www.ssoar.info/ssoar/bitstream/handle/document/39517/ssoar-2014-mayring-qualitative_content_analysis_theoretical_foundation.pdf https://www.ssoar.info/ssoar/bitstream/handle/document/39517/ssoar-2014-mayring-qualitative_content_analysis_theoretical_foundation.pdf https://doi.org/10.1353/jhe.2011.0007 https://oxfordre.com/business/view/10.1093/acrefore/9780190224851.001.0001/acrefore-9780190224851-e-64 https://oxfordre.com/business/view/10.1093/acrefore/9780190224851.001.0001/acrefore-9780190224851-e-64 https://doi.org/10.1016/j.ijer.2021.101804 https://www.oed.com/ https://www.weforum.org/publications/the-future-of-jobs-report-2025/ https://doi.org/10.1177/10525629211029630 